DEBATE | Marc Faber vs Brent Johnson: What Comes Next After The Iran War?
Summary
Market Outlook: Both guests expect the Iran conflict to fuel inflation via energy and supply shocks, with rising volatility and heightened recession risks globally.
Energy: Oil flow risks through the Strait of Hormuz and potential long-lived disruptions support a constructive stance on the Energy sector, with North America seen as relatively resilient.
Agriculture: Disruptions to fertilizers and chemicals transiting Hormuz may drive a 6–9 month surge in food prices, prompting allocations to agricultural commodities and related producers.
Gold: Both favor gold/precious metals as protection against currency debasement, geopolitical risk, and declining real purchasing power of fiat.
Currencies: Debate centers on US Dollar dominance; attempts to de-dollarize may continue, but USD could remain relatively strong, aided by stablecoins accelerating global dollar usage.
Equities Allocation: Mark prefers Emerging Markets equities (underowned, improving relative performance), while Brent tilts to North America/US equities given resource and security advantages.
Bonds: Defensive allocations to US Treasuries are favored, with debate on duration (10-year vs. shorter T-bills), and an emphasis on minimizing losses over maximizing gains near term.
Risks: Key risks include broader war escalation, social unrest from food inflation, asset volatility, and potential capital controls or asset freezes across jurisdictions.
Transcript
Heat. Heat. Hallelujah. Heat. Heat. Heat. Heat. Heat. Heat. Heat. Heat. All right. Heat. Heat. Heat. Heat. Heat. Heat. Heat. Heat. Heat. Heat. Welcome to a new Zero Hedge debate. I'm Adam Tagert, founder and host of Thoughtful Money, and I'll be the moderator for today's discussion. As the USIsraeli war versus Iran continues to unfold, what will its legacy be for the US dollar specifically and American hegemony in general? Is this the beginning of a reset towards stability, another leg up in the markets and lower inflation? Or are the early stages of a broader economic unraveling tied to supply shocks, currency stress, and geopolitical fragmentation ahead? Simply put, what comes next? To unpack for us, we've got the good fortune to be joined by Dr. Doom himself, Dr. Mark Fabber, editor and publisher of the Gloom, Boom, and Doom report, as well as Brent Johnson, CEO and portfolio manager at Santiago Capital, best known for developing his dollar milkshake theory. Gentlemen, thank you so much for joining us today. >> Great to be here. >> And Mark, you're joining us as well, correct, my friend? >> Yes, of course I'm joining you, but I don't I didn't get any question. >> All right. Well, don't worry. We've got plenty of questions. Um, I prepared a number in advance of this discussion and I made the mistake of asking X if they had any questions for you guys and I got about several hundred thousand. So, we'll try to get through as many of them as we can in the uh the short time that we have here. Um, all right. So, to kick us off here. Um, Mark, let's start with you. Um, if you can just kind of ground our listeners in what was your assessment of America's prospects both economically and geostrategically prior to the Iran war breaking out and how, if at all, is the war changing that outlook? Well, I'm sort of of the view that the US economy is much weaker than the statistics that are published by the government liars will would suggest. In other words, uh the government paints a rosy picture of everything, but the reality is simply the following. If you uh increase the quantity of debts in a society, in other words, the borrowings go up. >> Mhm. >> You can generate some sort of uh some sort of prosperity. I mean, you you send everybody in America, there's 340 million people, you send each person a $10,000 check, I guarantee you that retail sales will go up, but then the borrowings will one day come due. And uh the the problem occurs right away in the sense that if you do that the bond buyers will demand a higher interest rate. In other words, the bond market will be sensitive to that economic travesty of sending a check to each citizen of $10,000 US and it will go down and uh in my view the western societies and not just the US but all the western societies have lived beyond their means. In other words, uh the interest payments on the debts are becoming burdensome. And in the US, as you know, the interest payments on the debts are now um the largest expenditure of the government and over a trillion dollars there. The latest statistic is $88 billion a month. And that is a large amount, you know, then has to be repaid. And the consequence of that is that although the Fed began to cut interest rates in September 2024, I mean, in other words, almost two years ago, the bond market didn't rally. Bonds went down. in those interest rates on long-term securities went up and that is a problem for an economic ignorant people the e ignorant person like Mr. Trump because he thinks he can call up the Fed and say, "Oh, you have to cut short-term rates because yes, he would like to pay lower interest rates." And maybe on his commercial properties in theory, lower interest rates would be advisable because commercial properties are going down in value. But for the economic system as a whole uh the lower interest rates may not be advisable because there are still inflationary pressures in the system you know uh especially after the war but already before the war I don't believe that anywhere in the world the rate of inflation was like around 2% this complete nonsense. Open the invoices of your insurance company. Everywhere in the world, insurance premiums are going up by something like 10%. Then you travel around everywhere the prices are up. And so my view is that the governments are understating the rate of cost of living increases everywhere and the and as a result of it most people are actually struggling around 70% of Americans and in other countries is not better around 70% of people they live paycheck to paycheck. They need the paycheck so they can pay the bills that occurred during the months. And I think this is sort of like a modern slavery. I don't think that people are particularly happy to sit there anxiously waiting for the salaries to pay their debts. And therefore my outlook for the economy was already before the war in Iran was not favorable. But it doesn't mean that because it's unfavorable the bond that the bond market would rally a lot. I own bonds and I will explain later on why. But uh I find there is a diverging performance between the financial markets that have gone into the sky and the real economy of people that is flat on its back. >> Okay. Um very good introductory u summary of your perspective here. Um has a lot to do with the amount of debt that the company that the nations are are sort of wantingly uh building up here. Um and you've got a lot of concerns about inflation and again this was all pre uh the Iran war. Um Mark, I'm just curious real quick answer then I'm going to get to you Brent. Um uh you know obviously with the price of oil going above a hundred bucks a barrel that's sending an inflationary shock uh through the global economy right now um TBD but there may actually be some supply shortages um as a result of ships not making it out of the the straight of Hormuz. So, I got to think, Mark, with all the the the spending that's being done in the war by America, um, and these inflationary knock-on effects like I just mentioned, uh, the Iran war can't be helping the situation. And so, I'm curious from your perspective, is it making it a little worse, a lot worse, or somewhere in the middle? >> Uh, in my view, no war is helping the situation quite frankly. But uh but this war is very nasty and it in my view will last forever because it occurred for no reason. Quite frankly, I don't see why anyone would attack Iran. Of course, they have not the nicest intentions, but the others have no nice intentions towards the regime in Iran either. It's a sort of a a situation where diplomacy failed massively. And the arrogance of the western world is uh incredible because uh the western world they gave up colonialism. That is true. After the second world war the colonies essentially became free. But it was followed by a neoc colonial age where western countries uh and noticeably the US feels that they sort of should arrange the world according to their own beliefs and their own views and as you know in the US the views are very diversified so it's very difficult to to say this is really our policy and what has happened at the same time that the US still believes to be the world's hegemony in terms of power and science and everything what happened in the last 30 40 years is the rise of emerging economies notably China with which in many sectors has become the dominant country. The US is no longer leading in every sector and uh now we have the rise of India and the issue is this we in the western world not only in the US we are drowning in debts now I'm not saying that China has no debts but they have debts because they build tunnels and bridges so They fostered economic growth and economic development and an increase in the standards of living of all people not just the rich. And in the western world we have high debts because we spend too much on maintaining the standards of living of people and at handing out money to people and at doing unprotective act activities. >> Okay. All right. So, um, you know, outlook of western sclerosis, the rise of some of these larger countries and the rest of the world, but the war making the general things you're concerned about worse, and you've got a big concern that this war could be going on for a very long time. All right, Brent, coming to you. Um, I'd love to hear kind of, you know, your reaction to to to Mark's um, intro there in terms of the biggest similarities and differences to kind of your general framework. Um, and I'm going to guess one of the areas where you you you you'd potentially disagree is Mark sort of paints a picture of the sun setting on the Western Empire here. You may have a slightly different view. >> Yeah. Well, first of all, let me say this. I've been a big fan of Marks for a long time and I have a short story to tell. about uh 15 years ago, I was going to a conference in Vancouver and it just so happened that I was in line behind him, directly behind him in customs and I was so excited to talk to him and I finally like tapped him on the shoulder and introduced myself and he was so nice and we said we we talked for about 10 minutes while we were waiting to go through customs. So he won't remember that, but I remember it very well. And so uh I don't really disagree with a whole lot of what Mark has said so far. Um what I would say is that he has focused his analysis for the most part on the west and I think his analysis is correct. Uh but what I would point out is that inflation is higher in Russia than it is in the United States. Inflation is higher in India than it is in the United States. inflation is much higher in Iran than it is in the United States. And so while uh you know we definitely have a number of challenges and they are going to be incredibly difficult to overcome the whole world has challenges and like it or not it's a relative game until you know Elon takes us to Mars. you know, the earth is the battlefield and that's, you know, that's kind of the way it's always been. And I haven't seen anything that convinced me that that's no longer the case. And so, if the United States is going to lose dominance, somebody else has to take it. And, you know, in the last year, the United States flew a mission over Iran and dropped a number of bombs, came home within 24 hours with no, you know, harm to the United States. They went into Venezuela and kidnapped a sitting president and brought him back to the United States. Um they forced Kier Armor to change his position on a little island in the middle of the Indian Ocean and in the last six weeks they have launched an attack against Iran again and nobody has done anything to stop it. Now, within Iran, there's a big battle. And I fully admit that that is could very well be a huge miscalculation. And I'm open to the fact that it's the biggest blunder in American geopolitical history. But I'm also open to the fact that it might work. And I feel like a lot of the analysis that I've come across in the last month, if you say that it just might possibly out of some stretch of the imagination work, they think that you are saying that it's automatically going to work and that it can't possibly fail. And that's not what I'm saying at all. And what what I'm saying is, like it or not, countries do use military force to get what they want. I don't particularly like it. I don't particularly think they should do it. And I personally wouldn't have advocated for this move in Iran. Now having said that, I understand why they did it. I understand why they did it at this time and I understand how it could possibly work to the US's advantage. Now again, we don't know. I think a lot of people are jumping to conclusions on this, but what I do know is going to happen is we are going to get an in at least a short-term inflationary impulse. And it could be a pretty severe inflationary impulse. And it won't just hit the United States. And in fact, it may hit the United States the least, but it's still going to hurt. It's going to hurt a lot. But I think it's going to hurt the rest of the world more than it hurts the United States. Um, part of the problem is that it's not just an energy story. I think everybody is focused, or not everybody, a lot of people have focused on the energy impact, especially when you consider we're just now going to be in the summer driving season here pretty soon and gasoline and energy prices are already up. Um, and how that could dramatically negatively affect the US economy. And again, I I don't dispute that at all. But probably the bigger impact that I worry about is the fact that fertilizers and chemicals also get transited through the straight of Hormuz. And the timing of this happening is impacting the planting season for both the summer season in the northern hemisphere and the winter planting season in the southern hemisphere. And it's my expectation that even if the straight fully opens tomorrow, which it won't, and I don't think that this ceasefire will hold, but hopefully it does. Uh but even if it even if it holds and the straight fully opens tomorrow, uh there's going to be a 4 to six week period where most ships don't arrive. In other words, the last ships are arriving now. Uh they arrived in Europe like over the weekend. They're kind of or sorry, they arrived in Asia late last week and over the weekend. They're starting to arrive in Europe uh this weekend and I think the last ships arrive in the United States next week or the week after. And then after that there's nothing or maybe just a few ships and that is going to have I think a material impact on food prices six to nine months down the road. And once you get food price rises and food shocks, then you get social shocks and then you get people uh you know out in the streets chanting uh uh death to everyone, not just death to America. So uh I I think Mark and I that's a long way of saying I think Mark and I see things very