Market Outlook: Ed Dowd expects a 20–30% pullback within 3–6 months, followed by a failed countertrend rally that likely ushers in a broader bear market.
AI/Semiconductor Bubble: He sees AI and AI-adjacent semiconductors as a narrow, overheated driver of the indices, warning about double-ordering, inventory risk, and potential sharp reversals (mentions NVDA, SMH, SOX).
Bonds and Cash: He is pitching cash near term and long-duration US Treasuries (e.g., TLT) as potential top performers into a coming rate-cut cycle, citing multiple cycle lows in long bonds.
Energy/Oil Risk: The Iran-driven oil shock could lift headline CPI toward 5% near term and, in a worst case with oil $200–$250, briefly push inflation to double digits.
Housing: A broad housing correction is expected as rents cool, inventory builds, and regional price declines spread; homebuilder and financial stocks are not participating in the AI-led rally.
Gold: He favors a 5–10% allocation to gold, viewing current action as consolidation and projecting long-term upside supported by central bank and consumer demand.
Credit & Liquidity: Tightening in private credit and bank lending is a headwind; he suggests watching Bitcoin as a leading liquidity barometer for equity risk.
Tech Capex/Labor: Big Tech (e.g., MSFT, META, GOOGL) faces rising capex for data centers amid electricity/water constraints and social pushback, with layoffs likely to accelerate if AI payoffs disappoint.
Transcript
What I would expect to see sometime in the next three to six months is a healthy 20 to 30% pullback, scary, then a counter trend rally, the Fed starts cutting and then if we're in a bear market that counter trend rally will fail and then we'll go to lower lower lows, which I think yeah, we're we're almost there. I've never seen anything like this economically. The the disconnect between um you know, the consumer and the stock prices has never been wider. >> [music] >> Welcome to Thoughtful Money. I'm its founder and your host Adam Taggart. Today's guest entered the year pretty bearish on the prospects for the US economy, the global economy, the financial markets and the housing market. Well, now that we're five months into the year and embroiled in a new war with Iran, how has his outlook changed if at all? For insight, we're fortunate to welcome back to the program Edward Dowd, founder of macroeconomic consulting and research firm Finance Technologies. Ed, thanks so much for joining us today. Great to be here. Thanks for having me on again. Hey, it's always great Ed. Um you're a wonderful interview, also just a good guy. Um we were just talking before we turned the camera on here. I'm glad you made it through safely all those uh heavy rains and floods out there in Hawaii. We're glad you're still with us. Yeah, I'm glad I'm still here. I I almost I almost floated away in my car. I got caught in one of the flash floods, but I now I finally made it home during during the the the worst of it. That sounds kind of scary. Yeah, it was it was it was it was uh it was kind of a once in a 200-year event for Maui. I mean, it rained for a month. There were uh flash floods twice in in a week. Wow. Um but things are drier now, I hope. >> Oh, yeah. It's it's all we're back. We're on the mend. Okay. All right. Well, very glad to hear that's the case. All right, Um maybe going from one disaster potentially to another, who knows? It depends on your answer. You know, you and I talked a couple of times earlier this year and heading into 2026, if I took good notes, you were projecting a mild to moderately severe economic slowdown for the remainder of 2026. Is that still the case or if not, how is that outlook changed? No, it's well, I think when we talked, it was before the oil Well, we talked a couple of times, but we put out a report in January of this year. The oil price shock only makes it worse. Um So, forget the mild part, now it's moderate or >> Yeah, it's moderate to severe. Um And it's confusing for people because we change prior to the uh uh war beginning uh rates were headed lower. There was a growth growth scare beginning. Private credit was freezing. Payroll numbers were coming in bad. And then the war came and everybody focused over to war headlines. And then there was a nice rally which in a couple of podcasts uh prior to the bottom, I said we might go to new all-time highs in the market any kind of relief and we did. And the market has gone up on a very narrow participation. It's all basically AI and AI adjacent. Semiconductor stocks had a move that we saw similar to the 2000 top, 64% in five trading weeks. Um just unprecedented moves, very narrow participation. So, where are we? The S&P 500 is 5 and 1/2% above the highs we put in in January or February. The actual equal weighted S&P index is down from its high slightly. So, this is very narrow participation. It's all AI, that's the only thing that's working. The real economy has gotten according to the way we measure it has gotten worse. Housing prices are finally starting to give up the ghost. We had some bad home price declines in March, February, and March. I think we're waiting on April numbers. Home builders stocks are going lower. Financial stocks are going lower. They're not participating in this in this rally. So, once the S&P gives up the ghost, it'll become apparent to everybody and we think that's sooner rather than later. There's a scare on the long bond. Right now, basically everyone says it's the end for the long bond and long-term rates, but we've seen this before. The rates themselves are going to cause a growth scare and we're still very bullish on long the long bond. We like cash as the best near-term investment dry powder for picking up bargains on the other side of this, but nothing's changed in our in our economic outlook. Housing's gotten worse, the consumer's gotten worse, and we're going to see corporate profits get massively squeezed from this oil price shock cuz they're not going to be able to pass on the the cost to the consumer. So, we're going to see layoffs start to accelerate throughout the year as companies cut the factors of production because of the margin squeeze. We're already seeing layoffs. We'll see those accelerate. China China retail sales just came in. No surprise there. It was pretty dismal and we got the March China economic data. We're very bearish on China. That continues to go the wrong way. So, everything is globally and economically going south and people keep pointing to the S&P, which now everyone is now talking about I mean it's it's bubble talk. Everyone's talking about when does it end, not if it ends, but when. And some people are saying it's 99, we've got another year higher stock prices. I don't think so. I think I think we're going to see the growth scare come and be evident by the end of Q2, and the Fed I think the Fed is not going to raise rates. I think the Fed will be cutting sometime towards the end of this year. All right. Um so, one of the problems we now have, Ed, is you pretty much answered every question that I had already written out here for our discussion. So, maybe we're done here. >> [laughter] >> We'll we'll we'll peel the onion a little bit deeper here. Um you you said that your outlook hasn't changed at all. I'm going to I'm going to push back and say it sounds like it actually has changed. It's just gotten worse. Um with the with the Iran war, the higher oil prices, the rise in bond yields. Yeah, and uh the um the the the the oil price shock is is is really put the Fed in a box. They don't have the tools to deal with oil price shocks because it's a it's cost-push inflation, not demand-push inflation. So, And it's real it's real-world based. It's not monetary-based. You can't pick up a barrel of oil, yeah. >> Correct. And and demand destruction is coming. I'm just really surprised at how um people are not looking forward as investors. I was talking to my uh friend who manages he runs risk management for a $13 billion hedge fund. And and uh he's in agreement with my macroeconomic outlook, but he's just shocked at the fact that the the new cadre of traders and and investors have a 2-week outlook, and that's about it. They they they don't look out more than 2 weeks, and they chase what's working. And what's working is literally the last fashion of any kind of growth, but this growth is going to come under problems pretty soon. And it's it's uh it's AI and AI adjacent. So the S&P 500 is now 45% AI and AI adjacent. The Magnificent 7 36% and semiconductors are about 17-18% of the S&P 500 index, notoriously cyclical industry, and they're 30% of the NASDAQ. So what's really driven this last move in the S&P has been a very narrow sector with giant price gains. This The SMH and the SOX index are up 64% in 5 weeks, something crazy like that since the bottom that we put in April. Um and I've been here before, Adam. I mean I was I was there in March of 2000 as a tech analyst. And uh what we're hearing now is the word you don't want to hear in a semiconductor cycle, double ordering. Because this is what happened during the dot-com boom. Every purchasing manager needs They need these components so they can like build their products. So early on as as things become tight and AI I'll put a massive strain on the on the supply on the on the supply side. But then the oil price shock has people worried about helium shortages which go into the manufacturing of semiconductors. So that accelerated a lot of what we call, you know, pull forward demand, getting getting your supply. So each purchasing manager individually they need Let's say they need 1 million units. Well, they got they, you know, a couple you know, a couple quarters ago they started hearing, "Well, we can only give you half of that." So they they start double ordering saying, "I want I want 2 million." Yep. And then they get they get their million. And that that is the beginning of the end. And then when when demand when the demand destruction comes and flips, then they start canceling orders and all these semiconductor companies are stuck with inventory. Mhm. And that that's where we are. We're we're we're closer to the end of this than the beginning of anything. Okay. Um so I've talked to a number of people in the past week or two who have made similar comments about especially the performance in semiconductor stocks. And just say, you know, who was it? It was Cameron Dawson the other day who was quoting Bob Farrell's vertical moves don't correct by going sideways, right? So there are people that are thinking that are on the same page as you as saying, look, there's there's going to be some some uh froth removing event here in the near term on some of the stuff that's just gotten white hot, but they don't necessarily say, and then we think the market's going to really continue to to to roll over and and potentially close the year lower. I I get the sense that you expect it's going to correct the year lower. Is that correct? >> And we we still think that cash is the best place to be and if you're more of a an institutional investor or speculative investor, long duration US bonds and and 20 year 30 years and 20 years. And I have a friend who does a lot of cycles analysis. He's pretty good at cycles work. And we're coming into a cluster of timing band cluster of cycle lows in the long bond. It's the intermediate term low, the seasonal cycle low, and the three year low that are all clustering right now. Uh and so I his work is pretty good and everyone on Twitter today is so bearish the US long bond, it makes it makes me laugh. Yeah, I mean it's if that indeed does happen, it's going to surprise a lot of people right now. Um we'll get to bonds in just a minute here. Um So you know, at the end of the day what what drives stock prices for the most part is earnings expectations. And I know you expect demand destruction and earnings expectations to start coming down. You talked about how both the higher oil prices and the higher borrowing costs will pinch corporate profits. That's going to lead to layoffs. I totally get all of that. Um And I've had those same fears at times over the past several years. And um the challenge is is it it doesn't really matter to the markets and until the market starts seeing earnings estimates start to come down. And they're not yet. And a huge part of those earning estimates, as you said, are being driven by the just tsunami of of spending that's being done in the AI and AI adjacent space. Um do you expect some sort of real catalyst or trigger to start turning you know, start diminishing those earnings expectations? Or is this just like any bubble where we don't really know where the top is, but it's just mathematically out there and one day we're going to hit it. Yeah, I mean, look, the valuations last year was silly. They got even more silly. So we're at we're at crazy stock market valuations. And you know, I have people that I consult with some time to time and they you know, they'll they'll they'll get a inheritance and they'll be like, I have $4 million what should I do with it? Should I put it in the stock market? And I say, well, if you do now mathematically your return over the next 10 years is zero. So no. You know, wait. And that's where we are. I mean, you can you can you can hope that the AI bubble carries corporate earnings, but the the the the corporate earnings are mostly due to AI and and semiconductor earnings. That that's where all the the revisions are coming from. Those are probably and they're and if you look at look, I was on Wall Street. What they do with estimate forward estimates is they they they grow them continuously. And you know, second derivative is going to shift here pretty soon. And all all you need is a second derivative. One company to say there's a little weakness and the whole thing implodes. And I think that's coming soon. I think I think what you saw with the semiconductor stock was panic buying because of perceived shortages. And then the helium shortage really you know, people don't This is not well known in the public and maybe even in investing circles, but you know, purchasing managers are well aware of what's going on with helium. And they panicked and they they bought they they bought more than they did even for AI. So, I think I think the stock prices themselves are telling you the end is not in semiconductors at least. Whether that causes a general market problem remains to be seen. We have no structural evidence that there's a bear market yet, and you don't crash from tops. So, what I would expect to see sometime in the next 3 to 6 months is a healthy 20 to 30% pullback, scary, then a counter trend rally, the Fed starts cutting, and then if we're in a bear market, that counter trend rally will fail and then we'll go to lower lower lows, which I think yeah, we're we're almost there. I've never seen anything like this economically. The the disconnect between um you know, the consumer and the stock prices has never been wider. Joe Sixpack is struggling mightily. You know, you've heard from other people on your show, consumer credit uh credit card delinquencies are rising, auto loan delinquencies are rising. >> All all consumer credit is delinquency rising, yeah. Yeah, and that eventually is going to affect credit, and it's already affecting There's already a private credit problem. Um net flows in private credit are going the wrong way. They for the first time, I think in a long long time, there's been more net redemptions than there have been inflows to private credit. So, the credit engine, which was the the marginal producer of the credit the last few years, is private credit and private equity. That's shut off. And banks had already stopped making commercial and industrial loans and and and consumer loans in aggregate versus private the marginal creator of credit was private credit and private equity. Now, that's done. And uh if you want to look at a uh barometer for liquidity, keep watching Bitcoin. Bitcoin peaked in October of uh last year. Bitcoin is trying to rally, but it looks like it may have stalled out. So, watch Bit- Bitcoin will lead the any equity correction. All right. Um gosh, so much to talk about in here. Um let me ask you this. Uh you're doing a great job of pointing out a bunch of negatives. Um but there are uh you know, there are there are parts of the economy that are actually doing quite well. Uh I had uh uh [sighs] oh um Craig uh I'm blanking on his last name. Um it'll come to me in a second, but he's the CEO of of uh FreightWaves, which is the global um transport tracking um research firm. And he was despondent back in November. When I interviewed him about a month ago, he said, "I could not be telling a different story." Uh Craig Fuller, that's his name. Um the the the industrial economy, the US manufacturing economy, is is really booming now, and I don't see that I don't see that changing anytime soon. In fact, it just keeps building momentum here. Um so, you know, just just square that circle with me where we've got parts of the economy that actually seem to be getting stronger where you're painting a picture of a a very kind of dire um both economic and financial market future for the second half of this year. Well, it depends on where you are in manufacturing. Manufacturing jobs in the last payroll number were negative. Uh so there's there's there doesn't appear to be a wave of manufacturing jobs being created. Secondly, I would contend that a lot of the recent uptick you've seen in in in manufacturing has been a lot of people pre-ordering before the price shocks really come. And it's going to be it's an inventory build. >> Okay, so it's front-running. Front-running. Okay. Um all right. I I I get that. Okay, so >> And let's not you know, housing is 20 to 25 it's 20% of the US economy, 25% of the consumer economy. So, that's that that that is going into into into a decline. And that that's going to impact the consumption. Okay. So, and on housing housing has been frozen. Housing market's been frozen now for years, right? So, we've got low inventory. Um so you know, to a certain extent there are parts of industry that are just starving because transactions are low. Um but price hasn't really come down that much on a national average. Now, we've had certainly a number of markets where prices have cratered, you know, parts of Texas, Florida, etc. And I think that is, you know, the real estate experts I talked to, that that is a a contagion that is spreading across more and more markets in this economy. More inventory is coming on that's starting to let prices adjust downwards, but nationally we really haven't had a at least until maybe quite recently a national decline in average home prices. I'm guessing from what you're saying you expect that to turn into a full proper housing market correction. Cuz I think I think what we could say is on average the housing market has yet to correct. It hasn't been >> Yeah, and that that's not a good that's not a good thing. I'd rather see it correct fast. The faster it corrects, the better the the I'm Look, everyone thinks I'm a gloom and doomer. I I believe once we get this reset, it's going to be great. Um I think I think I think we're setting ourselves up for a nice economy on the other side of this as we transfer wealth from boomers who don't transact to young people who form families. So, that's >> Well, time time box that that then because that's not that doesn't happen in a quarter or even in a year. It's going to happen over a decade. >> That'll be two two years from now when everyone's bearish as all get out, that's when I'm going to be super bullish a year or two. Depending on how quickly asset prices The faster we adjust, the more bullish I get sooner. The the If this turns into a dot-com, you know, stock market decline of 50% and a a slow housing market decline, I'll I'll I'll I'll wait, but I'd love to see it happen quick quick. You know, you know, rip the band-aid off and then we come out the other side. Um you know, home prices So, we were tracking We made a a a We said And I'm, you know, we were we were kind of early to this. We said housing is going to roll over. We said that in January 2025, and we saw new tenant rents going lower. And those continue to go lower. All tenant rents are going lower. Home prices are Now, home prices are going lower cuz that Those all lead. New tenant rents lead. And what really is the big the big impact it has been the closure of the border and a lot of self-deportations from illegal aliens and, you know, some of the fraud. There were there were actually the FHA under Biden were were giving 100% loans to illegals to buy homes. That's gone. >> Yeah, I I I was literally just watching a segment on this yesterday, and I Sorry to interrupt, but I just want to note this cuz I want you to really dive into this if you can. So, I think one of the things This was a question I asked a lot of housing people over the previous years once immigration was really beginning to become an issue. Which is were illegal immigrants you know, artificially pushing housing prices higher and their general answer was I don't really think so. They're pushing rents higher and thereby you know, as rents as a function of housing prices, yes, they are but but these folks tend to rent than buy. But I think what we're finding out now is that not small number of them were actually able to get they were being given social security numbers by the the previous administration. They were able to use those numbers to get an FHA loan and you only need to put like 3% down to to get a house there and and now I think what they're finding is is now the people self deporting or or you know, they see ice in their neighborhood so they take off. They're finding these abandoned FHA homes now um and realizing that there's actually a fair amount of this. Yeah, you know, our our thesis was illegals were pushing up rents which you know, Yeah. >> kept that part of it. Yeah, that's what I was saying earlier too. >> is and we didn't we didn't want to say that they were buying homes but then it kind of came out that they were. So we're like, well that makes our thesis even more. Yeah, even worse, yeah. Yeah. So um yeah, so the home price declines really started in the south near the border. So the a lot of these red states along the border have been seeing the brunt of it and now we're starting to see national prices come down like I said in in in March uh uh and February and it's going to spread to the blue cities especially if we get into a lot of um uh tech layoffs and just general layoffs from the oil price shock. Uh we were you know, we were expecting layoffs to happen but the oil price shock only accelerates this in my humble opinion. It really does. Yeah. Uh sorry, let me let me ask you this. So we're [clears throat] actually seeing a fair amount of tech layoffs. I'll call it sort of housecleaning um or labor shedding where you know, the tech industry was famous, especially the big hyperscalers, the Googles, the Metas, etc., Amazons. They were kind of famous for labor hoarding. Right? Like I don't necessarily know what I'm going to do with this guy, but he's kind of smart and I don't want him going to my competitor and working on something, you know, that that could be against my interests. So, you had a lot of sort of excess talent being held at these companies. And I think starting about a year ago, they started realizing, okay, we can start letting some of these people go. And so, you you've been seeing this drumbeat of you know, 10,000 people here, 5,000 people here, 12,000 people here being let go by the Microsofts and the Metas, etc. That's going on while everything's going great in this hyperscaler world, right? And I think they're also thinking, too, well, we're going to use AI more in the future and need less of these people around and stuff. But if if if the if the tech sector experiences the type of correction that you think it's going to, what's going to happen to the volume of those layoffs? Are they just going to like are they just going to unleash the floodgates and just start firing tons of people or what would your opinion >> Well, let's let's let's look at the free cash flow of the of the tech companies. The free cash flow is going the wrong way because they're taking on tremendous amounts of debt to fund >> they're spending it all to build data centers, yeah. >> Yeah, to build data centers. So, if the profits if there comes a time where people realize there's no payoff on the other side of this, the funding dries up, uh and uh the you know, they're they're reporting earnings, but they're not cash earnings. I mean, they're they're it's a lot of circular token buying between each other with no cash exchanging hands. Uh at some point uh and all take is one person to start it start it. They scale back their cap backs, they start laying off people, then everybody will follow. And that's when the real massive wave of layoffs will come because cuz you know, they have all this tremendous amount of investment they've done that's been stranded. So, they're going to cut for factors of production. And and to be honest, you know, you put you touched on something. These tech companies, especially you know, were free cash flow generating machines and they did they hoarded a lot of capital and it was kind of like social like tech uh tech uh social um socialists uh spending. You know, they they And Twitter used to be notorious for this. Twitter had so many employees doing nothing. When Elon came in, he fired 80% of them cuz they were doing nothing. So, he kind of set set the you know, the standard like you don't need all these people. Right. Right. And and to be honest, I'm just I And I've been public about this. At the time he did that, I said, "Look, if Twitter's still running in 6 months, it's going to show the rest of Silicon Valley they need way fewer employees than they have." Um it's going to re- reset the standard of what an essential employee is. I think it has done that, but I I am surprised and have said I'm surprised that it is it seems to be taking Silicon Valley a lot longer to shed those excess employees than I thought it would. Right. And the other thing going on that people don't understand, and I anecdotally I picked this up from a former Google employee who wanted to tap out. He was looking He was looking to get a package and leave. Yeah. And by the way, they all do. I've I've at least the people our age do in Silicon Valley. They all want to tap out. Yeah. They want to tap out. They want a package. And uh if you're And what what was interesting, he was at Google and he wasn't involved in the AI part of the company. And he said if he said as as they rolled through time the last 2 years, if you weren't part of AI, your budgets were decreasing. Sure. So, so, you know, if you're in a if you're not part of the AI boom within these tech companies, you're kind of a non-essential employee and you kind of see the right you When your budget decreases and you're a manager, you have to let people go. So, you know, you don't want to be king of a shrinking empire. So, that's what's going on. They're they're starving other other parts of their business for the AI. All right. This is a little tangential, but um it's been in the news this week that uh there have been, I guess, a number of of commencement speeches now at colleges where the speaker and one of them was Eric Schmidt, a former CEO of Google, uh who got up there and sort of said, "Boy, you guys are lucky. You're launching into one of the greatest transformations in in you know, American world history. Um this this new AI age and there's going to be so much opportunity for you." And they pretty much get booed. And they get booed because I think the students are really thinking, "Oh, no, AI is seems like it's really working against us. We're we're we're finding it really hard to get jobs. We don't have a lot of confidence that even if we do get a job, that job will be around for all that long because it'll eventually get replaced by AI." So, there there definitely seems to be this sort of cultural backlash against AI or AI-adjacent stuff. Uh you've you've been reading about all the pushback on data centers. I live in Reno now and I think Reno's the first city that basically has um just voted to restrict future data center growth here because essentially it's created too much competition for the electrons between the data centers and the actual people that live in the area. Um so, uh like I said, this is kind of tangential, but I I uh What impact, if any, do you think sort of this potentially growing social backlash against AI might play in the mix here? It's super interesting and I've already seen the AI uh bulls come out and defend uh the students booing. This is the same sentiment occurred around the internet, which I was there, it did not. No one was booing anybody talking about the internet during >> Yeah, and I was there with you. I agree. Yep. And so that that did not happen. Um They get They get a They get a marketing sales pitch problem, and I've pointed this out on on X. Uh you know, their sales pitch seems to be white-collar jobs are going to disappear in 18 months. We need your electricity and your water. Good luck. That That's not a good pitch. >> [laughter] >> Crazy. You know, I was thinking about a tweet like that. It must have been your tweet that I was thinking about. Okay. >> Yeah, but and that's their pitch. These These executives actually say this. Now, I I've been Part of the reason I'm I'm I don't think the AI bubble is going to continue is because there actually is a shortage of uh you know, capacity to run these data centers, and there's not enough um water to do it. So, they're running into running into opposition. So, I I'm of the opinion CapEx is going to be scaled back as they realize they can't plug into anything. And there's somebody on X um who who's an analyst who's running around the country looking at all the data centers, and he said, "You'd be surprised at how many of them are not completed yet." So, there seems to be this all these future CapEx announcements, but then the actual going in the ground, getting it getting it up and running is not as fast as people think. And that's the bottleneck. And that And that that's how you end up with like a ton of uh you know, inventory of Nvidia chips and everything, you know, that you can't you can't deploy it, so it's sitting in a warehouse. Yeah, and you have that dark compute, right? Remember all the dark fiber? Yeah, well, dark compute. Yeah, dark compute. You don't even need And you don't need to order any more Nvidia chips. I think I think the constraining factor is electrons, water, and social acceptability of this. And there's going to be a lot of fights. Um so, it's all coming to a head and uh I you know, and then there's the the other thing about AI is that I there's all sorts of conflicting is it going to really replace white-collar jobs that quick? I I personally believe that's hype. I don't believe it's going to happen cuz you see these weird announcements where like you know, uh Ernst & Young and other consulting companies are teaming up with the OpenAI to help implement the solutions in the corporations. So, you need So, it's supposed to get rid of consulting and white-collar, but you need them to install it. That's That's That's kind of uh and then Google said they're hiring engineers uh to help their clients, you know, deploy So, we're hiring people to deploy something. It sounds like it's complicated and maybe not as easy as people think to get up and running. Secondly, there's all sorts of reports that uh people are running through their their token budgets so fast that they're they're deciding that it's actually cheaper to keep humans. So, there's all sorts of conflicting you know, stories. So, it doesn't it's not as clean as what someone might think. So, when I don't know why the Anthropic CEO keeps saying white-collar jobs are going to be gone in 18 months. I mean, it seems silly to say that. If it's not A, if it's not true, and B, it's not a good sales pitch. Yeah, exactly. I I mean, I think at a higher level your your your point is a really good one, which is if we really want to bring society into this AI future, um and look, I I believe AI is going to be transformative, um but if we want to bring society into it, supporting it and excited to be a part of it in some way, um we got to give them something positive to step into. And And right now, way too many people, myself included, kind of hear it as we're going to replace human labor and yeah, you know, your essentials like your electricity and your water is going to get prohibitively expensive. Yeah, yeah. It It sounds really dystopian and not it's just you know, is anyone shocked that college students are booing this? They're not doves. They read They read what we read and they're like, "This doesn't sound like very fair. I just I just spent 200 grand on my education." Yeah, and I don't think it's what they're reading. I think it's they're out there sending their resumes to these places and basically interacting with an AI chatbot and not getting a job in the process and just saying, "Jesus, you know what? Like we're Yeah, I just spent all this money on this degree and I don't think I've got a door open to me here." You know, a quick aside note for those who are young looking for jobs, you know, when my son graduated from UCLA without a job cuz it was a tough job market, um you know, my ex-wife and I helped him with all our contacts, information interviews. And you know, he was he was he was making a lot of headway, but he found a great job at a fintech company in LA by just going on LinkedIn, messaging someone that was a couple years older than it than than him from UCLA that hey, I'm interested in talking to you about your company. And he said, "Oh, we're hiring. Just come on in and like have a a screening interview." Got in uh and then eventually got the job and now he's killing it. So, you know, he did it he did it himself. He did it the human you know, he he did he didn't talk to any He didn't apply for a job. He inquired to a human using his alumni network, which is what I did when I was coming out of college. I leaned heavily on the Notre Dame alumni. Got to go back to like old school networking. That's how it works. Uh although I got to tell you, I think that has always worked and I've I've talked kind of at length about this topic several times in my weekly um rants with with Lance Roberts. Um but if you're looking for a job, your lowest odds are going through the front door, um which is what you're saying. You know, you you want to create your own side door window and you do that the human way, right? You you you do that with the phone. >> Absolutely. I was doing that I never once interacted with HR when I was coming out of college and business school. I did it all networking. Um I I tried tricks uh like I would I would uh figure out who the I would I would send my resume with a cover letter to for an informational interview to people that I was referred to. I would also do blind uh um letters to CEOs of of banks. W- I would FedEx them uh my resume with a cover letter, spend some money, and you know, one out of every six I would I would end up talking to a CEO of a bank in Boston. Mhm. Because he was just shocked that someone you know, could figure out a way to hack the