similarly. Um but perhaps uh I take a little bit bigger view. >> Okay. Um Mark, I'm going to let you react to that in just a second. I am going to just for the purposes of this discussion underscore I think we'll find out. I think one of the areas you guys are going to disagree more will be the fate of the US dollar at least over the next you know foreseeable several years. Uh but we'll get to that in just a moment. Um, so Brent, real quick, I I I presume not only do you expect to see higher prices in some key commodities as you just mentioned, but that if the straits remain compromised for even longer, um, then you think we may start to actually see some physical shortages as well. Is that correct? >> Yeah, I do think that that is correct. >> All right, Mark. Um, I'll give you a chance to react to anything that that Brent just said there about inflation and and potential shortages. Um, I'm curious, too. I'd like to get your thoughts on what you think is likely to happen with the Straits going forward. You know, will will Iran be able to keep the straits as asleeper? Now, going forward, we just saw this morning that uh not only is Iran now saying that they want to uh get a tribute essentially of about a dollar a barrel of oil per tanker that goes through there, um but they want it paid to them in Juan or cryptocurrency. Um so, we'd love to get your reactions to that as well. >> Well, actually, I have first a question for Brent because I'm very interested in his thought. Uh the first question is if I heard it correctly, you said there was a good reason for the US to attack Iran. Is that correct? >> I I don't think I said there was a good reason. I said I understand why they did it. >> Yes, understand why. Why did they do it? >> Because I think Iran or actually Yeah. Okay. I'll just use the word I think because it's never good to talk in absolutes. But Iran is a piece of the chessboard that is extremely important. But I don't believe that Iran was 100% about Iran. It's more about the great power competition with China. And anybody who thinks that the great power competition with China is not a real thing, I would encourage you to check that premise a little bit. It is a real thing. Um, and right now between China and United States, there's somewhat of a standoff. Um, there's a hostage exchange going on. They need things from us and we need things from them. And each side is working furiously behind the scenes to shore up their side of things to become selfsufficient from the other. And when that point is reached, whether it's a year or 5 years from now, then all bets are off. And part of the US's plan is to dominate the energy aspect of the globe as they have for a long time. And that was part of the reason that Venezuela happened. And that is part of the reason that Iran is happening. Now, I know there's some people out there saying, "Well, great job because now Iran is China's ally and they're going to supply them not only with oil, but they're going to sell it to them in Yuan." And what I would say is I this game is not over yet. It's still ongoing and even if it doesn't work out perfectly and the straight becomes a mess for a very long time because I tend to agree with you this is not going to this could go on for a very very long time a very long time. And any disruption in the straight while it hurts everyone it hurts the United States less than everyone else. And while the energy coming through the straight and the chemicals coming through the straight and the fertilizers coming through the straight are disrupted, guess what part of the world has those things? It's North America. And so it does. Now listen, just just to be clear, I'm not saying that this will work perfectly. I'm not saying they can pull it off, and I fully admit it could blow up in their face, but that doesn't mean that's not why it's not happening. And so that I think that that's how I would characterize it. >> Yes, I I understand that uh this might be an objective, but to this I will respond the following. First of all, it's difficult to say who is hurt the most in a conflict because I could argue the per capita consumption of oil is very high in the US and it is extremely low in India and it is low in China. You understand? So, uh, Asian countries could live with shortages of energy probably better than Western countries. But, but I would need to have a precise analysis on the subject. But secondly, and this I strongly believe, you said that US did this and that last year and nobody intervened and they took out the president of Venezuela and nobody did anything about it and so forth. That is all correct. But I can guarantee you the Chinese and the Indians and the Russians and all the Asians, the one thing they will never allow is America to control the entire oil supplies to the Far East. That is not going to happen. And the Chinese have not intervened yet officially, but it is likely or it is happening that they and the Russians are supplying uh weapons to the Iranians uh because uh they may not want to get directly involved into a war. But if America tries to land on Carrick Island, I think it's going to be the limit. And if the American troops land on Iranian territory, I think a lot of people will be interested to send the troops as well to fight with Iran against the Americans. I think that is a big danger that could lead us in a major I mean incredible conflict that would last a very long time. So, you know, the original question, do I think that uh with my relatively cautious outlook of the global economy and certainly the US, does the crisis in the Middle East uh aggravate the situation meaningfully or a little then my view would be yes, the potential for a major explosion is there. Can I re can I respond here? >> Absolutely. >> Okay. So again background the better it is for the listeners. Go ahead. >> I don't disagree with anything that you have said. So let me just tick off a couple points. Number one, the countries in Southeast Asia may be able to win better with or or or handle negative consequences better. That is potentially correct. But energy is the most important input in the technology race between China and the United States, which is probably the biggest part of the power competition between the United States and China. Whoever wins the technology race probably wins the overall race and you can't win that technology race without the energy needed for the inputs. So that's number one. Um, the second thing I fully agree with you. I mean, this could become the biggest conflict in history. It's uh for for many many reasons. We we could we could spend five hours just on that topic alone. But I think or actually I know for a fact that you like gold and I know that I like gold and probably one of each of our favorite movies is Goldfinger, right? And uh you know there was a there was a strategy used by Goldfinger was he wasn't going to steal the gold. He wasn't going to take the gold. He was just going to make it so nobody else could get it either. Right. So to your point that China, Russia, the Southeast Asian nations will never let United States get control of Middle Eastern. Perhaps that's true, but doesn't mean that the United States can't use a Goldfinger strategy on the straight of Hormuz. And then what does that leave? That leaves the United States and Russia as the two biggest remaining natural resource providers. To which then people will say, "Well, then China can just get all its energy from Russia." Well, no, they can't because the infrastructure is not there to actually do that. And could they do it over a 5, 10, 20 year period? Sure, they could, but not over a fivemonth period. They could not do that. So, again, I don't disagree with what you're saying. I agree that it's fraught with risk. But the one point I would make and this is a point that I think is very important because I've had many conversations with people both online and in person about this over the last couple weeks. I had a great dinner in New York City uh actually two dinners in New York City last week where this was the topic of discussion. And the point that I made to them was that if you think that you and I are sitting here and we understand that Iran has mountains and it's going to be difficult for the US to make any kind of invasion and if you and I understand that drones can fly out and you know effectively shut down the straight of hormoons. If you and I understand that, I absolutely guarantee you despite your belief to the contrary that the United States knows that as well and the Pentagon knows that as well. And nobody at the Pentagon, nobody at the Pentagon, I can tell you this, nobody at the Pentagon thought that they were going to fly in and fix this in 48 hours. Anybody who thinks that is being more arrogant than the people than than they think that the United States is for arrogance for going in and doing it. Nobody thought this was going to be a 48 hour operation. Everybody knows that this is extremely risky. war never survives the first contact or the battle plan never ever survives first contact. That's literally, you know, military education 101. So the idea that the United States wasn't prepared for this or had no idea that any of these things can happen, it's just fundamentally incorrect. Now, that does not mean that this is a fantastic plan. It doesn't mean it will work, and it doesn't mean extremely bad side effects won't happen. And I think we're probably seeing some of those bad side effects already baked in. Um, but anyway, that's that's that's kind of my retort to that. >> Brent, let me just ask a point of clarification. So, you you mentioned the Goldfinger strategy, right? Um, it's not that we want to take it, it's we want nobody to have access to it. In your mind, what what does a Goldfinger strategy look like in Iran? Is it just somehow keeping the straits closed or is it like blowing up Car Island? I mean I this kind of gets to the other thing. Um you know people on Twitter are upset that they're not the military is not sharing their exact plan how they're going to solve this situation. Of course the military is not going to share their exact strategy and exact plan. Short answer is I don't know. But I know there's several different ways that they can do it. And this is the other thing I'll say and this is it's kind of the same point that Mark was making. He his point was China, Russia and Saudi Arabia or the the Southeast Asia will not tolerate the United States controlling oil from the Middle East. Okay, that's a that's a very fair statement and I agree with him. The correlary to that is the United States will not tolerate all of the oil from the Middle East flowing to Southeast Asia and China. And I think that they have a number of tools and a number of things that they can do to disrupt that if it came to that. Now, I don't The other thing is I don't think they want it to come to this. The United States does not want World War II. They might get it, but that's not what they want. And I don't think they want to crush China because crushing China doesn't help anybody. There is a, you know, mutually assured destruction thing here, right? What the United States is trying to accomplish is actually harder than crushing China. what they're trying to do is keep China running, keep them growing, keep them efficient and part of the global uh, you know, economy without letting them surpass the United States. And that is incredibly hard to do. So anyway, that's uh that that that's that's my take on it. All right, Mark, do do you have any additional digging into that with Brent or I have another sort of related but larger question for you. So, >> the only comment I have and I understand Brent's views and arguments very well. The only counterargument I have is I believe the mission started out in complete ignorance by Mr. Trump. He woke up one day and said, "Let's do it." Uh, whatever the reasons may have been, some people say it had to do with the Epstein files, which I think is quite likely. But now that the US is in this actually difficult situation for the US and Israel is also in a difficult situation because they're dealing with people who are actually prepared to endure or have the population endure extreme hardship to stay in power. The Iranian regime, the mulas, they cannot admit defeat. You understand it? It's a survival question for them. >> 100% agree with you. And this the survival question for them has hardened their resolve and the population of Iran is now more supportive of the regime than it's probably been in a long time. Not 100% but to a large extent. And in my view, I mean, as of today, I'm telling you, this is a a widespread view, the American prestige has lost out a lot, a lot. And the sympathy for Israel has also diminished a lot until now. The Chinese haven't done anything. The Indians haven't done anything. They are actually up to today a relative winner as well as the Iranians but we know don't know how it will go on. I understand the argument but I think this argument that it's actually beneficial for the US for the reasons Brent outlined in terms of relative uh attraction of the US uh in the field of energy and so and uh to contain China. I understand that but I did I don't think that the US thought that in the first place that the strategist thought and now they're using it as an excuse for having done it but they went in without that knowledge. >> Okay. And you know what we we don't know for sure. We'll hopefully know over the scope of time as historians cover this. And Mark, I know you're a big fan of history. But Mark, you took it your answer right where I wanted to go, which was what is the war doing to American prestige? Um, you seem to think that it's really damaging American prestige. So, how do you expect that to manifest? Um, will that be a an acceleration of countries trying to ddollarize, of countries trying to reduce trade with the US? What do you see as the knock-on effects of that that diminishment of prestige? Well, Brent, he may have another view, but a country like China or India or Russia or anyone would be crazy to hold all his its assets in the US because I mean actually any country in the world because any country would say well if the US doesn't like me anymore, they'll do a Venezuela, they take me out or they freeze our assets and so forth. So it's an incentive for countries to de diversify their assets and uh it doesn't mean that the dollar will go down that I'm not saying but it means that other assets may have more upside potential and that uh countries will continue to diversify and as the percent of total global reserves that the importance of the US dollar will diminish. It's been diminishing for the last like 50 years but it may diminish more or there may be even an acceleration doesn't mean the dollar goes down because as uh red said India has more inflation and other countries have more inflation. So uh the dollar may be relatively favorable against other paper currencies. We have to specify that maybe the dollar may be relatively strong against other currencies whose purchasing power is going down at an even faster rate than the US dollar's purchasing power. But in this scenario, you want to be in assets uh that cannot be printed by an central banker who has no clue about anything. >> Okay. So, so gold obviously springs to mind. Um is that in your basket and and what other assets would you put in there as well that you think would appreciate on an accelerating basis versus the dollar? Well, I I sort of happen to agree with Brent about the potential of food shortages. In such a situation, you should live on a farm and have plenty of land. Uh but I can tell you out of farms, it's difficult to make money. But it's safe. uh do you have your food supplies and so forth and uh is a lifestyle lifestyle question. And the other thing is uh in a situation where things become bad, you have to change your strategy and say to yourself, I'm not here to maximize my profits. I'm here trying to minimize my losses. >> So say in a global collapse, lots of people will lose everything and lot of people will lose 50% of what they have because they are in real estate and so forth. And if you lose only 10%, you're like the king. So I think investors should change the strategy of always thinking asset prices will go up. Do the thinking of a lot of things will go down and how do I survive best in an environment that is unfriendly for asset prices because inflation comes in many different ways. uh it's very difficult to define precisely what is inflation and it touches a society and an economy in very different ways but uh we had a colossal asset inflation for the last 40 years as a result of continuous declining interest rates uh between 1981 September 81 1 10 years at 15.84% interest and now we're that we went down in August 2020 to 0.57 on the 10 years. Now we're a touch above 4%. But the trend in my view for interest rates is upwards and Trump will make sure they'll go up in the long run. But near term, maybe bonds are not so bad because this year the long-term bonds, the ETF, the TLT ETF is down 1.6% which is much better than being down 10% in NASDAQ stocks. >> I I get the math, the relative math. real quick question on your list of things that you want to own in an inflationary environment or have better access to. I got to imagine energy is high on that list. Um you and Brett have both been talking about it. Do you think right now given the unfolding developments of the war, do you think that energy will continue to be an attractive uh investment sector? >> I think so. But I want Brent to tell us what his view is. All right. And Brent, I just got to preface all this by saying Mark seems like he drinks the milkshake. He was very, very particular there about saying, "Hey, look, you know, the dollar might actually go up versus all the other currencies." He's not calling for that. He thinks it's going to go down in purchasing power versus real things. But that to me, that sounds very similar to your outlook. >> Yeah. No, I think I listen, I think Mark and I share a lot of very similar views. And like I said, I've followed his work for god two decades now. And uh I have uh Man, I we should be there together. I I didn't know we were going to be smoking. I would have brought my cigarette. >> Well, you're free. I can send them over. I press them against the screen. >> Yeah. Yeah. Yeah. Yeah. Um so yeah. So I I I think listen, I think Mark and I see a lot of similarities. I think uh I and I don't really know where we disagree that much other than I I I think I guess probably I think there's a higher degree um of likelihood that through this crisis, through this chaos, through this coming forth turning, however we want to define this environment that we're in, I think that the United States and North America is better positioned to come out on top than many people. And my guess is I think they're better positioned uh than Mark thinks. But I I I don't want to put words in his mouth. >> That is correct. I agree with you. I have a very negative view for the Western world uh following this conflict and specifically for the US a very negative view >> extremely negative that I I that is the point where we would disagree. Do you think the US will come out surprisingly strongly out of this conflict? And I think it's a complete disaster for the US completely. >> So let's dig into that and I'll let Brent, I'll let you respond any way that you want, but let me put this question out there for both of you. Do you expect the world from here to increasingly ddollarize or increasingly dollarize? Brent, why don't we start with you? So I think they will continue to try to ddollarize and I think they will be very unsuccessful in doing so. Um and then I'd put a caveat on that. I believe the governments and the bureaucrats and the politicians will try very hard to ddollarize, but I think their citizens will try very hard to dollar to get out of their local currencies. So I it kind of depends on who you're talking about doing the ddollarization and the dollarization. >> All right. And how much of a percent of your your position, Brent, has to deal with stable coins versus other dynamics? >> Oh, a big part of it. I mean, I'm, you know, you and I have talked about this and I I'm the first to hold up my hand and say I missed it when it first came out and that that was a mistake on my part. Um, but I I think stable coins are going to revolutionize uh global monetary matters. And I I think I've said this to you before. I think that US dollar stable coins and the US um kind of officially sanctioning them or or blessing them um you know, sanctioning them in the positive sense, I think has the potential to be as transformative to the global monetary system as when the United States left the gold standard. Um, and it doesn't mean it's going to happen tomorrow, but uh I think in the fullness of time um it will be seen as an incredible incredible innovation. One one thing I would say with regard to a point that Mark made where again I I don't disagree with him but there's always two sides to every uh you know every point and that is would the rest of the world be crazy to put their assets in the United States? Yeah, they would be. But you'd also be crazy to put them anywhere else. And you know, the idea that the United States is the first country in history to confiscate assets is it's kind of funny to be honest. I mean, China has a history of confiscating assets. Russia has a history of confiscating assets. Germany has a history of confiscating assets. Only a couple years ago, you know, the Canadian government locked down the monetary uh accounts of some of its own citizens. Um, so this idea that the United States is the first one to do this is is just provably incorrect. And the other thing is the big big part of my thesis and my whole framework is the Euro dollar market. The Euro dollar market literally started because the Soviets didn't want to put their money into a US bank for fear of confiscation. So they put that money, they put their dollar holdings into European banks which then over time went exponential and built this US dollar prison that the whole world is now uh you know stuck inside. Um so yeah, it's it's risky putting your money with the United States, but it's risky putting your money with any government. And you know, if people haven't picked up on this yet, I would say literally, you know, governments are not your friends, right? You can view them that way if you want to, but they sit on the other side of the table from you. And so, you know, but you do have to put your capital somewhere. Global asset allocators have to put their capital somewhere. And on a relative basis, I think more will be allocated to the United States than elsewhere. And if I'm wrong, I can live with that. So, that that that that's kind of my view on that. Mark, your reaction? >> Well, I understand that capital has to be put somewhere, but I think that uh capital flows uh where we have to distinguish. We have sovereign capital, government capital and we have private capital. Private capital flows where the profit opportunities are the best. And as you know, for the last 15 years until the end of 2024, early 2025, the US outperformed just about everything massively in terms of uh of wealth creation. I mean the S&P went up and is now more than 50% of the world's stock market capitalization and of the MCI index is close to 70% and so forth and so on and emerging markets and Europe became very cheap. Now I think there is a major change occurring in the world in the sense that last year many emerging markets grossly outperform the US as well as European markets they all were went up more than the US and even this year we have many emerging markets that are up much more than the US or down less. So I think we're in a very important economic and uh historical what I would call a shift period a changing period where major changes are occurring and uh one of these changes the symptom of it is the war in Iran and uh I I have say my assets So I'm diversified. I live in Asia and so my major stock investments are in Asia and because I have a Swiss passport, I also have a Swiss portfolio and European portfolio. But basically uh my bond holdings and cash is mostly in US dollars. And for me it would be horrible if there was a complete collapse of US dollars. this and in reality that this possibility I hedge by being a large holder of precious metals and you know the argument of friend that governments are not necessarily for your friend not I agree 100% they are actually the greatest enemy of people are governments especially in democracy But uh at the same time the expropriation issue is something that a citizen has to consider very carefully because as Brent said say after the second world war when China became communist and the whole eastern front and the Soviet Union became communist they took everything away. I know people they were immensely rich in China and they came out of China in 49 penniless, not a penny. Some had been smart uh because they had already uh experienced the hardship of fleeing a country before. Say the Iraqi Jews, they had a very large comm community in Shanghai. They had already shifted a lot of their money outside the country because they could read the writing on the wall. But the most Chinese they lost everything. But then they built up new fortunes in Hong Kong. Uh I mean in a way in a economically really astounding way. First in textiles, in toys, then in shipping and then in real estate. and now global. I mean this is an amazing success story but I want to say about the allocation of assets. I think that people in general, investors in general are grossly underweight emerging economies uh particularly in Latin America and Asia and their underweight oil and of course if you look at people around the world they own some gold and some precious metals but a tiny uh quantity with the exceptions of the true gold box like Eric Sprout and Tom Kaplan and so forth. But in in general, people don't own enough precious metals compared to the worstless to the paper currencies. All of them will become worthless. All of them. That I agree with friend. The dollar may not be the worst and may not become worse. The first >> I think I learned I think I learned that from you, Mark. >> It's also going to go down to zero. As well as all Trump related companies, they're going to go down to zero. All of them. >> All right. And Brent, I I don't think you you disagree about Mark's points about real assets holding their purchasing power much better against fiat currencies in the future, right? >> To totally agree. >> Okay, Mark, a quick question for you. Um uh I I totally understand your argument about um emerging markets being underowned and and them potentially having a relative uh outperformance versus the US market in this next cycle. In the short term though, do you worry that this inflationary shock that is propagating across the global economy right now because of the what's going on in Iran and the high oil prices, do you fear that that in the short term might hurt the rest of the world more than it will hurt a country like America? >> That I really don't know. I mean I see when I go out here that business has tumbled. I mean it's like a ghost town. But I think it has a lot to do with people uh being afraid. The psychology of the consumer has been hit very hard in my view. But at the same time you see Thailand is a country has relatively low population compared to the size of the country in terms of land mass and so we have never food shortages. We always have enough food and society is such that it is a helpful society. Anyone who travels around the world and comes to say Thai people are nice people which they are in many ways. They commit small crimes, but not that they would come into my office and knock me off is unlikely. Now, the US is building a huge consulate for $250 million US. Nobody knows for what, but they will house a lot of CIA agents and so forth. And then I have to be a bit more careful. But I bought already some crocodiles that are roaming around my ground. I just have to be careful that they don't bite the tires of my motorcycles. But in general, the country is very safe. That everybody agrees with as well as Hong Kong and Singapore. You can walk around Hong Kong as the richest man and nobody will bother you. same in Singapore. >> And I I want to assure you over time, people, especially people that have families, they will be concerned about having uh or living in a city that is safe. They don't want to live in Chicago and in Baltimore and so forth. >> Yeah, we've already seen that in America. I mean, thea safety and security was a big part of the last election. Probably will be the coming one. Brent, Brent, to your earlier point, Mark is like straight out of a James Bond movie, isn't he? He's got crocodiles and alligators and motorcycles. It's pretty awesome. >> Um, Mark, >> Mark, I want to ask you a question that I've asked Brent a number of times, and Brent, I'll I'll let you give your normal answer, too. Um so if are you familiar with the the the the um board game risk? >> Mark here. >> Okay. So BA basically it's it's a game of global domination and you you start off with a certain allocation of countries and then you try to take over the world. Um if you were if you had to place your a bet on a single country's prospects going forward and you could pick any country you want, which country would you pick? Which country do you think has the best prospects going forward in the great game of uh geostrategy? >> Is the question for Brent or for me? >> No, I'm sorry. The question's for you. I know Brent's I think I know Brent's answer. So, I want to I want to start with you. Well, I mean historically it's interesting that uh some countries dominated affairs chunk of the world like Jenis Khan and his successors the Mongols and they they were populationwise they must have been very tiny and yet they controlled vast territories. And so just looking at the picture today, if the US is vicious, they could probably control a fair chunk of the world. That is possible. The only issue with the US is to what what extent the people of the US would be fighting for the US. You understand? The US has many different people whereas the Mongols were Mongols and it was one tribe that believed in themselves and their leader and they went and rode through the lands and uh conquered essentially whatever they encountered. But the do you don't need to dominate the world by being the largest country. Britain wasn't the largest country. It has a small population much smaller than France. But it's interesting in