system. And get him. Yeah, no, very good. Look, it totally shows initiative. Yeah, exactly. Um well, you know what, folks? Maybe we should do uh actually, that might be not be a bad thing to do. I could assemble some of the great minds like you at that I talk talk to you on a regular basis, and we could do an interactive webinar with with folks to you know, maybe got kids that are at the age where they're going into the world, and just take their questions on like, hey, how you know, what what strategies would you guys recommend? I'm sure there's amongst that brain trust, I'm sure there's a lot of great uh advice folks would have. Absolutely. I would do that cuz I want to help young people, you know, uh because uh applying online is a dead end. It just it doesn't work. Oh, yeah. I mean, and you probably worked inside big companies like I did at times, and uh you know, you'd you'd go talk to the HR department about a a job, and and you would you would just see the just massive stacks of of resumes they would have that you could you just knew they weren't going through them all, and and that was back then, right? Um you know, it's it's like I said, the front door, it's your it's your lowest probability odds. You got to you got to create your own, like I said, side door or side window to go through, and there are plenty of ways to do that. Uh takes work. Don't want to lie, but you'll definitely have much higher odds. Um all right, I got to get back to to some of the key things here before we run out of time. Real quick though, I want to pull this AI thread just a little bit further with you. Um you mentioned the K-shaped economy, that's one of the things here I want to talk with you a little bit more. But, we have this um we've got this reality where the bottom leg of the K, which is the vast majority of people, um is their their prospects are getting more and more diminished, at least in my opinion. They're they're having a a tougher and tougher road to hoe. That certainly will be the case in the near term if we end up having the kind of economic slowdown that you think we're going to have. But, as I look to the future and I if I if I accept what the AI proponents say AI is going to do, and I largely do, you know, again, it might take longer to to really realize their true vision, but I think largely it's going to happen. And then you combine that with robotics, right? It's just rough. I mean, I look at that and think, yeah, there's just a lot less need for human labor. Um yeah, there will always be a need for highly specialized human labor. Um yes, there will be new fields of people that will work with AI or robot repair or what whatever you want to put, but I think in terms of just number of people, it's going to be an awful lot less than the current workforce we have right now. Do you have any real worries long-term about what we're going to do should there be a lot of permanently displaced labor? Yeah, you know, I'm not worried about that near term cuz I do think the AI hype, just like the internet hype uh cycle, and then we'll have a capital destruction, then the benefits of AI, the true benefits of AI will come out of the rubbles and ashes of this over uh over capacity. There's there's over investing in in infrastructure. Yep. And that's the way it always is with these things. Yeah. And and the the real solutions are going to be on the other side. Like, you know, I think you know, with given AI's hallucination rate, there'll be specialized AI companies that, you know, really focus on, you know, data silos, like medical AI companies. Mhm. That's the you know, that don't need, you know, to do an LLM for the world. I I think I think I think the model is so expensive, we need to we need to specialize. And that's I think that's where we're going. I think uh I think, you know, it's not going to be you you know, you you get a chatbot and it takes over your job. There's there's there's a long time between now and then. So, and then we don't know yet may may maybe the promise that AI will create more jobs could happen, but they're certainly not telling you that. Their their their message seems to be you will be jobless soon. I think the truth is somewhere between the two. It it probably is. And >> [clears throat] >> I hope my fears are wrong, and I'm not trying to be alarmist here. But there is a lot of mid to low-skilled work that um I'll call smart robotics can can do. Right? This is everything from you know, self-driving trucks to I mean, do we really need baristas in a world where you have humanoid robot robots? You know, do we need store clerks? Do we do we need anything where basically somebody's just saying, "May I help you?" and and uh you know, performing some relatively basic task for you. Um do we really need a human to do that stuff? And of course, for the employers, it's like you know, if the economics look like they're going to be, it's like I would why would I not want to have an automated solution here that doesn't take vacations or get sick or show up late or threaten to sue me for perceived harassment or whatever, right? So, I do worry about, you know, it's not every job, but it's we're talking tens of millions of jobs right there, I think. Well, you know, there's the doom loop. That's the doom loop. So, if you get rid of all the baristas, all the low-skilled people, and then they don't have income, uh no one's going to buy coffee, you know, there'll be less people being able to afford to buy it your your product. Yeah. >> So, it's it So, So, that brings into question the the UBI. You know, we're going to have a bunch of people sitting around doing nothing. Which I think is a non-solution, right? You give people UBI and they spend it and then prices adjust and then the next check they get doesn't buy anything. Right. And And you know, look, we know what uh welfare I mean, UBI's basically welfare. And we know what happens when you uh give people a lot of free money to do nothing. Uh it You know, the Humans need to be active and productive and have purpose. If you don't >> ambition. Yeah. You just You end up with these ghetto ghetto ghetto neighborhoods where, you know, that's that's where you go. So, it's going to be interesting. You know, look, I'm optimistic on the other side of this economic reset. I think AI out of the ashes something will come of it, but I what I don't like hearing is all this gloom and doom from these AI companies themselves. They need to figure out a a new message. Well, I agree and they need to they need to get me more encouraged on this. And And I'm trying to be. I mean, there's I see real application, obviously. I just >> Now, here's here's here's another thing that I'm finding out. I'm not I'm not a user I'm a user of AI, but I'm not using it to code or do, you know, I'm not creating my own chatbots and Yeah, you're you're not you're not vibe coding. Yeah. Yeah. Yeah. So, I have a friend who is vibe coding because he's at a hedge fund and he's finding out that it's super interesting cuz he cuz he wants to understand and uh you know, uh he's he's found that first of all, um uh the the products that Anthropic came out with Claude and all these new development tools, they really are putting a tax on the compute. So, you know, you've seen you've seen prices for um the the the prices for were declining and now they're they're going up again. That's not because it's off the chart demand because it requires more compute. And prices have gone up because they're running into because they don't have enough capacity built, there's a pricing issue. So, but he found that he was using Claude, Claude got too expensive and he switched to Codex, which is OpenAI. Switching costs were zero. And he's also finding that when he wrote all this code, uh he then asked uh you know, it to to find some errors and then then it found a ton of errors. He said, "Well, you So, it like it's like the amount of labor to go back and make sure it's all good is not it it's it's it's it's creating potentially more work than it solves. >> Yeah. And so, that's that is a problem. That is a problem. And I what I'm not smart enough to know is is that just is it just a growing pains, you know, and in 2 years is there an elegant solution to that, right? Well, and that's that's again why the internet was, you know, hyped and it was wasn't ready for prime time and then eventually it was and then we that's, you know, the real wealth that was created from the internet was the Web 2.0 companies. Google IPO'd after the dot-com crash. Uh Facebook, um Apple benefited from the cheap broadband, that's why the smartphone worked. Um you know, Amazon was the only one that really came out of the dot-com crash and did anything with itself. But all the all all the all the market cap wealth came after uh the internet build out infrastructure. So, uh you know, I don't I I can't even tell you what AI companies to invest in because I think that the the real good ones will be built on the backbone of the crash. And and and that they'll they'll be, you know, I don't I don't even know who they are yet. So, is it safe to say that you are not touching the AI and AI adjacent stocks now because you think A they're super richly valued and B there's some big corrective event ahead, but that you are excited to invest at the other side of the correction in that sector. Absolutely. And that's that I'm going to be, you know, it's it's it's going to be a year or two or three from now. Look for companies that kind of come out of it. And no after the market this I remember after the dot-com crash no one wanted to touch anything in that space. And that's that's what a bear market's supposed to do. It's supposed to crush your your your faith in anything, yeah. Correct. And you know, that's when that's when Google IPO'd and people thought it was out you know, I remember when we bought the IPO. I was like this this seems like a great company. And it was it was expensive when it IPO'd and everybody was so valuation sensitive because we just had a valuation crash. People people a lot of people missed Google the first couple years because they just thought it was too expensive. Yeah. And that's that's that's that's that's where I'm going to be looking. I mean, Nvidia is going to do what Cisco did. It's going to retrace, you know, 80-90% they all do. All right. Um just I don't know if you know this or not, but you're talking to a guy who worked at Yahoo through this transition. So, I know what it's like to kind of have ridden the 1.0 company down uh through all this and I I remember I mean, Yahoo's got the the nefarious distinction of passing on all of these companies it could have bought. Google being one of them. Um I mean, it's hard to name a company that Yahoo didn't have the opportunity to buy and I remember a quote from the CEO at the time, Terry Semel. The company was deep deep in negotiations to buy Facebook and I can't remember the exact number that he said, but but when when Yahoo broke off the negotiations, Terry said, "You know what? I don't know what I don't know what to value this company at, but I can tell you one thing, it's not worth $2 billion and that's I think what they were asking for." You know, in in retrospect you're like, "Oh my god, you kidding me? You could have bought that for just $2 billion." Right. Right. And you know, people couldn't see it then. I mean, you know, people didn't realize that you know, social media was going to be a thing where you could make tremendous amounts of free cash flow. So, I suspect in the rubble of the AI, we're going to you know, we're going to have to be futurists when everybody was a futurist now, but they're just a little too enthusiastic. We're going to be a futurist a couple years from now and dream and look look through the valuation, which may look cookie, but in hindsight it won't be. So, Ed, let me just ask you this, when you get to that back up the truck moment, you know, there are great bargains to be had now given the future value future potential of these companies, please come back on this program and ring that bell for this audience. Oh, absolutely, but you know, we got we got some time between now and then. I mean, Well, some rough some rough sledding between now and then. Exactly like you were saying. >> Look. I I This is my third rodeo. I was there for the dot com, I was there for the housing and it's all echoing. The participation of the general market, the breadth is so bad and there's only one game in town. Every hedge fund pod in the world is long these stocks. They're looking out two weeks. That's their time frame and it ends when it ends, it ends and it's going to and it's going to be a glorious swift decline, especially in those stocks. The rest of the stock market might take longer to go down there you know 40 to 50% because corporate earnings will will have to roll over which they we believe they will, but um once this bubble burst, I think I think it's going to be fast in those stocks, very fast. All right. Um okay, well let me let me bring this back real quick to bond yields and um your inflation expectations. Let's actually flip it. Let's start with your inflation expectations. So we're seeing an inflationary impulse from the oil price shock. Um I'm going to guess given what you've told me, you think that is real, but going to be relatively short-lived. Yeah, so it's it's real. So we we we put out a piece for free that's on our website financial technologies with two scenarios. $125 oil uh gets you to 5% and and and and a fairly you know a resolution to the war. It has to happen now. Uh get you to around 4 to 5% inflation by May. We just put in 3.8. Uh we we were predicting 4.1 for the month of April. Uh uh 3.8 was a shock. The Fed Cleveland now is forecasting above four for the month of May. Um so 5% is in the ballpark, you know, somewhere between 4.1 and 4.8 for for May. So let's say it comes in at 4.8, let's just call it 5%. That was what we were predicting at $125 oil. Um if this thing doesn't get results soon, unfortunately uh we're going to break out. And if we break out of uh technically I'm just looking at technicals on oil. And oil is driving the short-term CPI headline. That's the only variable you can care about. Um that's that that's how we're doing it. Um if we break out uh oil between 120 and 130, back test it, hold it as support, uh the the the long-term chart pattern which is a cup and handle suggests 200 to 250, which we put which was our second scenario. Oh my god. >> That'll take That'll take inflation to 11% by August. Oh my god. >> [sighs and gasps] >> Whoa. I mean, just that's a big number. Um what what could cause oil to do that short of Iran just carpet bombing the other GCC, you know, oil infrastructure? >> It's time. So, the longer we linger, the worse it gets. And it's And once And once we start getting real world uh impacts, you'll it'll it'll happen quick. Um so, Trump Trump and team need to figure out a If they want If they want oil to kind of peak out here, they need to do something quick. If they don't, you know, and and and again, it's all technically based. If we break out above 120, 130, and then back test it and hold, that's the that's the nightmare scenario. We're not there yet. We're at 109 on oil. Um so, let's hope let's hope and pray that they figure this out. Okay. And the market The market clearly doesn't think that's the default scenario yet, right? When you look at it oil futures, they're not up >> No, not yet not yet. So, that's So, our our first case scenario looks more more likely that's what's going to happen. But even then, that's pretty bad. Um So, in the short term, yields back up, but the yields backing up If you look at the long-term charts, um and I follow a cycles analyst, we're we're coming into a cluster of cycle lows uh according to my friend Tim Wood, intermediate-term low, seasonal cycle low, and 3-year cycle low. So, we're in a timing band where the long bond to kind of bottom here, and then it's going to start, you know, its bullish cycle. I know that's hard to believe right now cuz everyone's calling for you know, rates going 6, 10% and it's the end that's not happening because because this spiking yields is is going to is going to cause the accelerate the demand destruction. And when the demand destruction and the growth scare happens, the Fed will start cutting probably second half, you know, probably third or fourth quarter. So, I don't think they're going to hike. I think they're going to stay put. We're going to get a growth scare scare in Q2 and rates will start coming down and that's and that and when rates start coming down, that's when the real economic destruction begins. If you look historically, That's when it always does. It always does. Um And so when so we and we also have like so we have inflation prediction model. We're going to put out a paper on this free, but then we're going to charge to update the model. We have a model that we've designed that's pretty predictive of core inflation and CP headline CPI. Um core is what the Fed's going to focus on. We're seeing core inflation at 1.77% by the first quarter of 2027. Okay. And is that pretty much I was going to ask you like I'll give you plenty of chances over the next couple quarters to call audibles on this, but when do you sort of right now expect the long bond will bottom out? Uh in the next month or two. Whoa, next month or two? Yeah. It could the low could be now and and it won't go much higher it won't I don't think it's going to go significantly higher, but it's going to be soon. Okay, sorry. When you're saying bottom out then, you're talking about price. >> Price. Prices, yeah. >> Okay, okay, okay. Cuz I was like, wait a minute. All