the context of the Middle East that the decline of the British Empire was sealed essentially when they had to give up the can the Zou canal. That was really the end of the British Empire. And I I agree with Brent that it's a controversial call, but there is a chance that the US could be successful and uh kind of have the power to open the tab of oil to that flows to Asia or close it. Maybe they could be successful. I don't think they will be. I think it will be a total disaster. But the possibility is like when Germany went to into Russia in during the Second World War. They marched in in June 1939 or no I think 41. They could have been successful. they came close to being successful but they failed. So I think this um this conflict will be a major disaster for the US but I accept the view that that Brent holds that just they might just be successful and then they control the world. >> Okay, let's assume they're not though. Who which country would you would you think its its star would rise more brightly going forward most brightly? Is it China? >> Yeah. If if I if I didn't want if I didn't think the US has a chance, yeah, for sure China has a a meaningful chance because in a way it's a very homogeneous country. You understand? You have Chinese in America and you have Chinese in London and you have Chinese everywhere in Southeast Asia. The economy is already controlled by the Chinese in every respect because all the rich families I mean not all I'm exaggerating but say 90% of the rich families influential families in Indonesia, Malaysia, Philippines, Thailand are of Chinese origin and the Chinese is a Chinese no matter where he lives. M >> he has his village of the ancestors in China somewhere and his loyalty at heart is to China to nobody else. >> You're making me think of all these um birth tourists from China that are coming and having their babies in America. You're you're you're you're making the opposition's case for why we should end birthright citizenship here. Uh Mark. Um okay. So Brent, um we'll come to you. I think I know your answer, but you tell me. >> I mean, I've I mean, I've this is what my whole framework is based on is, you know, I've kind of done the analysis and I've and I've heard I've had a lot of people tell me I'm wrong, but I've had nobody provide me a suitable argument for why I'm wrong. um that I think that the United on a relative basis I think the United States North America is far and away the most secure the most self-sufficient and the most uh the ability to you know exert power um on on the map on the whole globe and you know the US has a head start and not only does the US have a head start but they have an enormous number of resources and advantages that the rest of the world just doesn't have. Now, that doesn't mean the United States hasn't committed atrocious sins along the way. Um, but if you believe that that's the case, that the United States has been a force for evil or however you want to define that, then don't you think they would continue to do that to stay there, right? Um, and so the idea that all, you know, we're just going to go through this, you know, 5, 10, 20 year period and all of a sudden the United States is going to fall and somebody else on the global stage is going to take their place. I don't think that's well thought out. Um I think what is more likely to happen and I I already know how this is going to go over, but I think I think what is more likely to happen is that we'll see the fall of the republic and the rise of the empire, but I think the power will remain in the United States. Um so anybody that says the empire is going to fall, I I don't think you've seen the empire yet. Um and I don't think anybody wants to see the empire to be quite honest, including me. But I think that's uh I think that's more likely than the opposite. >> All right, gentlemen. I'm looking at the time. We're going to have to start wrapping up here. So, we'll end this in the next few minutes. One thing I just want to note, Brent, I know that, you know, an increasingly substantial part of your view is the role of stable coins and we don't have the time to go into that here. So, I don't want to short change you on it. I'll just let folks know that you've written extensively on it. They should go to your your site and and read it. They can also go to Thoughtful Money's YouTube channel and watch some of the videos that you and I have done specifically on the stable coin topic if they want to just fully understand your point of view on that that new technology. Um, all right, Mark, coming to you uh just to sort of wrap up. So, you we had a lot of questions from folks about investing. I I I think you've largely answered this question, but for the road ahead, um, if I've taken good notes here, it sounds like you would say have a have a healthy exposure to hard assets, things whose intrinsic value can't be inflated away. This is things like, you know, gold and food production and agricultural commodities and energy and that type of stuff. Um I I think equities still play a role in your portfolio, but you would skew them towards international emerging markets versus the US. And then lastly, you think bonds uh still play an important defensive role. Uh so holding some bonds uh US dollar denominated probably not a bad idea. Did I capture that right or do you have a different recommended strategy? Yes, I think it's uh well summarized. I mean the main difference between myself and lots of investors is that uh most people sort of hate bonds and I can understand all the arguments and of course long-term bonds are going to be bad like in the 70s. I mean the when I started to work at White Weld at the time in 1970 in New York the 10 years treasury was yielding 6% and it went to over 15% and I became a friend of Henry Kaufman and before him Sydney Homer and Al Wnilau at first Boston Henry Kaufman is the first Dr. the doom because he predicted that interest rates would go up and Dr. V watcher they called him Dr. D because he was even more bearish than Mr. Henry Kaufman. But anyway, nobody expected interest rates to go up as much as they eventually did in 1988. And afterwards nobody expected interest rates to go down as much as they did. So these market movements may be very strong. But in the 70s I remember very well the we didn't follow the fed fund rate. We followed the discount rate and the prime rate which was the rate banks would charge to the high quality borrowers. And the prime rate went up and down a lot in different cycles. 1973 interest rates went up. Then 74 to76 they tended to go down and then they went up again and so forth. And although bonds were not a good investment, they were about as good as stocks were because as a bond investor, I want to tell you one of the problems is if interest rates go down, the money that is your cash flow is reinvested at lower and lower rates. So it's very important to structure the duration of the bond portfolio properly. >> Mhm. >> And I have sort of a worry. I mean I've read papers by Kevin Walsh the next Fed chairman as far as is uh likely to happen. He is a very brilliant intellectual. is uh very well informed about economic matters and I think he would make a very good Fed chair. But the conditions under which he becomes fed chair are quite horrible >> and he will have to print money and my concern at the present time for me I can get on deposits now around say 4 and a half%. But my concern is that in a year's time I may only get two 2% uh cash flow on my deposit. Right. So what are you doing with that money right now? >> Yeah, but that that's the point. I'm buying 10 years treasuries to some I mean I'm diversified always and I don't feel comfortable with anything but this is my nature that I'm worried about everything. I drive and in Thailand the traffic is the most dangerous thing you can engage in. as a pedestrian or as a car, you need to have eyes at the back and they come from everywhere. And so this is the thing. I mean, if the other day, you know, suddenly the price of oil is down 15% in one day. I mean, Brent may remember in 87 the Dow Jones dropped 21% in one day. 21% you know what 21% would be today >> be a huge number >> I so I think uh people must be prepared to endure a lot of volatility and I believe maybe the best is to take down your debts to reduce your debts and be well equipped to survive an asset deflationary period. >> As I took in my notes here, you said earlier the goal in this type of environment is not to try to maximize your gains. It's to try to minimize your losses. Yes, I think that is my view and you understand I'm older than you and uh especially friend and so I don't I'm not physically capable to be a waiter or a worker on in agriculture and therefore I have to be a little bit more prudent with my w with handling my assets because I depend on them and uh I still have a job. I write my newsletter, but the the assets concern me now. Not that I have sleepless nights, but I think that it's easier to wake up when your asset values goes up than wake up when your asset value goes down day by day by day. I don't know how I would handle this uh decline of my asset value by 50%, maybe I would become crazy or you may say even more crazy. >> Well, Mark, don't worry. Your your points are very gerine. I I think the data shows that the folks watching these videos are, you know, 50 and over, 45 and over. They're they're approaching retirement age or they're in retirement themselves. So they can't afford, you know, to to recover from a say a 50% drop. All right, Brent, coming to you. Um, how does your allocation, you know, your recommended allocation for this type of market environment differ if at all from what Mark just laid out? >> I think overall the allocation is probably not that much different, but where it's allocated is probably different. Again, um I agree with his assessment that there's a time to make money and a time not to lose it. And I think between now and the the election, I think it's probably a time not to lose it. After that could be a completely different story. Um um my my guess is that I would where he's allocated to foreign equities, I would say allocate those to US equities. Um whereas he has an allocation to 10-year bonds, I'm happy to keep it, you know, at, you know, two years or less or even T bills and, you know, earn 3% rather than an additional 1% by taking that duration risk. Um and where and you know kind of alluded to this earlier. One of the one of the areas that we're starting to allocate to is food and agriculture because we think we're going to see a rise in those prices. um maybe not over the next 6 weeks but over the next 6 to9 months >> and and and related to that what I would say is is if we get some kind of a peaceful resolution to this issue and as a result energy falls and food prices fall and anything that's you know has this supply shock bump to it in the short term I would use that as an opportunity to buy the dip because I think the real impact is going to be 6 to9 months from now not 6 to9 weeks from now Okay. And and Brent, when you say you're you're playing agricultural commodities, is that through like a generalized ETFs? Are you buying specific producers? Are you buying futures on the commodities themselves? How are you playing it? >> Kind of all all of the three. >> All of the three. Okay. All right, gentlemen. Well, look, this has been a fantastic discussion. Um, I very much enjoyed it. I hope the audience has, too. I just have some very quick wrap-up questions. Um Mark, it is not lost on the audience that you like to light up a cigarette during these discussions and folks are very curious. What brand of cigarettes do you smoke? >> I have a marble lights but I think they're fakes. They are because I buy them contra without tax. So I think they're fake cigarettes, but and someone smoked one and said it's horrible. I said to him, I sort of like it. I don't know. But uh I also quite like Camel aside from Malbor. I don't smoke strong cigarettes like Malbor Red, but the lights Marbor lights. And uh I drink beer and the beer I drink is usually beer ch is a Thai beer. The companies listed in Singapore is called Thai Beverage. >> All right. So when it when it comes to stocks, buy international stocks. When it comes to cigarettes, buy American cigarettes. When it comes to beer, buy Thai beer. >> Got it. All right. Bren for for you >> beer is the best. Belgian beer is the best. >> Belgian beer is the I think you'll probably get a lot of agreement in that in the comments below here. Brent, folks asked a similar question for you about steak. Are you a big steak eater? >> I you I grew up in Nebraska. We had steak like three times a week. When uh it's funny when I moved to college and then to New York, I never ate steak because I grew up eating steak so much that it wasn't even like a delicacy to me. It was just like that's just that's just like normal dinner, right? So I'm I'm I'm but I'm I I am very partial to Nebraska Sand Hill ribeye. >> Nebraska Sand Hill ribeye. Okay, great. So when folks >> I will say I will say I will say I don't remember his handle on Twitter but there's a very nice gentleman from oh I think it's independent arc independence arc on Twitter and he and I have interacted and he has sent me some stakes from time to time and they're fantastic. They're fantastic >> from that perspective, you know, go with him. >> So, when folks talk about the carnivore diet, they're just talking about the diet you grew up with then, huh? >> Pretty much. >> Pretty much. All right. Final question here, gentlemen. Mark, for people who have really enjoyed your perspective and this discussion and would like to follow you and your work after this video, where should they go? >> Well, I have interviews occasionally on YouTube, but I have a website. The website is called Gloom Boom Doom. All in one word. Gloom boom doom. And uh I mean I don't think it's particularly useful, but I have it. >> Well, I think you're >> what can I say? I mean, I'm not a great believer in uh knowledge about the future. I'm not a great believer in forecasting because I've seen so many good forecasts and an equal amount of bad forecasts. >> All right. Well, um I very much appreciate your newsletter. So folks, if you want to get marks, go to gloomboomdoom.com. And Brent, for folks that would like to follow you and your work, where should they go? >> Uh best place to go is to research.santiago.com. >> Okay, fantastic. And folks, if you like discussions like this, uh, you can go to my channel, thoughtfulmoney.com, where I interview Brent and Mark and many other similar experts. Uh, and you can get those videos there for free. Gentlemen, can't thank you enough. Great discussion. Um, great idea exchange and I look forward to seeing both of you again online very soon. >> This was fun. Thank you. >> Well, thank you very much, Adam. And it's very nice to meet you in person, friend, because I don't remember I I remember that we met once at an airport, but I didn't remember precisely the circumstances. >> There you go. >> But now that I see you, I sort of comes to my mind. >> Yeah. Yeah. Okay. Well, hopefully you guys get a chance to meet in person again very soon. Everybody else, thanks so much for watching and a special thanks to Zero Hedge for producing this debate. >> Welcome to a new Hey, hey, hey.