right. >> Yeah, we're in the timing band for for for prices. Uh when I say cycle low, I'm looking at the the the the 30-year Treasury futures. So, >> Yeah, but you're looking at the price, not the yield. Okay. >> Yeah, the yield the yields are the yields are going to top soon. Price is going to bottom soon. Let me just let me just make that clear. Yep, yep. then let me ask my other question. Um Um when do you think that this bottoming cycle uh the bottom it'll bottom soon. When do you think it'll Like like ride this until when? End of the year? Is this thing you So, again, it only take a quarter? Is this going to be a 2-year process? What do you think? Well, you know, look, it depends on how fast it moves. If if if the Fed goes in an emergency rate cut rate cut cycle and long bond goes from 5% to 3 and 1/2% inside of 6 months, you know, take take your profits and run. I mean, you know, because then the Fed is going to be looking to re-inflate this. So, if you look at the great financial crisis, the long bond was a tremendous uh a trade. And uh in the dot-com crisis, the same thing. But it was very it was very short-lived because, you know, they tried to re-inflate. So, it's more tactical than long-term. Okay. Um but for folks that are saying, "Oh my gosh, you know, the 30-year just priced above 5% for the first time since 2007 or whatever it was. Uh and I'm worried about all these other things. So, prices could be going way high. It's you know, yields are breaking out to the upside." Sounds like you're thinking now >> No. I I I've been here before. I'm not worried. Uh you know, so my call stands. TLT and uh long duration US Treasuries will be the best performing asset class. That was my call at the beginning of January. You're going to give me till December to be right or wrong. Okay. All right. Um But you know, look, they call it an oil price shock for a reason. What I What I What I What What What I find amazing is the mainstream media doesn't seem to be paying attention to it yet. I mean, it's going to be a it's going to be a shock. So, uh let me ask you this. So, there there's the risk of the shock, right? So, the the economy gets shocked by oil prices being this high. Um concurrently, yields are higher than they've been, right? So, that adds to the problem. Um so, that creates begins to create its own demand destruction. Correct. Um let's assume, hopefully, let's hope actually, that uh the Iran war concludes swiftly. Um does that actually worsen things? Because right at the moment where you're getting demand destruction, you start having like a lot more oil on the scene, and um you know, all of a sudden oil prices are like like po- potentially, does that uncorking of of what's been pent up there actually hit the market right at the wrong time as demand destruction is already happening, and then you get oversupply of some of these things? Well, let's say we have a resolution tomorrow, and things start flowing. There's damage that's already been done, so there's demand destruction from that and high yields. Demand destruction economy economy was already rolling over. Then you have uh some of these shortages uh alleviated, especially in semiconductors. If there's not a helium scare, all of a sudden, you just bought a bunch of semiconductors, you're not going to reorder. So, it could it could uncork a lot of things, a lot of the things. And like the pricing power of these guys that they're enjoying right now because of the constraints, that gets weakened, right? Correct. So, look, there's a lot of moving pieces, but at the end of the day, we were already rolling over before the war. The war actually kind of focused the market on Trump and Trump's tweets. Mhm. Uh but they're not paying attention to what's going on on underneath. And this most again, this most recent And I'm sure you've had some people on to talk about this. This rally we've seen is so unprecedented, the speed, uh the the the the the the V-shaped recovery, and narrow narrow participation, and the breadth we haven't seen indications like this like a lot of people are using the words ever. Like we've never seen this ever. So ever Pretty much all the technical guys I interview are saying in the short term guys you got to expect a pretty wicked pullback here. Yeah. And whether that turns into a bear market remains to be seen. I Although you think it will. I think it will. The tell will be we get a nasty pullback then a rally. If that rally fails it's over. Right. So we won't know we're in a bear market until top pullback countertrend rally failure. That's how you know. And if and if we go to new highs then you know it's delayed again. All right. Well, if this proves to be the top um Ed let's get you back on on the pullback if it rises again and stalls out let's get you on for that one cuz that's going to be the one where you tell everybody time to batten down the hatches. Yeah, absolutely. But I'm more bearish now than I was before the war because prices are higher, leverage and margin is higher. That usually conspires for nasty nasty deleveraging events. Okay. Um >> [sighs and gasps] >> All right. So in wrapping this up here um you said you like cash, you like the long bond, you mentioned TLTs and just long-dated US Treasuries. What else if anything do you like right now? Well, long term gold should be part of everyone's portfolio 5 to 10%. Gold has been going sideways since it's it's it's blowoff top and that's what I've been saying for a couple months that it's consolidating. We still think gold is 10,000 by 2030. Um it still has you know gold has been used as a source of liquidity as this war started. Turkey sold 120 tons worth of gold. Right. So you know look it it it in a scenario where people need money and that's what happens in financial uh economic turmoil, uh assets like gold get sold because you sell what you can, not what you want. >> It's a margin call. It's a margin call. And but I don't think gold has anywhere near to the 50% pullback it did in the great financial crisis. I think if there is a a sell-off in gold, maybe 25% is max and you're going to buy that because Mhm. long term uh central banks are buying gold. There's going to be a new currency system at some point again, whatever whenever that happens, no one knows. Uh commercial banks are buying gold. Chinese citizens are buying gold. Indian citizens So, gold demand is there. And gold uh gold is as we continue to roll through the sovereign the slow-rolling sovereign debt crisis, the the demand for gold will only increase over time. Okay. So, let me just reiterate. Sounds like right now, and of course this isn't personal financial advice on your your behalf behalf, but um you know, from your personal positioning, sounds like pretty defensive. Cash, long bonds, gold. >> Yeah, look, normally I wouldn't be positioned this way, but I mean I you know, Warren Buffett and I have been early and wrong to this call by about 2 years, but we didn't expect 20 million illegal immigrants to be, you know, flushing the economy, running, you know, 8% deficits to keep this thing going, but there we are. Um Warren Buffett said 40% cash. I mean, that's, you know, >> Yeah. And that's what? That's like 400 billion dollars? I mean, it's almost half a trillion dollars. >> billion Yeah, it's 400 billion dollars. He owns something and it's all in T three-month T bills. He owns something like 5 or 4 and 1/2% of the T-bill market. So, and and and you know, look, T bills are the most liquid asset, the pristine collateral. You can you can click a button and sell them and raise cash immediately. All right, Ed. >> don't And you don't have bank risk. You have You know, you know, you're your risk is the And the US government's not going anywhere. Right. So, I'm sorry. I'm I'm I'm not a gloom and doomer that one. I I I It's one of the things I very much appreciate about you and and I I do look forward to the day, Ed, where you know, whatever's whatever process we go through here, when you get to the point where you're really optimistic, um I can't wait till it gets You're You're like a lot of people, and I include myself in this camp, but a lot of people who I interview, who are kind of tired about ringing the warning bell, but because to your point, they they just keep finding ways to extend this, and it would be so much better if we just let national I'm sorry, natural market forces just flush the the malinvestment from the system, uh get true price discovery in there, and then we can start from a sane baseline and pursue things that are, you know, sustainable. Yeah, before I go, I want people to understand two things. During '23 and '24, we had illegal immigration and deficit spending to give people money directly that flooded the economy. Yeah. >> And made it look like it was growing when it wasn't. And then we also had the marginal credit growth in '23 and '24 and '25 was private credit. That's all you need to know. So, basically two two two big artificial pillars that have now been pretty much dismantled, yeah. Correct. So, unless there's a new source of of credit creation that I'm not aware of, I It looks grim. And then the other thing, people keep saying the Fed's doing QE by buying Treasury bills. That's bank reserve management. That's not QE. And and and by the way, they just cut that reserve management from uh 40 billion to 10 billion last Wednesday. Okay. So, and and and you know, they were buying a lot of it going into the beginning of the year and then we had the stock market weakness into the war. So, that it it you know, people like to point to it as the Fed's printing money and and and people are using it to buy stuff. That's not what's going on. Okay. But but basically the way you interpret that with your earlier comment is if there's a cavalry riding to the rescue here, you don't see it. I don't see it and the Fed's not going to act until they have to and and and you know, with the new Fed chair, Kevin Warsh, uh he is anti-balance sheet. Whether he sticks to that remains to be seen. And also, another another thing that probably you've got some of your other guests have talked about. Every time there's a new Fed chair, the market tests them. Yeah. And and historically, new Fed chairs it it minimum 10% pullback. Yeah. Yeah, it and and that's I mean, is that is there any real correlation or causation there or is it just pure correlation? But yeah, pretty >> We don't know. But but it's Every time there's a new sheriff at the Fed, there's some sort of emergency soon after. >> All right. Um well, okay. This has been fantastic. Um for folks that would like to follow you and your work, where should they go? Uh financetechnologies.com. We sell our research reports. Um and it's with a ph instead of an f. I can be found on X at Dowd Edward D R W D Edward and I have a personal website at eddowd.com. Great. And Ed, as usual, when I edit this, I will put up the link. Uh I'll I'll put up the the URLs and your handles there so folks know exactly where to go. Folks, those will be in the description below this video as well. Um All right. Uh hang on for just 1 sec, Ed. First, folks, please join me in thanking Ed for just putting it all all out in the field for us like you did um by hitting the like button and then clicking on the subscribe button below as well as that little bell icon right next to it. It's a reminder we're getting close to like, I think, 177,500 subscribers here on YouTube, which is awesome. But, we're trying to hit 200,000 by midsummer, if not sooner. So, if you can help us out, please just take a quick second and hit that subscribe button. It really does help. And then, last, if you would like to get, you know, none of what Ed said today was personal financial advice, but if you would like to get personalized advice from a professional financial advisor to, you know, maybe evaluate your portfolio, see how vulnerable you might be to some of the risks that Ed's talked about here, as well as to maybe find some some areas of opportunity for you, as well. If you don't already have a good financial advisor doing that for you, consider talking to one of the ones that Thoughtful Money endorses. These are the firms you see with me on this channel every week. To schedule one of those consultations, just fill out the very short form at thoughtfulmoney.com. Only takes a couple seconds to fill out the form. These discussions are totally free. There's no commitments involved. It's just a service these offer these firms offer to help as many investors like you as possible. Ed, last question for you in parting here. I I I know you're just a very thoughtful guy about many things, not not just the markets themselves. What parting bits of advice, if any, would you have for what I'll call kind of the the awake viewer, you know, the person that is is paying attention to the same things that you're looking at and make you worried about not just about the economy of the markets, but society, as well. Any just parting bits of advice, life steps to take? Could be could be financial or could be in other parts of your life. Yeah, look, you know, there's a lot of people who are stressed out and a lot of what we say sounds scary, but it I view it as opportunity. And you want to live in the present moment, keep your head in what's about you. Life Life is going to go on. You know, there's all these scary things, AI, robots, um, you know, disease X, disease Y. Mhm. And and you know, don't let the fear and anxiety creep in and just create your own life. Keep living every day as if it's a gift and you know, it's going to be fine. I mean, if you look back in history, you know, we've had a pretty good run as a society. There's been a lot tougher times and people made it out the other end, had babies and life went on. It's not the end of the world. I'm so glad you said that. I've made that comment recently and and I think it might even been misinterpreted at times. Um, but uh, you know, there are challenges as I talk an awful lot about folks. You know, I think that that bottom leg of the K, most people are having tougher and tougher times ahead. I do think it is harder in terms of like career prospects and just being able to afford the essentials in life, the American middle class dream lifestyle. Uh, it is harder for this generation, I think, than say it was for the boomers, um, for sure. Um, so there's all sorts of challenges out there, but at the same time, have some perspective, right? It's like you know, you could be you could be 20 years old, you know, yeah, trying to find a job in an increasingly AI environment today and it really sucks. But you could be 20 years old back in the early 1900s being shipped to the trenches, you know, of Europe to fight in World War I. Like you said, I mean, just previous generations had a lot of crazy adversity to deal with and so just keep it all in perspective and you've got, you know, certainly more resources and and just sort of a a general uh, higher quality lifestyle in terms of on demand electricity and hot running water and stuff like that than really any generation alive. And I'm not trying to diminish the challenges you may be facing. I'm just saying, don't fall into the depths of despair, which is what I think you're avoid you're telling folks to avoid doing it. >> Right. Right. And the other thing is, you know, obviously that this American dream of having a home, a good job, private schools and all this, you don't need that to be happy. You just get in the game, put put your best effort forward and it takes care of itself. And people are already, you know, creating a lot of solutions. I mean, we're going to go if if the oil price should prices going to 250, we're going to be in the era of carpooling again. And that brings people closer. Multi-generational families are coming back, which actually is I think it's a good thing. Shipping off your elders to, you know, nursing care homes, I I don't like that. I think I think, you know, during the Great Depression and the the the the the the thought is it was an awful time. But there are stories and after story of people who like really helped each other, came together as communities, and figured it out. So, like there's always a silver lining to everything. I totally agree and I won't go into it here, folks, except just to say if you want to learn more about what what Ed just mentioned there, which is sort of previous generations and in different societies in today's world who have actually found what I would consider to be a higher degree of happiness uh in their lives despite persisting through some pretty horrible conditions, go read the book Tribe by Sebastian Junger and um I've also interviewed him here on Thought Provoking Money. You can you can find my interview with him there and if you want the crib notes for it, but very fascinating discussion, but also just really important in understanding what what really at the end of the day truly matters for humans to be happy. And a lot of it isn't based upon attending a certain uh amount of wealth or living in a certain size house or stuff like that. Absolutely. I I read his book and I I've seen some of his interviews. He's fabulous different way of looking at the world. And I believe one of his great stories is, you know, the the the corporate executive sitting in his big house being lonely drinking his scotch wondering what the hell's going on. Yeah. Yeah. Yeah, I mean, well, anyway, suppose we talk about it forever. Go read the book or watch the video. Ed, can't thank you enough, my friend. Look forward to having you back on the channel as soon as events call for your expertise again. All right, take care, Adam. Thank you. All right, buddy. And everybody else, thanks so much for watching.