DEBATE | Marc Faber vs Brent Johnson: What Comes Next After The Iran War?
Summary
Transcript
Heat. Heat. Hallelujah. Heat. Heat. Heat. Heat. Heat. Heat. Heat. Heat. All right. Heat. Heat. Heat. Heat. Heat. Heat. Heat. Heat. Heat. Heat. Welcome to a new Zero Hedge debate. I'm Adam Tagert, founder and host of Thoughtful Money, and I'll be the moderator for today's discussion. As the USIsraeli war versus Iran continues to unfold, what will its legacy be for the US dollar specifically and American hegemony in general? Is this the beginning of a reset towards stability, another leg up in the markets and lower inflation? Or are the early stages of a broader economic unraveling tied to supply shocks, currency stress, and geopolitical fragmentation ahead? Simply put, what comes next? To unpack for us, we've got the good fortune to be joined by Dr. Doom himself, Dr. Mark Fabber, editor and publisher of the Gloom, Boom, and Doom report, as well as Brent Johnson, CEO and portfolio manager at Santiago Capital, best known for developing his dollar milkshake theory. Gentlemen, thank you so much for joining us today. >> Great to be here. >> And Mark, you're joining us as well, correct, my friend? >> Yes, of course I'm joining you, but I don't I didn't get any question. >> All right. Well, don't worry. We've got plenty of questions. Um, I prepared a number in advance of this discussion and I made the mistake of asking X if they had any questions for you guys and I got about several hundred thousand. So, we'll try to get through as many of them as we can in the uh the short time that we have here. Um, all right. So, to kick us off here. Um, Mark, let's start with you. Um, if you can just kind of ground our listeners in what was your assessment of America's prospects both economically and geostrategically prior to the Iran war breaking out and how, if at all, is the war changing that outlook? Well, I'm sort of of the view that the US economy is much weaker than the statistics that are published by the government liars will would suggest. In other words, uh the government paints a rosy picture of everything, but the reality is simply the following. If you uh increase the quantity of debts in a society, in other words, the borrowings go up. >> Mhm. >> You can generate some sort of uh some sort of prosperity. I mean, you you send everybody in America, there's 340 million people, you send each person a $10,000 check, I guarantee you that retail sales will go up, but then the borrowings will one day come due. And uh the the problem occurs right away in the sense that if you do that the bond buyers will demand a higher interest rate. In other words, the bond market will be sensitive to that economic travesty of sending a check to each citizen of $10,000 US and it will go down and uh in my view the western societies and not just the US but all the western societies have lived beyond their means. In other words, uh the interest payments on the debts are becoming burdensome. And in the US, as you know, the interest payments on the debts are now um the largest expenditure of the government and over a trillion dollars there. The latest statistic is $88 billion a month. And that is a large amount, you know, then has to be repaid. And the consequence of that is that although the Fed began to cut interest rates in September 2024, I mean, in other words, almost two years ago, the bond market didn't rally. Bonds went down. in those interest rates on long-term securities went up and that is a problem for an economic ignorant people the e ignorant person like Mr. Trump because he thinks he can call up the Fed and say, "Oh, you have to cut short-term rates because yes, he would like to pay lower interest rates." And maybe on his commercial properties in theory, lower interest rates would be advisable because commercial properties are going down in value. But for the economic system as a whole uh the lower interest rates may not be advisable because there are still inflationary pressures in the system you know uh especially after the war but already before the war I don't believe that anywhere in the world the rate of inflation was like around 2% this complete nonsense. Open the invoices of your insurance company. Everywhere in the world, insurance premiums are going up by something like 10%. Then you travel around everywhere the prices are up. And so my view is that the governments are understating the rate of cost of living increases everywhere and the and as a result of it most people are actually struggling around 70% of Americans and in other countries is not better around 70% of people they live paycheck to paycheck. They need the paycheck so they can pay the bills that occurred during the months. And I think this is sort of like a modern slavery. I don't think that people are particularly happy to sit there anxiously waiting for the salaries to pay their debts. And therefore my outlook for the economy was already before the war in Iran was not favorable. But it doesn't mean that because it's unfavorable the bond that the bond market would rally a lot. I own bonds and I will explain later on why. But uh I find there is a diverging performance between the financial markets that have gone into the sky and the real economy of people that is flat on its back. >> Okay. Um very good introductory u summary of your perspective here. Um has a lot to do with the amount of debt that the company that the nations are are sort of wantingly uh building up here. Um and you've got a lot of concerns about inflation and again this was all pre uh the Iran war. Um Mark, I'm just curious real quick answer then I'm going to get to you Brent. Um uh you know obviously with the price of oil going above a hundred bucks a barrel that's sending an inflationary shock uh through the global economy right now um TBD but there may actually be some supply shortages um as a result of ships not making it out of the the straight of Hormuz. So, I got to think, Mark, with all the the the spending that's being done in the war by America, um, and these inflationary knock-on effects like I just mentioned, uh, the Iran war can't be helping the situation. And so, I'm curious from your perspective, is it making it a little worse, a lot worse, or somewhere in the middle? >> Uh, in my view, no war is helping the situation quite frankly. But uh but this war is very nasty and it in my view will last forever because it occurred for no reason. Quite frankly, I don't see why anyone would attack Iran. Of course, they have not the nicest intentions, but the others have no nice intentions towards the regime in Iran either. It's a sort of a a situation where diplomacy failed massively. And the arrogance of the western world is uh incredible because uh the western world they gave up colonialism. That is true. After the second world war the colonies essentially became free. But it was followed by a neoc colonial age where western countries uh and noticeably the US feels that they sort of should arrange the world according to their own beliefs and their own views and as you know in the US the views are very diversified so it's very difficult to to say this is really our policy and what has happened at the same time that the US still believes to be the world's hegemony in terms of power and science and everything what happened in the last 30 40 years is the rise of emerging economies notably China with which in many sectors has become the dominant country. The US is no longer leading in every sector and uh now we have the rise of India and the issue is this we in the western world not only in the US we are drowning in debts now I'm not saying that China has no debts but they have debts because they build tunnels and bridges so They fostered economic growth and economic development and an increase in the standards of living of all people not just the rich. And in the western world we have high debts because we spend too much on maintaining the standards of living of people and at handing out money to people and at doing unprotective act activities. >> Okay. All right. So, um, you know, outlook of western sclerosis, the rise of some of these larger countries and the rest of the world, but the war making the general things you're concerned about worse, and you've got a big concern that this war could be going on for a very long time. All right, Brent, coming to you. Um, I'd love to hear kind of, you know, your reaction to to to Mark's um, intro there in terms of the biggest similarities and differences to kind of your general framework. Um, and I'm going to guess one of the areas where you you you you'd potentially disagree is Mark sort of paints a picture of the sun setting on the Western Empire here. You may have a slightly different view. >> Yeah. Well, first of all, let me say this. I've been a big fan of Marks for a long time and I have a short story to tell. about uh 15 years ago, I was going to a conference in Vancouver and it just so happened that I was in line behind him, directly behind him in customs and I was so excited to talk to him and I finally like tapped him on the shoulder and introduced myself and he was so nice and we said we we talked for about 10 minutes while we were waiting to go through customs. So he won't remember that, but I remember it very well. And so uh I don't really disagree with a whole lot of what Mark has said so far. Um what I would say is that he has focused his analysis for the most part on the west and I think his analysis is correct. Uh but what I would point out is that inflation is higher in Russia than it is in the United States. Inflation is higher in India than it is in the United States. inflation is much higher in Iran than it is in the United States. And so while uh you know we definitely have a number of challenges and they are going to be incredibly difficult to overcome the whole world has challenges and like it or not it's a relative game until you know Elon takes us to Mars. you know, the earth is the battlefield and that's, you know, that's kind of the way it's always been. And I haven't seen anything that convinced me that that's no longer the case. And so, if the United States is going to lose dominance, somebody else has to take it. And, you know, in the last year, the United States flew a mission over Iran and dropped a number of bombs, came home within 24 hours with no, you know, harm to the United States. They went into Venezuela and kidnapped a sitting president and brought him back to the United States. Um they forced Kier Armor to change his position on a little island in the middle of the Indian Ocean and in the last six weeks they have launched an attack against Iran again and nobody has done anything to stop it. Now, within Iran, there's a big battle. And I fully admit that that is could very well be a huge miscalculation. And I'm open to the fact that it's the biggest blunder in American geopolitical history. But I'm also open to the fact that it might work. And I feel like a lot of the analysis that I've come across in the last month, if you say that it just might possibly out of some stretch of the imagination work, they think that you are saying that it's automatically going to work and that it can't possibly fail. And that's not what I'm saying at all. And what what I'm saying is, like it or not, countries do use military force to get what they want. I don't particularly like it. I don't particularly think they should do it. And I personally wouldn't have advocated for this move in Iran. Now having said that, I understand why they did it. I understand why they did it at this time and I understand how it could possibly work to the US's advantage. Now again, we don't know. I think a lot of people are jumping to conclusions on this, but what I do know is going to happen is we are going to get an in at least a short-term inflationary impulse. And it could be a pretty severe inflationary impulse. And it won't just hit the United States. And in fact, it may hit the United States the least, but it's still going to hurt. It's going to hurt a lot. But I think it's going to hurt the rest of the world more than it hurts the United States. Um, part of the problem is that it's not just an energy story. I think everybody is focused, or not everybody, a lot of people have focused on the energy impact, especially when you consider we're just now going to be in the summer driving season here pretty soon and gasoline and energy prices are already up. Um, and how that could dramatically negatively affect the US economy. And again, I I don't dispute that at all. But probably the bigger impact that I worry about is the fact that fertilizers and chemicals also get transited through the straight of Hormuz. And the timing of this happening is impacting the planting season for both the summer season in the northern hemisphere and the winter planting season in the southern hemisphere. And it's my expectation that even if the straight fully opens tomorrow, which it won't, and I don't think that this ceasefire will hold, but hopefully it does. Uh but even if it even if it holds and the straight fully opens tomorrow, uh there's going to be a 4 to six week period where most ships don't arrive. In other words, the last ships are arriving now. Uh they arrived in Europe like over the weekend. They're kind of or sorry, they arrived in Asia late last week and over the weekend. They're starting to arrive in Europe uh this weekend and I think the last ships arrive in the United States next week or the week after. And then after that there's nothing or maybe just a few ships and that is going to have I think a material impact on food prices six to nine months down the road. And once you get food price rises and food shocks, then you get social shocks and then you get people uh you know out in the streets chanting uh uh death to everyone, not just death to America. So uh I I think Mark and I that's a long way of saying I think Mark and I see things very similarly. Um but perhaps uh I take a little bit bigger view. >> Okay. Um Mark, I'm going to let you react to that in just a second. I am going to just for the purposes of this discussion underscore I think we'll find out. I think one of the areas you guys are going to disagree more will be the fate of the US dollar at least over the next you know foreseeable several years. Uh but we'll get to that in just a moment. Um, so Brent, real quick, I I I presume not only do you expect to see higher prices in some key commodities as you just mentioned, but that if the straits remain compromised for even longer, um, then you think we may start to actually see some physical shortages as well. Is that correct? >> Yeah, I do think that that is correct. >> All right, Mark. Um, I'll give you a chance to react to anything that that Brent just said there about inflation and and potential shortages. Um, I'm curious, too. I'd like to get your thoughts on what you think is likely to happen with the Straits going forward. You know, will will Iran be able to keep the straits