Ed Dowd: "I've Never Seen Anything Like This"
Summary
Transcript
What I would expect to see sometime in the next three to six months is a healthy 20 to 30% pullback, scary, then a counter trend rally, the Fed starts cutting and then if we're in a bear market that counter trend rally will fail and then we'll go to lower lower lows, which I think yeah, we're we're almost there. I've never seen anything like this economically. The the disconnect between um you know, the consumer and the stock prices has never been wider. >> [music] >> Welcome to Thoughtful Money. I'm its founder and your host Adam Taggart. Today's guest entered the year pretty bearish on the prospects for the US economy, the global economy, the financial markets and the housing market. Well, now that we're five months into the year and embroiled in a new war with Iran, how has his outlook changed if at all? For insight, we're fortunate to welcome back to the program Edward Dowd, founder of macroeconomic consulting and research firm Finance Technologies. Ed, thanks so much for joining us today. Great to be here. Thanks for having me on again. Hey, it's always great Ed. Um you're a wonderful interview, also just a good guy. Um we were just talking before we turned the camera on here. I'm glad you made it through safely all those uh heavy rains and floods out there in Hawaii. We're glad you're still with us. Yeah, I'm glad I'm still here. I I almost I almost floated away in my car. I got caught in one of the flash floods, but I now I finally made it home during during the the the worst of it. That sounds kind of scary. Yeah, it was it was it was it was uh it was kind of a once in a 200-year event for Maui. I mean, it rained for a month. There were uh flash floods twice in in a week. Wow. Um but things are drier now, I hope. >> Oh, yeah. It's it's all we're back. We're on the mend. Okay. All right. Well, very glad to hear that's the case. All right, Um maybe going from one disaster potentially to another, who knows? It depends on your answer. You know, you and I talked a couple of times earlier this year and heading into 2026, if I took good notes, you were projecting a mild to moderately severe economic slowdown for the remainder of 2026. Is that still the case or if not, how is that outlook changed? No, it's well, I think when we talked, it was before the oil Well, we talked a couple of times, but we put out a report in January of this year. The oil price shock only makes it worse. Um So, forget the mild part, now it's moderate or >> Yeah, it's moderate to severe. Um And it's confusing for people because we change prior to the uh uh war beginning uh rates were headed lower. There was a growth growth scare beginning. Private credit was freezing. Payroll numbers were coming in bad. And then the war came and everybody focused over to war headlines. And then there was a nice rally which in a couple of podcasts uh prior to the bottom, I said we might go to new all-time highs in the market any kind of relief and we did. And the market has gone up on a very narrow participation. It's all basically AI and AI adjacent. Semiconductor stocks had a move that we saw similar to the 2000 top, 64% in five trading weeks. Um just unprecedented moves, very narrow participation. So, where are we? The S&P 500 is 5 and 1/2% above the highs we put in in January or February. The actual equal weighted S&P index is down from its high slightly. So, this is very narrow participation. It's all AI, that's the only thing that's working. The real economy has gotten according to the way we measure it has gotten worse. Housing prices are finally starting to give up the ghost. We had some bad home price declines in March, February, and March. I think we're waiting on April numbers. Home builders stocks are going lower. Financial stocks are going lower. They're not participating in this in this rally. So, once the S&P gives up the ghost, it'll become apparent to everybody and we think that's sooner rather than later. There's a scare on the long bond. Right now, basically everyone says it's the end for the long bond and long-term rates, but we've seen this before. The rates themselves are going to cause a growth scare and we're still very bullish on long the long bond. We like cash as the best near-term investment dry powder for picking up bargains on the other side of this, but nothing's changed in our in our economic outlook. Housing's gotten worse, the consumer's gotten worse, and we're going to see corporate profits get massively squeezed from this oil price shock cuz they're not going to be able to pass on the the cost to the consumer. So, we're going to see layoffs start to accelerate throughout the year as companies cut the factors of production because of the margin squeeze. We're already seeing layoffs. We'll see those accelerate. China China retail sales just came in. No surprise there. It was pretty dismal and we got the March China economic data. We're very bearish on China. That continues to go the wrong way. So, everything is globally and economically going south and people keep pointing to the S&P, which now everyone is now talking about I mean it's it's bubble talk. Everyone's talking about when does it end, not if it ends, but when. And some people are saying it's 99, we've got another year higher stock prices. I don't think so. I think I think we're going to see the growth scare come and be evident by the end of Q2, and the Fed I think the Fed is not going to raise rates. I think the Fed will be cutting sometime towards the end of this year. All right. Um so, one of the problems we now have, Ed, is you pretty much answered every question that I had already written out here for our discussion. So, maybe we're done here. >> [laughter] >> We'll we'll we'll peel the onion a little bit deeper here. Um you you said that your outlook hasn't changed at all. I'm going to I'm going to push back and say it sounds like it actually has changed. It's just gotten worse. Um with the with the Iran war, the higher oil prices, the rise in bond yields. Yeah, and uh the um the the the the oil price shock is is is really put the Fed in a box. They don't have the tools to deal with oil price shocks because it's a it's cost-push inflation, not demand-push inflation. So, And it's real it's real-world based. It's not monetary-based. You can't pick up a barrel of oil, yeah. >> Correct. And and demand destruction is coming. I'm just really surprised at how um people are not looking forward as investors. I was talking to my uh friend who manages he runs risk management for a $13 billion hedge fund. And and uh he's in agreement with my macroeconomic outlook, but he's just shocked at the fact that the the new cadre of traders and and investors have a 2-week outlook, and that's about it. They they they don't look out more than 2 weeks, and they chase what's working. And what's working is literally the last fashion of any kind of growth, but this growth is going to come under problems pretty soon. And it's it's uh it's AI and AI adjacent. So the S&P 500 is now 45% AI and AI adjacent. The Magnificent 7 36% and semiconductors are about 17-18% of the S&P 500 index, notoriously cyclical industry, and they're 30% of the NASDAQ. So what's really driven this last move in the S&P has been a very narrow sector with giant price gains. This The SMH and the SOX index are up 64% in 5 weeks, something crazy like that since the bottom that we put in April. Um and I've been here before, Adam. I mean I was I was there in March of 2000 as a tech analyst. And uh what we're hearing now is the word you don't want to hear in a semiconductor cycle, double ordering. Because this is what happened during the dot-com boom. Every purchasing manager needs They need these components so they can like build their products. So early on as as things become tight and AI I'll put a massive strain on the on the supply on the on the supply side. But then the oil price shock has people worried about helium shortages which go into the manufacturing of semiconductors. So that accelerated a lot of what we call, you know, pull forward demand, getting getting your supply. So each purchasing manager individually they need Let's say they need 1 million units. Well, they got they, you know, a couple you know, a couple quarters ago they started hearing, "Well, we can only give you half of that." So they they start double ordering saying, "I want I want 2 million." Yep. And then they get they get their million. And that that is the beginning of the end. And then when when demand when the demand destruction comes and flips, then they start canceling orders and all these semiconductor companies are stuck with inventory. Mhm. And that that's where we are. We're we're we're closer to the end of this than the beginning of anything. Okay. Um so I've talked to a number of people in the past week or two who have made similar comments about especially the performance in semiconductor stocks. And just say, you know, who was it? It was Cameron Dawson the other day who was quoting Bob Farrell's vertical moves don't correct by going sideways, right? So there are people that are thinking that are on the same page as you as saying, look, there's there's going to be some some uh froth removing event here in the near term on some of the stuff that's just gotten white hot, but they don't necessarily say, and then we think the market's going to really continue to to to roll over and and potentially close the year lower. I I get the sense that you expect it's going to correct the year lower. Is that correct? >> And we we still think that cash is the best place to be and if you're more of a an institutional investor or speculative investor, long duration US bonds and and 20 year 30 years and 20 years. And I have a friend who does a lot of cycles analysis. He's pretty good at cycles work. And we're coming into a cluster of timing band cluster of cycle lows in the long bond. It's the intermediate term low, the seasonal cycle low, and the three year low that are all clustering right now. Uh and so I his work is pretty good and everyone on Twitter today is so bearish the US long bond, it makes it makes me laugh. Yeah, I mean it's if that indeed does happen, it's going to surprise a lot of people right now. Um we'll get to bonds in just a minute here. Um So you know, at the end of the day what what drives stock prices for the most part is earnings expectations. And I know you expect demand destruction and earnings expectations to start coming down. You talked about how both the higher oil prices and the higher borrowing costs will pinch corporate profits. That's going to lead to layoffs. I totally get all of that. Um And I've had those same fears at times over the past several years. And um the challenge is is it it doesn't really matter to the markets and until the market starts seeing earnings estimates start to come down. And they're not yet. And a huge part of those earning estimates, as you said, are being driven by the just tsunami of of spending that's being done in the AI and AI adjacent space. Um do you expect some sort of real catalyst or trigger to start turning you know, start diminishing those earnings expectations? Or is this just like any bubble where we don't really know where the top is, but it's just mathematically out there and one day we're going to hit it. Yeah, I mean, look, the valuations last year was silly. They got even more silly. So we're at we're at crazy stock market valuations. And you know, I have people that I consult with some time to time and they you know, they'll they'll they'll get a inheritance and they'll be like, I have $4 million what should I do with it? Should I put it in the stock market? And I say, well, if you do now mathematically your return over the next 10 years is zero. So no. You know, wait. And that's where we are. I mean, you can you can you can hope that the AI bubble carries corporate earnings, but the the the the corporate earnings are mostly due to AI and and semiconductor earnings. That that's where all the the revisions are coming from. Those are probably and they're and if you look at look, I was on Wall Street. What they do with estimate forward estimates is they they they grow them continuously. And you know, second derivative is going to shift here pretty soon. And all all you need is a second derivative. One company to say there's a little weakness and the whole thing implodes. And I think that's coming soon. I think I think what you saw with the semiconductor stock was panic buying because of perceived shortages. And then the helium shortage really you know, people don't This is not well known in the public and maybe even in investing circles, but you know, purchasing managers are well aware of what's going on with helium. And they panicked and they they bought they they bought more than they did even for AI. So, I think I think the stock prices themselves are telling you the end is not in semiconductors at least. Whether that causes a general market problem remains to be seen. We have no structural evidence that there's a bear market yet, and you don't crash from tops. So, what I would expect to see sometime in the next 3 to 6 months is a healthy 20 to 30% pullback, scary, then a counter trend rally, the Fed starts cutting, and then if we're in a bear market, that counter trend rally will fail and then we'll go to lower lower lows, which I think yeah, we're we're almost there. I've never seen anything like this economically. The the disconnect between um you know, the consumer and the stock prices has never been wider. Joe Sixpack is struggling mightily. You know, you've heard from other people on your show, consumer credit uh credit card delinquencies are rising, auto loan delinquencies are rising. >> All all consumer credit is delinquency rising, yeah. Yeah, and that eventually is going to affect credit, and it's already affecting There's already a private credit problem. Um net flows in private credit are going the wrong way. They for the first time, I think in a long long time, there's been more net redemptions than there have been inflows to private credit. So, the credit engine, which was the the marginal producer of the credit the last few years, is private credit and private equity. That's shut off. And banks had already stopped making commercial and industrial loans and and and consumer loans in aggregate versus private the marginal creator of credit was private credit and private equity. Now, that's done. And uh if you want to look at a uh barometer for liquidity, keep watching Bitcoin. Bitcoin peaked in October of uh last year. Bitcoin is trying to rally, but it looks like it may have stalled out. So, watch Bit- Bitcoin will lead the any equity correction. All right. Um gosh, so much to talk about in here. Um let me ask you this. Uh you're doing a great job of pointing out a bunch of negatives. Um but there are uh you know, there are there are parts of the economy that are actually doing quite well. Uh I had uh uh [sighs] oh um Craig uh I'm blanking on his last name. Um it'll come to me in a second, but he's the CEO of of uh FreightWaves, which is the global um transport tracking um research firm. And he was despondent back in November. When I interviewed him about a month ago, he said, "I could not be telling a different story." Uh Craig Fuller, that's his name. Um the the the industrial economy, the US manufacturing economy, is is really booming now, and I don't see that I don't see that changing anytime soon. In fact, it just keeps building momentum here. Um so, you know, just just square that circle with me where we've got parts of the economy that actually seem to be getting stronger where you're painting a picture of a a very kind of dire um both economic and financial market future for the second half of this year. Well, it depends on where you are in manufacturing. Manufacturing jobs in the last payroll number were negative. Uh so there's there's there doesn't appear to be a wave of manufacturing jobs being created. Secondly, I would contend that a lot of the recent uptick you've seen in in in manufacturing has been a lot of people pre-ordering before the price shocks really come. And it's going to be it's an inventory build. >> Okay, so it's front-running. Front-running. Okay. Um all right. I I I get that. Okay, so >> And let's not you know, housing is 20 to 25 it's 20% of the US economy, 25% of the consumer economy. So, that's that that that is going into into into a decline. And that that's going to impact the consumption. Okay. So, and on housing housing has been frozen. Housing market's been frozen now for years, right? So, we've got low inventory. Um so you know, to a certain extent there are parts of industry that are just starving because transactions are low. Um but price hasn't really come down that much on a national average. Now, we've had certainly a number of markets where prices have cratered, you know, parts of Texas, Florida, etc. And I think that is, you know, the real estate experts I talked to, that that is a a contagion that is spreading across more and more markets in this economy. More inventory is coming on that's starting to let prices adjust downwards, but nationally we really haven't had a at least until maybe quite recently a national decline in average home prices. I'm guessing from what you're saying you expect that to turn into a full proper housing market correction. Cuz I think I think what we could say is on average the housing market has yet to correct. It hasn't been >> Yeah, and that that's not a good that's not a good thing. I'd rather see it correct fast. The faster it corrects, the better the the I'm Look, everyone thinks I'm a gloom and doomer. I I believe once we get this reset, it's going to be great. Um I think I think I think we're setting ourselves up for a nice economy on the other side of this as we transfer wealth from boomers who don't transact to young people who form families. So, that's >> Well, time time box that that then because that's not that doesn't happen in a quarter or even in a year. It's going to happen over a decade. >> That'll be two two years from now when everyone's bearish as all get out, that's when I'm going to be super bullish a year or two. Depending on how quickly asset prices The faster we adjust, the more bullish I get sooner. The the If this turns into a dot-com, you know, stock market decline of 50% and a a slow housing market decline, I'll I'll I'll I'll wait, but I'd love to see it happen quick quick. You know, you know, rip the band-aid off and then we come out the other side. Um you know, home prices So, we were tracking We made a a a We said And I'm, you know, we were we were kind of early to this. We said housing is going to roll over. We said that in January 2025, and we saw new tenant rents going lower. And those continue to go lower. All tenant rents are going lower. Home prices are Now, home prices are going lower cuz that Those all lead. New tenant rents lead. And what really is the big the big impact it has been the closure of the border and a lot of self-deportations from illegal aliens and, you know, some of the fraud. There were there were actually the FHA under Biden were were giving 100% loans to illegals to buy homes. That's gone. >> Yeah, I I I was literally just watching a segment on this yesterday, and I Sorry to interrupt, but I just want to note this cuz I want you to really dive into this if you can. So, I think one of the things This was a question I asked a lot of housing people over the previous years once immigration was really beginning to become an issue. Which is were illegal immigrants you know, artificially pushing housing prices higher and their general answer was I don't really think so. They're pushing rents higher and thereby you know, as rents as a function of housing prices, yes, they are but but these folks tend to rent than buy. But I think what we're finding out now is that not small number of them were actually able to get they were being given social security numbers by the the previous administration. They were able to use those numbers to get an FHA loan and you only need to put like 3% down to to get a house there and and now I think what they're finding is is now the people self deporting or or you know, they see ice in their neighborhood so they take off. They're finding these abandoned FHA homes now um and realizing that there's actually a fair amount of this. Yeah, you know, our our thesis was illegals were pushing up rents which you know, Yeah. >> kept that part of it. Yeah, that's what I was saying earlier too. >> is and we didn't we didn't want to say that they were buying homes but then it kind of came out that they were. So we're like, well that makes our thesis even more. Yeah, even worse, yeah. Yeah. So um yeah, so the home price declines really started in the south near the border. So the a lot of these red states along the border have been seeing the brunt of it and now we're starting to see national prices come down like I said in in in March uh uh and February and it's going to spread to the blue cities especially if we get into a lot of um uh tech layoffs and just general layoffs from the oil price shock. Uh we were you know, we were expecting layoffs to happen but the oil price shock only accelerates this in my humble opinion. It really does. Yeah. Uh sorry, let me let me ask you this. So we're [clears throat] actually seeing a fair amount of tech layoffs. I'll call it sort of housecleaning um or labor shedding where you know, the tech industry was famous, especially the big hyperscalers, the Googles, the Metas, etc., Amazons. They were kind of famous for labor hoarding. Right? Like I don't necessarily know what I'm going to do with this guy, but he's kind of smart and I don't want him going to my competitor and working on something, you know, that that could be against my interests. So, you had a lot of sort of excess talent being held at these companies. And I think starting about a year ago, they started realizing, okay, we can start letting some of these people go. And so, you you've been seeing this drumbeat of you know, 10,000 people here, 5,000 people here, 12,000 people here being let go by the Microsofts and the Metas, etc. That's going on while everything's going great in this hyperscaler world, right? And I think they're also thinking, too, well, we're going to use AI more in the future and need less of these people around and stuff. But if if if the if the tech sector experiences the type of correction that you think it's going to, what's going to happen to the volume of those layoffs? Are they just going to like are they just going to unleash the floodgates and just start firing tons of people or what would your opinion >> Well, let's let's let's look at the free cash flow of the of the tech companies. The free cash flow is going the wrong way because they're taking on tremendous amounts of debt to fund >> they're spending it all to build data centers, yeah. >> Yeah, to build data centers. So, if the profits if there comes a time where people realize there's no payoff on the other side of this, the funding dries up, uh and uh the you know, they're they're reporting earnings, but they're not cash earnings. I mean, they're they're it's a lot of circular token buying between each other with no cash exchanging hands. Uh at some point uh and all take is one person to start it start it. They scale back their cap backs, they start laying off people, then everybody will follow. And that's when the real massive wave of layoffs will come because cuz you know, they have all this tremendous amount of investment they've done that's been stranded. So, they're going to cut for factors of production. And and to be honest, you know, you put you touched on something. These tech companies, especially you know, were free cash flow generating machines and they did they hoarded a lot of capital and it was kind of like social like tech uh tech uh social um socialists uh spending. You know, they they And Twitter used to be notorious for this. Twitter had so many employees doing nothing. When Elon came in, he fired 80% of them cuz they were doing nothing. So, he kind of set set the you know, the standard like you don't need all these people. Right. Right. And and to be honest, I'm just I And I've been public about this. At the time he did that, I said, "Look, if Twitter's still running in 6 months, it's going to show the rest of Silicon Valley they need way fewer employees than they have." Um it's going to re- reset the standard of what an essential employee is. I think it has done that, but I I am surprised and have said I'm surprised that it is it seems to be taking Silicon Valley a lot longer to shed those excess employees than I thought it would. Right. And the other thing going on that people don't understand, and I anecdotally I picked this up from a former Google employee who wanted to tap out. He was looking He was looking to get a package and leave. Yeah. And by the way, they all do. I've I've at least the people our age do in Silicon Valley. They all want to tap out. Yeah. They want to tap out. They want a package. And uh if you're And what what was interesting, he was at Google and he wasn't involved in the AI part of the company. And he said if he said as as they rolled through time the last 2 years, if you weren't part of AI, your budgets were decreasing. Sure. So, so, you know, if you're in a if you're not part of the AI boom within these tech companies, you're kind of a non-essential employee and you kind of see the right you When your budget decreases and you're a manager, you have to let people go. So, you know, you don't want to be king of a shrinking empire. So, that's what's going on. They're they're starving other other parts of their business for the AI. All right. This is a little tangential, but um it's been in the news this week that uh there have been, I guess, a number of of commencement speeches now at colleges where the speaker and one of them was Eric Schmidt, a former CEO of Google, uh who got up there and sort of said, "Boy, you guys are lucky. You're launching into one of the greatest transformations in in you know, American world history. Um this this new AI age and there's going to be so much opportunity for you." And they pretty much get booed. And they get booed because I think the students are really thinking, "Oh, no, AI is seems like it's really working against us. We're we're we're finding it really hard to get jobs. We don't have a lot of confidence that even if we do get a job, that job will be around for all that long because it'll eventually get replaced by AI." So, there there definitely seems to be this sort of cultural backlash against AI or AI-adjacent stuff. Uh you've you've been reading about all the pushback on data centers. I live in Reno now and I think Reno's the first city that basically has um just voted to restrict future data center growth here because essentially it's created too much competition for the electrons between the data centers and the actual people that live in the area. Um so, uh like I said, this is kind of tangential, but I I uh What impact, if any, do you think sort of this potentially growing social backlash against AI might play in the mix here? It's super interesting and I've already seen the AI uh bulls come out and defend uh the students booing. This is the same sentiment occurred around the internet, which I was there, it did not. No one was booing anybody talking about the internet during >> Yeah, and I was there with you. I agree. Yep. And so that that did not happen. Um They get They get a They get a marketing sales pitch problem, and I've pointed this out on on X. Uh you know, their sales pitch seems to be white-collar jobs are going to disappear in 18 months. We need your electricity and your water. Good luck. That That's not a good pitch. >> [laughter] >> Crazy. You know, I was thinking about a tweet like that. It must have been your tweet that I was thinking about. Okay. >> Yeah, but and that's their pitch. These These executives actually say this. Now, I I've been Part of the reason I'm I'm I don't think the AI bubble is going to continue is because there actually is a shortage of uh you know, capacity to run these data centers, and there's not enough um water to do it. So, they're running into running into opposition. So, I I'm of the opinion CapEx is going to be scaled back as they realize they can't plug into anything. And there's somebody on X um who who's an analyst who's running around the country looking at all the data centers, and he said, "You'd be surprised at how many of them are not completed yet." So, there seems to be this all these future CapEx announcements, but then the actual going in the ground, getting it getting it up and running is not as fast as people think. And that's the bottleneck. And that And that that's how you end up with like a ton of uh you know, inventory of Nvidia chips and everything, you know, that you can't you can't deploy it, so it's sitting in a warehouse. Yeah, and you have that dark compute, right? Remember all the dark fiber? Yeah, well, dark compute. Yeah, dark compute. You don't even need And you don't need to order any more Nvidia chips. I think I think the constraining factor is electrons, water, and social acceptability of this. And there's going to be a lot of fights. Um so, it's all coming to a head and uh I you know, and then there's the the other thing about AI is that I there's all sorts of conflicting is it going to really replace white-collar jobs that quick? I I personally believe that's hype. I don't believe it's going to happen cuz you see these weird announcements where like you know, uh Ernst & Young and other consulting companies are teaming up with the OpenAI to help implement the solutions in the corporations. So, you need So, it's supposed to get rid of consulting and white-collar, but you need them to install it. That's That's That's kind of uh and then Google said they're hiring engineers uh to help their clients, you know, deploy So, we're hiring people to deploy something. It sounds like it's complicated and maybe not as easy as people think to get up and running. Secondly, there's all sorts of reports that uh people are running through their their token budgets so fast that they're they're deciding that it's actually cheaper to keep humans. So, there's all sorts of conflicting you know, stories. So, it doesn't it's not as clean as what someone might think. So, when I don't know why the Anthropic CEO keeps saying white-collar jobs are going to be gone in 18 months. I mean, it seems silly to say that. If it's not A, if it's not true, and B, it's not a good sales pitch. Yeah, exactly. I I mean, I think at a higher level your your your point is a really good one, which is if we really want to bring society into this AI future, um and look, I I believe AI is going to be transformative, um but if we want to bring society into it, supporting it and excited to be a part of it in some way, um we got to give them something positive to step into. And And right now, way too many people, myself included, kind of hear it as we're going to replace human labor and yeah, you know, your essentials like your electricity and your water is going to get prohibitively expensive. Yeah, yeah. It It sounds really dystopian and not it's just you know, is anyone shocked that college students are booing this? They're not doves. They read They read what we read and they're like, "This doesn't sound like very fair. I just I just spent 200 grand on my education." Yeah, and I don't think it's what they're reading. I think it's they're out there sending their resumes to these places and basically interacting with an AI chatbot and not getting a job in the process and just saying, "Jesus, you know what? Like we're Yeah, I just spent all this money on this degree and I don't think I've got a door open to me here." You know, a quick aside note for those who are young looking for jobs, you know, when my son graduated from UCLA without a job cuz it was a tough job market, um you know, my ex-wife and I helped him with all our contacts, information interviews. And you know, he was he was he was making a lot of headway, but he found a great job at a fintech company in LA by just going on LinkedIn, messaging someone that was a couple years older than it than than him from UCLA that hey, I'm interested in talking to you about your company. And he said, "Oh, we're hiring. Just come on in and like have a a screening interview." Got in uh and then eventually got the job and now he's killing it. So, you know, he did it he did it himself. He did it the human you know, he he did he didn't talk to any He didn't apply for a job. He inquired to a human using his alumni network, which is what I did when I was coming out of college. I leaned heavily on the Notre Dame alumni. Got to go back to like old school networking. That's how it works. Uh although I got to tell you, I think that has always worked and I've I've talked kind of at length about this topic several times in my weekly um rants with with Lance Roberts. Um but if you're looking for a job, your lowest odds are going through the front door, um which is what you're saying. You know, you you want to create your own side door window and you do that the human way, right? You you you do that with the phone. >> Absolutely. I was doing that I never once interacted with HR when I was coming out of college and business school. I did it all networking. Um I I tried tricks uh like I would I would uh figure out who the I would I would send my resume with a cover letter to for an informational interview to people that I was referred to. I would also do blind uh um letters to CEOs of of banks. W- I would FedEx them uh my resume with a cover letter, spend some money, and you know, one out of every six I would I would end up talking to a CEO of a bank in Boston. Mhm. Because he was just shocked that someone you know, could figure out a way to hack the system. And get him. Yeah, no, very good. Look, it totally shows initiative. Yeah, exactly. Um well, you know what, folks? Maybe we should do uh actually, that might be not be a bad thing to do. I could assemble some of the great minds like you at that I talk talk to you on a regular basis, and we could do an interactive webinar with with folks to you know, maybe got kids that are at the age where they're going into the world, and just take their questions on like, hey, how you know, what what strategies would you guys recommend? I'm sure there's amongst that brain trust, I'm sure there's a lot of great uh advice folks would have. Absolutely. I would do that cuz I want to help young