as asleeper? Now, going forward, we just saw this morning that uh not only is Iran now saying that they want to uh get a tribute essentially of about a dollar a barrel of oil per tanker that goes through there, um but they want it paid to them in Juan or cryptocurrency. Um so, we'd love to get your reactions to that as well. >> Well, actually, I have first a question for Brent because I'm very interested in his thought. Uh the first question is if I heard it correctly, you said there was a good reason for the US to attack Iran. Is that correct? >> I I don't think I said there was a good reason. I said I understand why they did it. >> Yes, understand why. Why did they do it? >> Because I think Iran or actually Yeah. Okay. I'll just use the word I think because it's never good to talk in absolutes. But Iran is a piece of the chessboard that is extremely important. But I don't believe that Iran was 100% about Iran. It's more about the great power competition with China. And anybody who thinks that the great power competition with China is not a real thing, I would encourage you to check that premise a little bit. It is a real thing. Um, and right now between China and United States, there's somewhat of a standoff. Um, there's a hostage exchange going on. They need things from us and we need things from them. And each side is working furiously behind the scenes to shore up their side of things to become selfsufficient from the other. And when that point is reached, whether it's a year or 5 years from now, then all bets are off. And part of the US's plan is to dominate the energy aspect of the globe as they have for a long time. And that was part of the reason that Venezuela happened. And that is part of the reason that Iran is happening. Now, I know there's some people out there saying, "Well, great job because now Iran is China's ally and they're going to supply them not only with oil, but they're going to sell it to them in Yuan." And what I would say is I this game is not over yet. It's still ongoing and even if it doesn't work out perfectly and the straight becomes a mess for a very long time because I tend to agree with you this is not going to this could go on for a very very long time a very long time. And any disruption in the straight while it hurts everyone it hurts the United States less than everyone else. And while the energy coming through the straight and the chemicals coming through the straight and the fertilizers coming through the straight are disrupted, guess what part of the world has those things? It's North America. And so it does. Now listen, just just to be clear, I'm not saying that this will work perfectly. I'm not saying they can pull it off, and I fully admit it could blow up in their face, but that doesn't mean that's not why it's not happening. And so that I think that that's how I would characterize it. >> Yes, I I understand that uh this might be an objective, but to this I will respond the following. First of all, it's difficult to say who is hurt the most in a conflict because I could argue the per capita consumption of oil is very high in the US and it is extremely low in India and it is low in China. You understand? So, uh, Asian countries could live with shortages of energy probably better than Western countries. But, but I would need to have a precise analysis on the subject. But secondly, and this I strongly believe, you said that US did this and that last year and nobody intervened and they took out the president of Venezuela and nobody did anything about it and so forth. That is all correct. But I can guarantee you the Chinese and the Indians and the Russians and all the Asians, the one thing they will never allow is America to control the entire oil supplies to the Far East. That is not going to happen. And the Chinese have not intervened yet officially, but it is likely or it is happening that they and the Russians are supplying uh weapons to the Iranians uh because uh they may not want to get directly involved into a war. But if America tries to land on Carrick Island, I think it's going to be the limit. And if the American troops land on Iranian territory, I think a lot of people will be interested to send the troops as well to fight with Iran against the Americans. I think that is a big danger that could lead us in a major I mean incredible conflict that would last a very long time. So, you know, the original question, do I think that uh with my relatively cautious outlook of the global economy and certainly the US, does the crisis in the Middle East uh aggravate the situation meaningfully or a little then my view would be yes, the potential for a major explosion is there. Can I re can I respond here? >> Absolutely. >> Okay. So again background the better it is for the listeners. Go ahead. >> I don't disagree with anything that you have said. So let me just tick off a couple points. Number one, the countries in Southeast Asia may be able to win better with or or or handle negative consequences better. That is potentially correct. But energy is the most important input in the technology race between China and the United States, which is probably the biggest part of the power competition between the United States and China. Whoever wins the technology race probably wins the overall race and you can't win that technology race without the energy needed for the inputs. So that's number one. Um, the second thing I fully agree with you. I mean, this could become the biggest conflict in history. It's uh for for many many reasons. We we could we could spend five hours just on that topic alone. But I think or actually I know for a fact that you like gold and I know that I like gold and probably one of each of our favorite movies is Goldfinger, right? And uh you know there was a there was a strategy used by Goldfinger was he wasn't going to steal the gold. He wasn't going to take the gold. He was just going to make it so nobody else could get it either. Right. So to your point that China, Russia, the Southeast Asian nations will never let United States get control of Middle Eastern. Perhaps that's true, but doesn't mean that the United States can't use a Goldfinger strategy on the straight of Hormuz. And then what does that leave? That leaves the United States and Russia as the two biggest remaining natural resource providers. To which then people will say, "Well, then China can just get all its energy from Russia." Well, no, they can't because the infrastructure is not there to actually do that. And could they do it over a 5, 10, 20 year period? Sure, they could, but not over a fivemonth period. They could not do that. So, again, I don't disagree with what you're saying. I agree that it's fraught with risk. But the one point I would make and this is a point that I think is very important because I've had many conversations with people both online and in person about this over the last couple weeks. I had a great dinner in New York City uh actually two dinners in New York City last week where this was the topic of discussion. And the point that I made to them was that if you think that you and I are sitting here and we understand that Iran has mountains and it's going to be difficult for the US to make any kind of invasion and if you and I understand that drones can fly out and you know effectively shut down the straight of hormoons. If you and I understand that, I absolutely guarantee you despite your belief to the contrary that the United States knows that as well and the Pentagon knows that as well. And nobody at the Pentagon, nobody at the Pentagon, I can tell you this, nobody at the Pentagon thought that they were going to fly in and fix this in 48 hours. Anybody who thinks that is being more arrogant than the people than than they think that the United States is for arrogance for going in and doing it. Nobody thought this was going to be a 48 hour operation. Everybody knows that this is extremely risky. war never survives the first contact or the battle plan never ever survives first contact. That's literally, you know, military education 101. So the idea that the United States wasn't prepared for this or had no idea that any of these things can happen, it's just fundamentally incorrect. Now, that does not mean that this is a fantastic plan. It doesn't mean it will work, and it doesn't mean extremely bad side effects won't happen. And I think we're probably seeing some of those bad side effects already baked in. Um, but anyway, that's that's that's kind of my retort to that. >> Brent, let me just ask a point of clarification. So, you you mentioned the Goldfinger strategy, right? Um, it's not that we want to take it, it's we want nobody to have access to it. In your mind, what what does a Goldfinger strategy look like in Iran? Is it just somehow keeping the straits closed or is it like blowing up Car Island? I mean I this kind of gets to the other thing. Um you know people on Twitter are upset that they're not the military is not sharing their exact plan how they're going to solve this situation. Of course the military is not going to share their exact strategy and exact plan. Short answer is I don't know. But I know there's several different ways that they can do it. And this is the other thing I'll say and this is it's kind of the same point that Mark was making. He his point was China, Russia and Saudi Arabia or the the Southeast Asia will not tolerate the United States controlling oil from the Middle East. Okay, that's a that's a very fair statement and I agree with him. The correlary to that is the United States will not tolerate all of the oil from the Middle East flowing to Southeast Asia and China. And I think that they have a number of tools and a number of things that they can do to disrupt that if it came to that. Now, I don't The other thing is I don't think they want it to come to this. The United States does not want World War II. They might get it, but that's not what they want. And I don't think they want to crush China because crushing China doesn't help anybody. There is a, you know, mutually assured destruction thing here, right? What the United States is trying to accomplish is actually harder than crushing China. what they're trying to do is keep China running, keep them growing, keep them efficient and part of the global uh, you know, economy without letting them surpass the United States. And that is incredibly hard to do. So anyway, that's uh that that that's that's my take on it. All right, Mark, do do you have any additional digging into that with Brent or I have another sort of related but larger question for you. So, >> the only comment I have and I understand Brent's views and arguments very well. The only counterargument I have is I believe the mission started out in complete ignorance by Mr. Trump. He woke up one day and said, "Let's do it." Uh, whatever the reasons may have been, some people say it had to do with the Epstein files, which I think is quite likely. But now that the US is in this actually difficult situation for the US and Israel is also in a difficult situation because they're dealing with people who are actually prepared to endure or have the population endure extreme hardship to stay in power. The Iranian regime, the mulas, they cannot admit defeat. You understand it? It's a survival question for them. >> 100% agree with you. And this the survival question for them has hardened their resolve and the population of Iran is now more supportive of the regime than it's probably been in a long time. Not 100% but to a large extent. And in my view, I mean, as of today, I'm telling you, this is a a widespread view, the American prestige has lost out a lot, a lot. And the sympathy for Israel has also diminished a lot until now. The Chinese haven't done anything. The Indians haven't done anything. They are actually up to today a relative winner as well as the Iranians but we know don't know how it will go on. I understand the argument but I think this argument that it's actually beneficial for the US for the reasons Brent outlined in terms of relative uh attraction of the US uh in the field of energy and so and uh to contain China. I understand that but I did I don't think that the US thought that in the first place that the strategist thought and now they're using it as an excuse for having done it but they went in without that knowledge. >> Okay. And you know what we we don't know for sure. We'll hopefully know over the scope of time as historians cover this. And Mark, I know you're a big fan of history. But Mark, you took it your answer right where I wanted to go, which was what is the war doing to American prestige? Um, you seem to think that it's really damaging American prestige. So, how do you expect that to manifest? Um, will that be a an acceleration of countries trying to ddollarize, of countries trying to reduce trade with the US? What do you see as the knock-on effects of that that diminishment of prestige? Well, Brent, he may have another view, but a country like China or India or Russia or anyone would be crazy to hold all his its assets in the US because I mean actually any country in the world because any country would say well if the US doesn't like me anymore, they'll do a Venezuela, they take me out or they freeze our assets and so forth. So it's an incentive for countries to de diversify their assets and uh it doesn't mean that the dollar will go down that I'm not saying but it means that other assets may have more upside potential and that uh countries will continue to diversify and as the percent of total global reserves that the importance of the US dollar will diminish. It's been diminishing for the last like 50 years but it may diminish more or there may be even an acceleration doesn't mean the dollar goes down because as uh red said India has more inflation and other countries have more inflation. So uh the dollar may be relatively favorable against other paper currencies. We have to specify that maybe the dollar may be relatively strong against other currencies whose purchasing power is going down at an even faster rate than the US dollar's purchasing power. But in this scenario, you want to be in assets uh that cannot be printed by an central banker who has no clue about anything. >> Okay. So, so gold obviously springs to mind. Um is that in your basket and and what other assets would you put in there as well that you think would appreciate on an accelerating basis versus the dollar? Well, I I sort of happen to agree with Brent about the potential of food shortages. In such a situation, you should live on a farm and have plenty of land. Uh but I can tell you out of farms, it's difficult to make money. But it's safe. uh do you have your food supplies and so forth and uh is a lifestyle lifestyle question. And the other thing is uh in a situation where things become bad, you have to change your strategy and say to yourself, I'm not here to maximize my profits. I'm here trying to minimize my losses. >> So say in a global collapse, lots of people will lose everything and lot of people will lose 50% of what they have because they are in real estate and so forth. And if you lose only 10%, you're like the king. So I think investors should change the strategy of always thinking asset prices will go up. Do the thinking of a lot of things will go down and how do I survive best in an environment that is unfriendly for asset prices because inflation comes in many different ways. uh it's very difficult to define precisely what is inflation and it touches a society and an economy in very different ways but uh we had a colossal asset inflation for the last 40 years as a result of continuous declining interest rates uh between 1981 September 81 1 10 years at 15.84% interest and now we're that we went down in August 2020 to 0.57 on the 10 years. Now we're a touch above 4%. But the trend in my view for interest rates is upwards and Trump will make sure they'll go up in the long run. But near term, maybe bonds are not so bad because this year the long-term bonds, the ETF, the TLT ETF is down 1.6% which is much better than being down 10% in NASDAQ stocks. >> I I get the math, the relative math. real quick question on your list of things that you want to own in an inflationary environment or have better access to. I got to imagine energy is high on that list. Um you and Brett have both been talking about it. Do you think right now given the unfolding developments of the war, do you think that energy will continue to be an attractive uh investment sector? >> I think so. But I want Brent to tell us what his view is. All right. And Brent, I just got to preface all this by saying Mark seems like he drinks the milkshake. He was very, very particular there about saying, "Hey, look, you know, the dollar might actually go up versus all the other currencies." He's not calling for that. He thinks it's going to go down in purchasing power versus real things. But that to me, that sounds very similar to your outlook. >> Yeah. No, I think I listen, I think Mark and I share a lot of very similar views. And like I said, I've followed his work for god two decades now. And uh I have uh Man, I we should be there together. I I didn't know we were going to be smoking. I would have brought my cigarette. >> Well, you're free. I can send them over. I press them against the screen. >> Yeah. Yeah. Yeah. Yeah. Um so yeah. So I I I think listen, I think Mark and I see a lot of similarities. I think uh I and I don't really know where we disagree that much other than I I I think I guess probably I think there's a higher degree um of likelihood that through this crisis, through this chaos, through this coming forth turning, however we want to define this environment that we're in, I think that the United States and North America is better positioned to come out on top than many people. And my guess is I think they're better positioned uh than Mark thinks. But I I I don't want to put words in his mouth. >> That is correct. I agree with you. I have a very negative view for the Western world uh following this conflict and specifically for the US a very negative view >> extremely negative that I I that is the point where we would disagree. Do you think the US will come out surprisingly strongly out of this conflict? And I think it's a complete disaster for the US completely. >> So let's dig into that and I'll let Brent, I'll let you respond any way that you want, but let me put this question out there for both of you. Do you expect the world from here to increasingly ddollarize or increasingly dollarize? Brent, why don't we start with you? So I think they will continue to try to ddollarize and I think they will be very unsuccessful in doing so. Um and then I'd put a caveat on that. I believe the governments and the bureaucrats and the politicians will try very hard to ddollarize, but I think their citizens will try very hard to dollar to get out of their local currencies. So I it kind of depends on who you're talking about doing the ddollarization and the dollarization. >> All right. And how much of a percent of your your position, Brent, has to deal with stable coins versus other dynamics? >> Oh, a big part of it. I mean, I'm, you know, you and I have talked about this and I I'm the first to hold up my hand and say I missed it when it first came out and that that was a mistake on my part. Um, but I I think stable coins are going to revolutionize uh global monetary matters. And I I think I've said this to you before. I think that US dollar stable coins and the US um kind of officially sanctioning them or or blessing them um you know, sanctioning them in the positive sense, I think has the potential to be as transformative to the global monetary system as when the United States left the gold standard. Um, and it doesn't mean it's going to happen tomorrow, but uh I think in the fullness of time um it will be seen as an incredible incredible innovation. One one thing I would say with regard to a point that Mark made where again I I don't disagree with him but there's always two sides to every uh you know every point and that is would the rest of the world be crazy to put their assets in the United States? Yeah, they would be. But you'd also be crazy to put them anywhere else. And you know, the idea that the United States is the first country in history to confiscate assets is it's kind of funny to be honest. I mean, China has a history of confiscating assets. Russia has a history of confiscating assets. Germany has a history of confiscating assets. Only a couple years ago, you know, the Canadian government locked down the monetary uh accounts of some of its own citizens. Um, so this idea that the United States is the first one to do this is is just provably incorrect. And the other thing is the big big part of my thesis and my whole framework is the Euro dollar market. The Euro dollar market literally started because the Soviets didn't want to put their money into a US bank for fear of confiscation. So they put that money, they put their dollar holdings into European banks which then over time went exponential and built this US dollar prison that the whole world is now uh you know stuck inside. Um so yeah, it's it's risky putting your money with the United States, but it's risky putting your money with any government. And you know, if people haven't picked up on this yet, I would say literally, you know, governments are not your friends, right? You can view them that way if you want to, but they sit on the other side of the table from you. And so, you know, but you do have to put your capital somewhere. Global asset allocators have to put their capital somewhere. And on a relative basis, I think more will be allocated to the United States than elsewhere. And if I'm wrong, I can live with that. So, that that that that's kind of my view on that. Mark, your reaction? >> Well, I understand that capital has to be put somewhere, but I think that uh capital flows uh where we have to distinguish. We have sovereign capital, government capital and we have private capital. Private capital flows where the profit opportunities are the best. And as you know, for the last 15 years until the end of 2024, early 2025, the US outperformed just about everything massively in terms of uh of wealth creation. I mean the S&P went up and is now more than 50% of the world's stock market capitalization and of the MCI index is close to 70% and so forth and so on and emerging markets and Europe became very cheap. Now I think there is a major change occurring in the world in the sense that last year many emerging markets grossly outperform the US as well as European markets they all were went up more than the US and even this year we have many emerging markets that are up much more than the US or down less. So I think we're in a very important economic and uh historical what I would call a shift period a changing period where major changes are occurring and uh one of these changes the symptom of it is the war in Iran and uh I I have say my assets So I'm diversified. I live in Asia and so my major stock investments are in Asia and because I have a Swiss passport, I also have a Swiss portfolio and European portfolio. But basically uh my bond holdings and cash is mostly in US dollars. And for me it would be horrible if there was a complete collapse of US dollars. this and in reality that this possibility I hedge by being a large holder of precious metals and you know the argument of friend that governments are not necessarily for your friend not I agree 100% they are actually the greatest enemy of people are governments especially in democracy But uh at the same time the expropriation issue is something that a citizen has to consider very carefully because as Brent said say after the second world war when China became communist and the whole eastern front and the Soviet Union became communist they took everything away. I know people they were immensely rich in China and they came out of China in 49 penniless, not a penny. Some had been smart uh because they had already uh experienced the hardship of fleeing a country before. Say the Iraqi Jews, they had a very large comm community in Shanghai. They had already shifted a lot of their money outside the country because they could read the writing on the wall. But the most Chinese they lost everything. But then they built up new fortunes in Hong Kong. Uh I mean in a way in a economically really astounding way. First in textiles, in toys, then in shipping and then in real estate. and now global. I mean this is an amazing success story but I want to say about the allocation of assets. I think that people in general, investors in general are grossly underweight emerging economies uh particularly in Latin America and Asia and their underweight oil and of course if you look at people around the world they own some gold and some precious metals but a tiny uh quantity with the exceptions of the true gold box like Eric Sprout and Tom Kaplan and so forth. But in in general, people don't own enough precious metals compared to the worstless to the paper currencies. All of them will become worthless. All of them. That I agree with friend. The dollar may not be the worst and may not become worse. The first >> I think I learned I think I learned that from you, Mark. >> It's also going to go down to zero. As well as all Trump related companies, they're going to go down to zero. All of them. >> All right. And Brent, I I don't think you you disagree about Mark's points about real assets holding their purchasing power much better against fiat currencies in the future, right? >> To totally agree. >> Okay, Mark, a quick question for you. Um uh I I totally understand your argument about um emerging markets being underowned and and them potentially having a relative uh outperformance versus the US market in this next cycle. In the short term though, do you worry that this inflationary shock that is propagating across the global economy right now because of the what's going on in Iran and the high oil prices, do you fear that that in the short term might hurt the rest of the world more than it will hurt a country like America? >> That I really don't know. I mean I see when I go out here that business has tumbled. I mean it's like a ghost town. But I think it has a lot to do with people uh being afraid. The psychology of the consumer has been hit very hard in my view. But at the same time you see Thailand is a country has relatively low population compared to the size of the country in terms of land mass and so we have never food shortages. We always have enough food and society is such that it is a helpful society. Anyone who travels around the world and comes to say Thai people are nice people which they are in many ways. They commit small crimes, but not that they would come into my office and knock me off is unlikely. Now, the US is building a huge consulate for $250 million US. Nobody knows for what, but they will house a lot of CIA agents and so forth. And then I have to be a bit more careful. But I bought already some crocodiles that are roaming around my ground. I just have to be careful that they don't bite the tires of my motorcycles. But in general, the country is very safe. That everybody agrees with as well as Hong Kong and Singapore. You can walk around Hong Kong as the richest man and nobody will bother you. same in Singapore. >> And I I want to assure you over time, people, especially people that have families, they will be concerned about having uh or living in a city that is safe. They don't want to live in Chicago and in Baltimore and so forth. >> Yeah, we've already seen that in America. I mean, thea safety and security was a big part of the last election. Probably will be the coming one. Brent, Brent, to your earlier point, Mark is like straight out of a James Bond movie, isn't he? He's got crocodiles and alligators and motorcycles. It's pretty awesome. >> Um, Mark, >> Mark, I want to ask you a question that I've asked Brent a number of times, and Brent, I'll I'll let you give your normal answer, too. Um so if are you familiar with the the the the um board game risk? >> Mark here. >> Okay. So BA basically it's it's a game of global domination and you you start off with a certain allocation of countries and then you try to take over the world. Um if you were if you had to place your a bet on a single country's prospects going forward and you could pick any country you want, which country would you pick? Which country do you think has the best prospects going forward in the great game of uh geostrategy? >> Is the question for Brent or for me? >> No, I'm sorry. The question's for you. I know Brent's I think I know Brent's answer. So, I want to I want to start with you. Well, I mean historically it's interesting that uh some countries dominated affairs chunk of the world like Jenis Khan and his successors the Mongols and they they were populationwise they must have been very tiny and yet they controlled vast territories. And so just looking at the picture today, if the US is vicious, they could probably control a fair chunk of the world. That is possible. The only issue with the US is to what what extent the people of the US would be fighting for the US. You understand? The US has many different people whereas the Mongols were Mongols and it was one tribe that believed in themselves and their leader and they went and rode through the lands and uh conquered essentially whatever they encountered. But the do you don't need to dominate the world by being the largest country. Britain wasn't the largest country. It has a small population much smaller than France. But it's interesting in the context of the Middle East that the decline of the British Empire was sealed essentially when they had to give up the can the Zou canal. That was really the end of the British Empire. And I I agree with Brent that it's a controversial call, but there is a chance that the US could be successful and uh kind of have the power to open the tab of oil to