people, you know, uh because uh applying online is a dead end. It just it doesn't work. Oh, yeah. I mean, and you probably worked inside big companies like I did at times, and uh you know, you'd you'd go talk to the HR department about a a job, and and you would you would just see the just massive stacks of of resumes they would have that you could you just knew they weren't going through them all, and and that was back then, right? Um you know, it's it's like I said, the front door, it's your it's your lowest probability odds. You got to you got to create your own, like I said, side door or side window to go through, and there are plenty of ways to do that. Uh takes work. Don't want to lie, but you'll definitely have much higher odds. Um all right, I got to get back to to some of the key things here before we run out of time. Real quick though, I want to pull this AI thread just a little bit further with you. Um you mentioned the K-shaped economy, that's one of the things here I want to talk with you a little bit more. But, we have this um we've got this reality where the bottom leg of the K, which is the vast majority of people, um is their their prospects are getting more and more diminished, at least in my opinion. They're they're having a a tougher and tougher road to hoe. That certainly will be the case in the near term if we end up having the kind of economic slowdown that you think we're going to have. But, as I look to the future and I if I if I accept what the AI proponents say AI is going to do, and I largely do, you know, again, it might take longer to to really realize their true vision, but I think largely it's going to happen. And then you combine that with robotics, right? It's just rough. I mean, I look at that and think, yeah, there's just a lot less need for human labor. Um yeah, there will always be a need for highly specialized human labor. Um yes, there will be new fields of people that will work with AI or robot repair or what whatever you want to put, but I think in terms of just number of people, it's going to be an awful lot less than the current workforce we have right now. Do you have any real worries long-term about what we're going to do should there be a lot of permanently displaced labor? Yeah, you know, I'm not worried about that near term cuz I do think the AI hype, just like the internet hype uh cycle, and then we'll have a capital destruction, then the benefits of AI, the true benefits of AI will come out of the rubbles and ashes of this over uh over capacity. There's there's over investing in in infrastructure. Yep. And that's the way it always is with these things. Yeah. And and the the real solutions are going to be on the other side. Like, you know, I think you know, with given AI's hallucination rate, there'll be specialized AI companies that, you know, really focus on, you know, data silos, like medical AI companies. Mhm. That's the you know, that don't need, you know, to do an LLM for the world. I I think I think I think the model is so expensive, we need to we need to specialize. And that's I think that's where we're going. I think uh I think, you know, it's not going to be you you know, you you get a chatbot and it takes over your job. There's there's there's a long time between now and then. So, and then we don't know yet may may maybe the promise that AI will create more jobs could happen, but they're certainly not telling you that. Their their their message seems to be you will be jobless soon. I think the truth is somewhere between the two. It it probably is. And >> [clears throat] >> I hope my fears are wrong, and I'm not trying to be alarmist here. But there is a lot of mid to low-skilled work that um I'll call smart robotics can can do. Right? This is everything from you know, self-driving trucks to I mean, do we really need baristas in a world where you have humanoid robot robots? You know, do we need store clerks? Do we do we need anything where basically somebody's just saying, "May I help you?" and and uh you know, performing some relatively basic task for you. Um do we really need a human to do that stuff? And of course, for the employers, it's like you know, if the economics look like they're going to be, it's like I would why would I not want to have an automated solution here that doesn't take vacations or get sick or show up late or threaten to sue me for perceived harassment or whatever, right? So, I do worry about, you know, it's not every job, but it's we're talking tens of millions of jobs right there, I think. Well, you know, there's the doom loop. That's the doom loop. So, if you get rid of all the baristas, all the low-skilled people, and then they don't have income, uh no one's going to buy coffee, you know, there'll be less people being able to afford to buy it your your product. Yeah. >> So, it's it So, So, that brings into question the the UBI. You know, we're going to have a bunch of people sitting around doing nothing. Which I think is a non-solution, right? You give people UBI and they spend it and then prices adjust and then the next check they get doesn't buy anything. Right. And And you know, look, we know what uh welfare I mean, UBI's basically welfare. And we know what happens when you uh give people a lot of free money to do nothing. Uh it You know, the Humans need to be active and productive and have purpose. If you don't >> ambition. Yeah. You just You end up with these ghetto ghetto ghetto neighborhoods where, you know, that's that's where you go. So, it's going to be interesting. You know, look, I'm optimistic on the other side of this economic reset. I think AI out of the ashes something will come of it, but I what I don't like hearing is all this gloom and doom from these AI companies themselves. They need to figure out a a new message. Well, I agree and they need to they need to get me more encouraged on this. And And I'm trying to be. I mean, there's I see real application, obviously. I just >> Now, here's here's here's another thing that I'm finding out. I'm not I'm not a user I'm a user of AI, but I'm not using it to code or do, you know, I'm not creating my own chatbots and Yeah, you're you're not you're not vibe coding. Yeah. Yeah. Yeah. So, I have a friend who is vibe coding because he's at a hedge fund and he's finding out that it's super interesting cuz he cuz he wants to understand and uh you know, uh he's he's found that first of all, um uh the the products that Anthropic came out with Claude and all these new development tools, they really are putting a tax on the compute. So, you know, you've seen you've seen prices for um the the the prices for were declining and now they're they're going up again. That's not because it's off the chart demand because it requires more compute. And prices have gone up because they're running into because they don't have enough capacity built, there's a pricing issue. So, but he found that he was using Claude, Claude got too expensive and he switched to Codex, which is OpenAI. Switching costs were zero. And he's also finding that when he wrote all this code, uh he then asked uh you know, it to to find some errors and then then it found a ton of errors. He said, "Well, you So, it like it's like the amount of labor to go back and make sure it's all good is not it it's it's it's it's creating potentially more work than it solves. >> Yeah. And so, that's that is a problem. That is a problem. And I what I'm not smart enough to know is is that just is it just a growing pains, you know, and in 2 years is there an elegant solution to that, right? Well, and that's that's again why the internet was, you know, hyped and it was wasn't ready for prime time and then eventually it was and then we that's, you know, the real wealth that was created from the internet was the Web 2.0 companies. Google IPO'd after the dot-com crash. Uh Facebook, um Apple benefited from the cheap broadband, that's why the smartphone worked. Um you know, Amazon was the only one that really came out of the dot-com crash and did anything with itself. But all the all all the all the market cap wealth came after uh the internet build out infrastructure. So, uh you know, I don't I I can't even tell you what AI companies to invest in because I think that the the real good ones will be built on the backbone of the crash. And and and that they'll they'll be, you know, I don't I don't even know who they are yet. So, is it safe to say that you are not touching the AI and AI adjacent stocks now because you think A they're super richly valued and B there's some big corrective event ahead, but that you are excited to invest at the other side of the correction in that sector. Absolutely. And that's that I'm going to be, you know, it's it's it's going to be a year or two or three from now. Look for companies that kind of come out of it. And no after the market this I remember after the dot-com crash no one wanted to touch anything in that space. And that's that's what a bear market's supposed to do. It's supposed to crush your your your faith in anything, yeah. Correct. And you know, that's when that's when Google IPO'd and people thought it was out you know, I remember when we bought the IPO. I was like this this seems like a great company. And it was it was expensive when it IPO'd and everybody was so valuation sensitive because we just had a valuation crash. People people a lot of people missed Google the first couple years because they just thought it was too expensive. Yeah. And that's that's that's that's that's where I'm going to be looking. I mean, Nvidia is going to do what Cisco did. It's going to retrace, you know, 80-90% they all do. All right. Um just I don't know if you know this or not, but you're talking to a guy who worked at Yahoo through this transition. So, I know what it's like to kind of have ridden the 1.0 company down uh through all this and I I remember I mean, Yahoo's got the the nefarious distinction of passing on all of these companies it could have bought. Google being one of them. Um I mean, it's hard to name a company that Yahoo didn't have the opportunity to buy and I remember a quote from the CEO at the time, Terry Semel. The company was deep deep in negotiations to buy Facebook and I can't remember the exact number that he said, but but when when Yahoo broke off the negotiations, Terry said, "You know what? I don't know what I don't know what to value this company at, but I can tell you one thing, it's not worth $2 billion and that's I think what they were asking for." You know, in in retrospect you're like, "Oh my god, you kidding me? You could have bought that for just $2 billion." Right. Right. And you know, people couldn't see it then. I mean, you know, people didn't realize that you know, social media was going to be a thing where you could make tremendous amounts of free cash flow. So, I suspect in the rubble of the AI, we're going to you know, we're going to have to be futurists when everybody was a futurist now, but they're just a little too enthusiastic. We're going to be a futurist a couple years from now and dream and look look through the valuation, which may look cookie, but in hindsight it won't be. So, Ed, let me just ask you this, when you get to that back up the truck moment, you know, there are great bargains to be had now given the future value future potential of these companies, please come back on this program and ring that bell for this audience. Oh, absolutely, but you know, we got we got some time between now and then. I mean, Well, some rough some rough sledding between now and then. Exactly like you were saying. >> Look. I I This is my third rodeo. I was there for the dot com, I was there for the housing and it's all echoing. The participation of the general market, the breadth is so bad and there's only one game in town. Every hedge fund pod in the world is long these stocks. They're looking out two weeks. That's their time frame and it ends when it ends, it ends and it's going to and it's going to be a glorious swift decline, especially in those stocks. The rest of the stock market might take longer to go down there you know 40 to 50% because corporate earnings will will have to roll over which they we believe they will, but um once this bubble burst, I think I think it's going to be fast in those stocks, very fast. All right. Um okay, well let me let me bring this back real quick to bond yields and um your inflation expectations. Let's actually flip it. Let's start with your inflation expectations. So we're seeing an inflationary impulse from the oil price shock. Um I'm going to guess given what you've told me, you think that is real, but going to be relatively short-lived. Yeah, so it's it's real. So we we we put out a piece for free that's on our website financial technologies with two scenarios. $125 oil uh gets you to 5% and and and and a fairly you know a resolution to the war. It has to happen now. Uh get you to around 4 to 5% inflation by May. We just put in 3.8. Uh we we were predicting 4.1 for the month of April. Uh uh 3.8 was a shock. The Fed Cleveland now is forecasting above four for the month of May. Um so 5% is in the ballpark, you know, somewhere between 4.1 and 4.8 for for May. So let's say it comes in at 4.8, let's just call it 5%. That was what we were predicting at $125 oil. Um if this thing doesn't get results soon, unfortunately uh we're going to break out. And if we break out of uh technically I'm just looking at technicals on oil. And oil is driving the short-term CPI headline. That's the only variable you can care about. Um that's that that's how we're doing it. Um if we break out uh oil between 120 and 130, back test it, hold it as support, uh the the the long-term chart pattern which is a cup and handle suggests 200 to 250, which we put which was our second scenario. Oh my god. >> That'll take That'll take inflation to 11% by August. Oh my god. >> [sighs and gasps] >> Whoa. I mean, just that's a big number. Um what what could cause oil to do that short of Iran just carpet bombing the other GCC, you know, oil infrastructure? >> It's time. So, the longer we linger, the worse it gets. And it's And once And once we start getting real world uh impacts, you'll it'll it'll happen quick. Um so, Trump Trump and team need to figure out a If they want If they want oil to kind of peak out here, they need to do something quick. If they don't, you know, and and and again, it's all technically based. If we break out above 120, 130, and then back test it and hold, that's the that's the nightmare scenario. We're not there yet. We're at 109 on oil. Um so, let's hope let's hope and pray that they figure this out. Okay. And the market The market clearly doesn't think that's the default scenario yet, right? When you look at it oil futures, they're not up >> No, not yet not yet. So, that's So, our our first case scenario looks more more likely that's what's going to happen. But even then, that's pretty bad. Um So, in the short term, yields back up, but the yields backing up If you look at the long-term charts, um and I follow a cycles analyst, we're we're coming into a cluster of cycle lows uh according to my friend Tim Wood, intermediate-term low, seasonal cycle low, and 3-year cycle low. So, we're in a timing band where the long bond to kind of bottom here, and then it's going to start, you know, its bullish cycle. I know that's hard to believe right now cuz everyone's calling for you know, rates going 6, 10% and it's the end that's not happening because because this spiking yields is is going to is going to cause the accelerate the demand destruction. And when the demand destruction and the growth scare happens, the Fed will start cutting probably second half, you know, probably third or fourth quarter. So, I don't think they're going to hike. I think they're going to stay put. We're going to get a growth scare scare in Q2 and rates will start coming down and that's and that and when rates start coming down, that's when the real economic destruction begins. If you look historically, That's when it always does. It always does. Um And so when so we and we also have like so we have inflation prediction model. We're going to put out a paper on this free, but then we're going to charge to update the model. We have a model that we've designed that's pretty predictive of core inflation and CP headline CPI. Um core is what the Fed's going to focus on. We're seeing core inflation at 1.77% by the first quarter of 2027. Okay. And is that pretty much I was going to ask you like I'll give you plenty of chances over the next couple quarters to call audibles on this, but when do you sort of right now expect the long bond will bottom out? Uh in the next month or two. Whoa, next month or two? Yeah. It could the low could be now and and it won't go much higher it won't I don't think it's going to go significantly higher, but it's going to be soon. Okay, sorry. When you're saying bottom out then, you're talking about price. >> Price. Prices, yeah. >> Okay, okay, okay. Cuz I was like, wait a minute. All right. >> Yeah, we're in the timing band for for for prices. Uh when I say cycle low, I'm looking at the the the the 30-year Treasury futures. So, >> Yeah, but you're looking at the price, not the yield. Okay. >> Yeah, the yield the yields are the yields are going to top soon. Price is going to bottom soon. Let me just let me just make that clear. Yep, yep. then let me ask my other question. Um Um when do you think that this bottoming cycle uh the bottom it'll bottom soon. When do you think it'll Like like ride this until when? End of the year? Is this thing you So, again, it only take a quarter? Is this going to be a 2-year process? What do you think? Well, you know, look, it depends on how fast it moves. If if if the Fed goes in an emergency rate cut rate cut cycle and long bond goes from 5% to 3 and 1/2% inside of 6 months, you know, take take your profits and run. I mean, you know, because then the Fed is going to be looking to re-inflate this. So, if you look at the great financial crisis, the long bond was a tremendous uh a trade. And uh in the dot-com crisis, the same thing. But it was very it was very short-lived because, you know, they tried to re-inflate. So, it's more tactical than long-term. Okay. Um but for folks that are saying, "Oh my gosh, you know, the 30-year just priced above 5% for the first time since 2007 or whatever it was. Uh and I'm worried about all these other things. So, prices could be going way high. It's you know, yields are breaking out to the upside." Sounds like you're thinking now >> No. I I I've been here before. I'm not worried. Uh you know, so my call stands. TLT and uh long duration US Treasuries will be the best performing asset class. That was my call at the beginning of January. You're going to give me till December to be right or wrong. Okay. All right. Um But you know, look, they call it an oil price shock for a reason. What I What I What I What What What I find amazing is the mainstream media doesn't seem to be paying attention to it yet. I mean, it's going to be a it's going to be a shock. So, uh let me ask you this. So, there there's the risk of the shock, right? So, the the economy gets shocked by oil prices being this high. Um concurrently, yields are higher than they've been, right? So, that adds to the problem. Um so, that creates begins to create its own demand destruction. Correct. Um let's assume, hopefully, let's hope actually, that uh the Iran war concludes swiftly. Um does that actually worsen things? Because right at the moment where you're getting demand destruction, you start having like a lot more oil on the scene, and um you know, all of a sudden oil prices are like like po- potentially, does that uncorking of of what's been pent up there actually hit the market right at the wrong time as demand destruction is already happening, and then you get oversupply of some of these things? Well, let's say we have a resolution tomorrow, and things start flowing. There's damage that's already been done, so there's demand destruction from that and high yields. Demand destruction economy economy was already rolling over. Then you have uh some of these shortages uh alleviated, especially in semiconductors. If there's not a helium scare, all of a sudden, you just bought a bunch of semiconductors, you're not going to reorder. So, it could it could uncork a lot of things, a lot of the things. And like the pricing power of these guys that they're enjoying right now because of the constraints, that gets weakened, right? Correct. So, look, there's a lot of moving pieces, but at the end of the day, we were already rolling over before the war. The war actually kind of focused the market on Trump and Trump's tweets. Mhm. Uh but they're not paying attention to what's going on on underneath. And this most again, this most recent And I'm sure you've had some people on to talk about this. This rally we've seen is so unprecedented, the speed, uh the the the the the the V-shaped recovery, and narrow narrow participation, and the breadth we haven't seen indications like this like a lot of people are using the words ever. Like we've never seen this ever. So ever Pretty much all the technical guys I interview are saying in the short term guys you got to expect a pretty wicked pullback here. Yeah. And whether that turns into a bear market remains to be seen. I Although you think it will. I think it will. The tell will be we get a nasty pullback then a rally. If that rally fails it's over. Right. So we won't know we're in a bear market until top pullback countertrend rally failure. That's how you know. And if and if we go to new highs then you know it's delayed again. All right. Well, if this proves to be the top um Ed let's get you back on on the pullback if it rises again and stalls out let's get you on for that one cuz that's going to be the one where you tell everybody time to batten down the hatches. Yeah, absolutely. But I'm more bearish now than I was before the war because prices are higher, leverage and margin is higher. That usually conspires for nasty nasty deleveraging events. Okay. Um >> [sighs and gasps] >> All right. So in wrapping this up here um you said you like cash, you like the long bond, you mentioned TLTs and just long-dated US Treasuries. What else if anything do you like right now? Well, long term gold should be part of everyone's portfolio 5 to 10%. Gold has been going sideways since it's it's it's blowoff top and that's what I've been saying for a couple months that it's consolidating. We still think gold is 10,000 by 2030. Um it still has you know gold has been used as a source of liquidity as this war started. Turkey sold 120 tons worth of gold. Right. So you know look it it it in a scenario where people need money and that's what happens in financial uh economic turmoil, uh assets like gold get sold because you sell what you can, not what you want. >> It's a margin call. It's a margin call. And but I don't think gold has anywhere near to the 50% pullback it did in the great financial crisis. I think if there is a a sell-off in gold, maybe 25% is max and you're going to buy that because Mhm. long term uh central banks are buying gold. There's going to be a new currency system at some point again, whatever whenever that happens, no one knows. Uh commercial banks are buying gold. Chinese citizens are buying gold. Indian citizens So, gold demand is there. And gold uh gold is as we continue to roll through the sovereign the slow-rolling sovereign debt crisis, the the demand for gold will only increase over time. Okay. So, let me just reiterate. Sounds like right now, and of course this isn't personal financial advice on your your behalf behalf, but um you know, from your personal positioning, sounds like pretty defensive. Cash, long bonds, gold. >> Yeah, look, normally I wouldn't be positioned this way, but I mean I you know, Warren Buffett and I have been early and wrong to this call by about 2 years, but we didn't expect 20 million illegal immigrants to be, you know, flushing the economy, running, you know, 8% deficits to keep this thing going, but there we are. Um Warren Buffett said 40% cash. I mean, that's, you know, >> Yeah. And that's what? That's like 400 billion dollars? I mean, it's almost half a trillion dollars. >> billion Yeah, it's 400 billion dollars. He owns something and it's all in T three-month T bills. He owns something like 5 or 4 and 1/2% of the T-bill market. So, and and and you know, look, T bills are the most liquid asset, the pristine collateral. You can you can click a button and sell them and raise cash immediately. All right, Ed. >> don't And you don't have bank risk. You have You know, you know, you're your risk is the And the US government's not going anywhere. Right. So, I'm sorry. I'm I'm I'm not a gloom and doomer that one. I I I It's one of the things I very much appreciate about you and and I I do look forward to the day, Ed, where you know, whatever's whatever process we go through here, when you get to the point where you're really optimistic, um I can't wait till it gets You're You're like a lot of people, and I include myself in this camp, but a lot of people who I interview, who are kind of tired about ringing the warning bell, but because to your point, they they just keep finding ways to extend this, and it would be so much better if we just let national I'm sorry, natural market forces just flush the the malinvestment from the system, uh get true price discovery in there, and then we can start from a sane baseline and pursue things that are, you know, sustainable. Yeah, before I go, I want people to understand two things. During '23 and '24, we had illegal immigration and deficit spending to give people money directly that flooded the economy. Yeah. >> And made it look like it was growing when it wasn't. And then we also had the marginal credit growth in '23 and '24 and '25 was private credit. That's all you need to know. So, basically two two two big artificial pillars that have now been pretty much dismantled, yeah. Correct. So, unless there's a new source of of credit creation that I'm not aware of, I It looks grim. And then the other thing, people keep saying the Fed's doing QE by buying Treasury bills. That's bank reserve management. That's not QE. And and and by the way, they just cut that reserve management from uh 40 billion to 10 billion last Wednesday. Okay. So, and and and you know, they were buying a lot of it going into the beginning of the year and then we had the stock market weakness into the war. So, that it it you know, people like to point to it as the Fed's printing money and and and people are using it to buy stuff. That's not what's going on. Okay. But but basically the way you interpret that with your earlier comment is if there's a cavalry riding to the rescue here, you don't see it. I don't see it and the Fed's not going to act until they have to and and and you know, with the new Fed chair, Kevin Warsh, uh he is anti-balance sheet. Whether he sticks to that remains to be seen. And also, another another thing that probably you've got some of your other guests have talked about. Every time there's a new Fed chair, the market tests them. Yeah. And and historically, new Fed chairs it it minimum 10% pullback. Yeah. Yeah, it and and that's I mean, is that is there any real correlation or causation there or is it just pure correlation? But yeah, pretty >> We don't know. But but it's Every time there's a new sheriff at the Fed, there's some sort of emergency soon after. >> All right. Um well, okay. This has been fantastic. Um for folks that would like to follow you and your work, where should they go? Uh financetechnologies.com. We sell our research reports. Um and it's with a ph instead of an f. I can be found on X at Dowd Edward D R W D Edward and I have a personal website at eddowd.com. Great. And Ed, as usual, when I edit this, I will put up the link. Uh I'll I'll put up the the URLs and your handles there so folks know exactly where to go. Folks, those will be in the description below this video as well. Um All right. Uh hang on for just 1 sec, Ed. First, folks, please join me in thanking Ed for just putting it all all out in the field for us like you did um by hitting the like button and then clicking on the subscribe button below as well as that little bell icon right next to it. It's a reminder we're getting close to like, I think, 177,500 subscribers here on YouTube, which is awesome. But, we're trying to hit 200,000 by midsummer, if not sooner. So, if you can help us out, please just take a quick second and hit that subscribe button. It really does help. And then, last, if you would like to get, you know, none of what Ed said today was personal financial advice, but if you would like to get personalized advice from a professional financial advisor to, you know, maybe evaluate your portfolio, see how vulnerable you might be to some of the risks that Ed's talked about here, as well as to maybe find some some areas of opportunity for you, as well. If you don't already have a good financial advisor doing that for you, consider talking to one of the ones that Thoughtful Money endorses. These are the firms you see with me on this channel every week. To schedule one of those consultations, just fill out the very short form at thoughtfulmoney.com. Only takes a couple seconds to fill out the form. These discussions are totally free. There's no commitments involved. It's just a service these offer these firms offer to help as many investors like you as possible. Ed, last question for you in parting here. I I I know you're just a very thoughtful guy about many things, not not just the markets themselves. What parting bits of advice, if any, would you have for what I'll call kind of the the awake viewer, you know, the person that is is paying attention to the same things that you're looking at and make you worried about not just about the economy of the markets, but society, as well. Any just parting bits of advice, life steps to take? Could be could be financial or could be in other parts of your life. Yeah, look, you know, there's a lot of people who are stressed out and a lot of what we say sounds scary, but it I view it as opportunity. And you want to live in the present moment, keep your head in what's about you. Life Life is going to go on. You know, there's all these scary things, AI, robots, um, you know, disease X, disease Y. Mhm. And and you know, don't let the fear and anxiety creep in and just create your own life. Keep living every day as if it's a gift and you know, it's going to be fine. I mean, if you look back in history, you know, we've had a pretty good run as a society. There's been a lot tougher times and people made it out the other end, had babies and life went on. It's not the end of the world. I'm so glad you said that. I've made that comment recently and and I think it might even been misinterpreted at times. Um, but uh, you know, there are challenges as I talk an awful lot about folks. You know, I think that that bottom leg of the K, most people are having tougher and tougher times ahead. I do think it is harder in terms of like career prospects and just being able to afford the essentials in life, the American middle class dream lifestyle. Uh, it is harder for this generation, I think, than say it was for the boomers, um, for sure. Um, so there's all sorts of challenges out there, but at the same time, have some perspective, right? It's like you know, you could be you could be 20 years old, you know, yeah, trying to find a job in an increasingly AI environment today and it really sucks. But you could be 20 years old back in the early 1900s being shipped to the trenches, you know, of Europe to fight in World War I. Like you said, I mean, just previous generations had a lot of crazy adversity to deal with and so just keep it all in perspective and you've got, you know, certainly more resources and and just sort of a a general uh, higher quality lifestyle in terms of on demand electricity and hot running water and stuff like that than really any generation alive. And I'm not trying to diminish the challenges you may be facing. I'm just saying, don't fall into the depths of despair, which is what I think you're avoid you're telling folks to avoid doing it. >> Right. Right. And the other thing is, you know, obviously that this American dream of having a home, a good job, private schools and all this, you don't need that to be happy. You just get in the game, put put your best effort forward and it takes care of itself. And people are already, you know, creating a lot of solutions. I mean, we're going to go if if the oil price should prices going to 250, we're going to be in the era of carpooling again. And that brings people closer. Multi-generational families are coming back, which actually is I think it's a good thing. Shipping off your elders to, you know, nursing care homes, I I don't like that. I think I think, you know, during the Great Depression and the the the the the the thought is it was an awful time. But there are stories and after story of people who like really helped each other, came together as communities, and figured it out. So, like there's always a silver lining to everything. I totally agree and I won't go into it here, folks, except just to say if you want to learn more about what what Ed just mentioned there, which is sort of previous generations and in different societies in today's world who have actually found what I would consider to be a higher degree of happiness uh in their lives despite persisting through some pretty horrible conditions, go read the book Tribe by Sebastian Junger and um I've also interviewed him here on Thought Provoking Money. You can you can find my interview with him there and if you want the crib notes for it, but very fascinating discussion, but also just really important in understanding what what really at the end of the day truly matters for humans to be happy. And a lot of it isn't based upon attending a certain uh amount of wealth or living in a certain size house or stuff like that. Absolutely. I I read his book and I I've seen some of his interviews. He's fabulous different way of looking at the world. And I believe one of his great stories is, you know, the the the corporate executive sitting in his big house being lonely drinking his scotch wondering what the hell's going on. Yeah. Yeah. Yeah, I mean, well, anyway, suppose we talk about it forever. Go read the book or watch the video. Ed, can't thank you enough, my friend. Look forward to having you back on the channel as soon as events call for your expertise again. All right, take care, Adam. Thank you. All right, buddy. And everybody else, thanks so much for watching.