that flows to Asia or close it. Maybe they could be successful. I don't think they will be. I think it will be a total disaster. But the possibility is like when Germany went to into Russia in during the Second World War. They marched in in June 1939 or no I think 41. They could have been successful. they came close to being successful but they failed. So I think this um this conflict will be a major disaster for the US but I accept the view that that Brent holds that just they might just be successful and then they control the world. >> Okay, let's assume they're not though. Who which country would you would you think its its star would rise more brightly going forward most brightly? Is it China? >> Yeah. If if I if I didn't want if I didn't think the US has a chance, yeah, for sure China has a a meaningful chance because in a way it's a very homogeneous country. You understand? You have Chinese in America and you have Chinese in London and you have Chinese everywhere in Southeast Asia. The economy is already controlled by the Chinese in every respect because all the rich families I mean not all I'm exaggerating but say 90% of the rich families influential families in Indonesia, Malaysia, Philippines, Thailand are of Chinese origin and the Chinese is a Chinese no matter where he lives. M >> he has his village of the ancestors in China somewhere and his loyalty at heart is to China to nobody else. >> You're making me think of all these um birth tourists from China that are coming and having their babies in America. You're you're you're you're making the opposition's case for why we should end birthright citizenship here. Uh Mark. Um okay. So Brent, um we'll come to you. I think I know your answer, but you tell me. >> I mean, I've I mean, I've this is what my whole framework is based on is, you know, I've kind of done the analysis and I've and I've heard I've had a lot of people tell me I'm wrong, but I've had nobody provide me a suitable argument for why I'm wrong. um that I think that the United on a relative basis I think the United States North America is far and away the most secure the most self-sufficient and the most uh the ability to you know exert power um on on the map on the whole globe and you know the US has a head start and not only does the US have a head start but they have an enormous number of resources and advantages that the rest of the world just doesn't have. Now, that doesn't mean the United States hasn't committed atrocious sins along the way. Um, but if you believe that that's the case, that the United States has been a force for evil or however you want to define that, then don't you think they would continue to do that to stay there, right? Um, and so the idea that all, you know, we're just going to go through this, you know, 5, 10, 20 year period and all of a sudden the United States is going to fall and somebody else on the global stage is going to take their place. I don't think that's well thought out. Um I think what is more likely to happen and I I already know how this is going to go over, but I think I think what is more likely to happen is that we'll see the fall of the republic and the rise of the empire, but I think the power will remain in the United States. Um so anybody that says the empire is going to fall, I I don't think you've seen the empire yet. Um and I don't think anybody wants to see the empire to be quite honest, including me. But I think that's uh I think that's more likely than the opposite. >> All right, gentlemen. I'm looking at the time. We're going to have to start wrapping up here. So, we'll end this in the next few minutes. One thing I just want to note, Brent, I know that, you know, an increasingly substantial part of your view is the role of stable coins and we don't have the time to go into that here. So, I don't want to short change you on it. I'll just let folks know that you've written extensively on it. They should go to your your site and and read it. They can also go to Thoughtful Money's YouTube channel and watch some of the videos that you and I have done specifically on the stable coin topic if they want to just fully understand your point of view on that that new technology. Um, all right, Mark, coming to you uh just to sort of wrap up. So, you we had a lot of questions from folks about investing. I I I think you've largely answered this question, but for the road ahead, um, if I've taken good notes here, it sounds like you would say have a have a healthy exposure to hard assets, things whose intrinsic value can't be inflated away. This is things like, you know, gold and food production and agricultural commodities and energy and that type of stuff. Um I I think equities still play a role in your portfolio, but you would skew them towards international emerging markets versus the US. And then lastly, you think bonds uh still play an important defensive role. Uh so holding some bonds uh US dollar denominated probably not a bad idea. Did I capture that right or do you have a different recommended strategy? Yes, I think it's uh well summarized. I mean the main difference between myself and lots of investors is that uh most people sort of hate bonds and I can understand all the arguments and of course long-term bonds are going to be bad like in the 70s. I mean the when I started to work at White Weld at the time in 1970 in New York the 10 years treasury was yielding 6% and it went to over 15% and I became a friend of Henry Kaufman and before him Sydney Homer and Al Wnilau at first Boston Henry Kaufman is the first Dr. the doom because he predicted that interest rates would go up and Dr. V watcher they called him Dr. D because he was even more bearish than Mr. Henry Kaufman. But anyway, nobody expected interest rates to go up as much as they eventually did in 1988. And afterwards nobody expected interest rates to go down as much as they did. So these market movements may be very strong. But in the 70s I remember very well the we didn't follow the fed fund rate. We followed the discount rate and the prime rate which was the rate banks would charge to the high quality borrowers. And the prime rate went up and down a lot in different cycles. 1973 interest rates went up. Then 74 to76 they tended to go down and then they went up again and so forth. And although bonds were not a good investment, they were about as good as stocks were because as a bond investor, I want to tell you one of the problems is if interest rates go down, the money that is your cash flow is reinvested at lower and lower rates. So it's very important to structure the duration of the bond portfolio properly. >> Mhm. >> And I have sort of a worry. I mean I've read papers by Kevin Walsh the next Fed chairman as far as is uh likely to happen. He is a very brilliant intellectual. is uh very well informed about economic matters and I think he would make a very good Fed chair. But the conditions under which he becomes fed chair are quite horrible >> and he will have to print money and my concern at the present time for me I can get on deposits now around say 4 and a half%. But my concern is that in a year's time I may only get two 2% uh cash flow on my deposit. Right. So what are you doing with that money right now? >> Yeah, but that that's the point. I'm buying 10 years treasuries to some I mean I'm diversified always and I don't feel comfortable with anything but this is my nature that I'm worried about everything. I drive and in Thailand the traffic is the most dangerous thing you can engage in. as a pedestrian or as a car, you need to have eyes at the back and they come from everywhere. And so this is the thing. I mean, if the other day, you know, suddenly the price of oil is down 15% in one day. I mean, Brent may remember in 87 the Dow Jones dropped 21% in one day. 21% you know what 21% would be today >> be a huge number >> I so I think uh people must be prepared to endure a lot of volatility and I believe maybe the best is to take down your debts to reduce your debts and be well equipped to survive an asset deflationary period. >> As I took in my notes here, you said earlier the goal in this type of environment is not to try to maximize your gains. It's to try to minimize your losses. Yes, I think that is my view and you understand I'm older than you and uh especially friend and so I don't I'm not physically capable to be a waiter or a worker on in agriculture and therefore I have to be a little bit more prudent with my w with handling my assets because I depend on them and uh I still have a job. I write my newsletter, but the the assets concern me now. Not that I have sleepless nights, but I think that it's easier to wake up when your asset values goes up than wake up when your asset value goes down day by day by day. I don't know how I would handle this uh decline of my asset value by 50%, maybe I would become crazy or you may say even more crazy. >> Well, Mark, don't worry. Your your points are very gerine. I I think the data shows that the folks watching these videos are, you know, 50 and over, 45 and over. They're they're approaching retirement age or they're in retirement themselves. So they can't afford, you know, to to recover from a say a 50% drop. All right, Brent, coming to you. Um, how does your allocation, you know, your recommended allocation for this type of market environment differ if at all from what Mark just laid out? >> I think overall the allocation is probably not that much different, but where it's allocated is probably different. Again, um I agree with his assessment that there's a time to make money and a time not to lose it. And I think between now and the the election, I think it's probably a time not to lose it. After that could be a completely different story. Um um my my guess is that I would where he's allocated to foreign equities, I would say allocate those to US equities. Um whereas he has an allocation to 10-year bonds, I'm happy to keep it, you know, at, you know, two years or less or even T bills and, you know, earn 3% rather than an additional 1% by taking that duration risk. Um and where and you know kind of alluded to this earlier. One of the one of the areas that we're starting to allocate to is food and agriculture because we think we're going to see a rise in those prices. um maybe not over the next 6 weeks but over the next 6 to9 months >> and and and related to that what I would say is is if we get some kind of a peaceful resolution to this issue and as a result energy falls and food prices fall and anything that's you know has this supply shock bump to it in the short term I would use that as an opportunity to buy the dip because I think the real impact is going to be 6 to9 months from now not 6 to9 weeks from now Okay. And and Brent, when you say you're you're playing agricultural commodities, is that through like a generalized ETFs? Are you buying specific producers? Are you buying futures on the commodities themselves? How are you playing it? >> Kind of all all of the three. >> All of the three. Okay. All right, gentlemen. Well, look, this has been a fantastic discussion. Um, I very much enjoyed it. I hope the audience has, too. I just have some very quick wrap-up questions. Um Mark, it is not lost on the audience that you like to light up a cigarette during these discussions and folks are very curious. What brand of cigarettes do you smoke? >> I have a marble lights but I think they're fakes. They are because I buy them contra without tax. So I think they're fake cigarettes, but and someone smoked one and said it's horrible. I said to him, I sort of like it. I don't know. But uh I also quite like Camel aside from Malbor. I don't smoke strong cigarettes like Malbor Red, but the lights Marbor lights. And uh I drink beer and the beer I drink is usually beer ch is a Thai beer. The companies listed in Singapore is called Thai Beverage. >> All right. So when it when it comes to stocks, buy international stocks. When it comes to cigarettes, buy American cigarettes. When it comes to beer, buy Thai beer. >> Got it. All right. Bren for for you >> beer is the best. Belgian beer is the best. >> Belgian beer is the I think you'll probably get a lot of agreement in that in the comments below here. Brent, folks asked a similar question for you about steak. Are you a big steak eater? >> I you I grew up in Nebraska. We had steak like three times a week. When uh it's funny when I moved to college and then to New York, I never ate steak because I grew up eating steak so much that it wasn't even like a delicacy to me. It was just like that's just that's just like normal dinner, right? So I'm I'm I'm but I'm I I am very partial to Nebraska Sand Hill ribeye. >> Nebraska Sand Hill ribeye. Okay, great. So when folks >> I will say I will say I will say I don't remember his handle on Twitter but there's a very nice gentleman from oh I think it's independent arc independence arc on Twitter and he and I have interacted and he has sent me some stakes from time to time and they're fantastic. They're fantastic >> from that perspective, you know, go with him. >> So, when folks talk about the carnivore diet, they're just talking about the diet you grew up with then, huh? >> Pretty much. >> Pretty much. All right. Final question here, gentlemen. Mark, for people who have really enjoyed your perspective and this discussion and would like to follow you and your work after this video, where should they go? >> Well, I have interviews occasionally on YouTube, but I have a website. The website is called Gloom Boom Doom. All in one word. Gloom boom doom. And uh I mean I don't think it's particularly useful, but I have it. >> Well, I think you're >> what can I say? I mean, I'm not a great believer in uh knowledge about the future. I'm not a great believer in forecasting because I've seen so many good forecasts and an equal amount of bad forecasts. >> All right. Well, um I very much appreciate your newsletter. So folks, if you want to get marks, go to gloomboomdoom.com. And Brent, for folks that would like to follow you and your work, where should they go? >> Uh best place to go is to research.santiago.com. >> Okay, fantastic. And folks, if you like discussions like this, uh, you can go to my channel, thoughtfulmoney.com, where I interview Brent and Mark and many other similar experts. Uh, and you can get those videos there for free. Gentlemen, can't thank you enough. Great discussion. Um, great idea exchange and I look forward to seeing both of you again online very soon. >> This was fun. Thank you. >> Well, thank you very much, Adam. And it's very nice to meet you in person, friend, because I don't remember I I remember that we met once at an airport, but I didn't remember precisely the circumstances. >> There you go. >> But now that I see you, I sort of comes to my mind. >> Yeah. Yeah. Okay. Well, hopefully you guys get a chance to meet in person again very soon. Everybody else, thanks so much for watching and a special thanks to Zero Hedge for producing this debate. >> Welcome to a new Hey, hey, hey.