Gold at Record Highs While the Economy Stalls: What Are Markets Missing? Gary Shilling
Summary
Market Outlook: The guest sees a goldilocks-like economy with slowing growth and easing labor markets, noting rate cuts reflect underlying weakness rather than strength.
AI: He warns AI is becoming a speculative bubble with heavy overbuilding of data centers and power generation, likely causing pain for participants but not a systemic collapse.
US Treasuries: In a recession he expects a flight to safety and lower yields (potentially 100–200 bps), while current moves by bond vigilantes are modest.
US Debt: He highlights a growing “debt bomb” with massive federal borrowing and interest costs, sustained by investor demand due to limited attractive alternatives.
US Consumer: Consumer debt burdens (credit cards, student loans) are critical, with holiday and discretionary spending serving as key gauges for 2026 momentum.
US Housing: Housing remains weak with soft demand and mortgage rates still too high to spur meaningful activity, offering little support to growth.
Precious Metals: Despite record gold and silver prices, he is agnostic, citing multiple cross-currents and no clear long-term signal.
Risk Management: He sees no broad systemic bubble today besides AI risks, advocating caution given the economy’s lack of strong drivers.
Transcript
Gold and silver have hit a new all-time high as we're recording this. Gold is trading over $4,400, silver over $69 an ounce. And uh the question is now, what does that mean? What what can we take away from that? Is it just maybe a short squeeze in the precious metals or is there more at stake here? The S&P 500 is trading fairly high still. The Dixie is hanging in there as well. So, we're trying to read the tea leaves here a little bit with my guest today. His name is Dr. Gary Schilling. I'm really looking forward to catching up with him. He was on the program about 6 months ago and he made some great calls. He called for lower inflation and higher unemployment. But the question is now how did the market deal with that? Because we've seen a couple of rate cuts this year and we need to understand like how is the consumer doing and what does it really mean for markets moving into 2026. So lots to discuss today. But before I switch over to my guest, hit that like and subscribe button. It helps us out tremendously and we just appreciate it. So thank you so much. And Dr. Shilling, it is great to welcome you back on Soore Financially. Thank you so much for joining us during this busy time of the year. >> Good. Glad to be with you. >> Yeah, really looking forward to a recapping 2025 with you a little bit, but then also trying to look forward to 2026. Um, we've had you on the program about six months ago, Dr. shilling and you made some some great calls because you said well inflation is going to trend lower, unemployment is going to tra trend higher but uh the market didn't really um like take that into account because the market S&P 500 is still trading at record levels. Um what do you sort of make of the market reaction to the economic trends the economic data that we've been presented with? >> You're talking about the equity about stock markets? >> Yeah. >> Yeah, primarily. Yeah. Uh well, I've uh I've been uh known uh for a quote I made years ago. I said, "Markets can remain irrational a lot longer than I can remain solvent." And I think we've got a situation here where uh markets are uh and particularly the stock market is is uh going on its on its own. and and I'm not sure it's all that uh all that rational, but uh we we do have uh labor markets that are that are easing. Um uh we we do have a situation where uh the economy is growing but at slower rates. Um, uh, we're not in a recession. At least we don't have the statistics yet that would say so. Um, but I think that we the economy just doesn't have big sources of of of of strength. Um, so, um, it's sort of mosing along here and, um, it doesn't have a lot of it doesn't have a lot of oomph. it doesn't have a lot of factors there that are pushing it. U consumers have had tremendous borrowing. You look at credit card loans, student loans and so on very very high. Um and u uh it's um and and the Fed has been cutting rates, but the question is are they going to continue? Um it's it's not a it's not a great direction to the stock market uh by any stretch of the imagination. >> Yeah. The the question though is like what is propping up the markets perhaps? Where is that euphoria is perhaps the wrong word but uh like the sense of normality perhaps coming from? Is it now the hope of cheap and free money again? We've seen you you've mentioned the rate cuts. Um the Fed has started nonQE QE there. call it quantitive easing but we all know what it is. Um is that the hope that is propping up the market right now or is the economy just doing so great that yeah of course we have to own stocks. >> Yeah. Well, there there is there is that, but you know, it's a very interesting situation because everybody gets excited over the prospects of of rate cuts by the Fed, but they don't spend much time saying, "Why does the Fed cut rates?" The Fed doesn't cut rates just because they haven't got anything else to do that day. They cut rates because they think the economy is not showing a lot of strength and it needs some help. Uh so I I'm I find it very interesting that people look at the at the uh uh results in this case rates cuts but not at the rationale behind it on the part of the Fed. Uh but if the Fed is is cutting rates because they're concerned about lack lack of strong strong growth in the economy, that's what ultimately is important. That's exactly the thing like the the rate cuts are supposed to stimulate my my question as a pragmatic mind is like what is it supposed to stimulate? Is it even because there's a trickle down effect and it takes time like the Fed expects it to trickle down immediately. The consumer is feeling better. Maybe the housing crisis gets resolved. Houses become cheaper of what is it supposed to so maybe rectify in the markets or in in the economy that we don't see yet? Well, I I think the rate cuts are because the Fed is worried about weakness in the economy and they're trying to they're trying to they're trying to offset that and um they always want to be ahead of the game if they possibly can and and so we have a situation where um the Fed is trying to act preemptively because they know that whatever they do is not going to take effect immediately. Uh so they're trying to say they're trying to stay ahead of the head of the game and and they they obviously are concerned about the economy not having a lot of underlying strength and I think that's a the correct interpretation because you look at the various segments of the economy the house housing remains in the dumpster. Uh there's there's nothing there. The uh the housing demand is weak. Um, people don't have the money for new new houses. Uh, there isn't a there isn't interest rates, mortgage rates remain higher than uh it would take to get people really out there borrowing and buying new houses. Consumer spending doesn't show a lot of strength and particularly since people have such heavy debt and the only thing that's been supporting the economy really has been consumer borrowing uh and you know credit card credit card debt now student debt since people now have to again service their their student debts. So uh you look you look at the various segments of the economy and there isn't there isn't a lot of strength. Now there isn't huge weakness either. Uh so it isn't a case of where this thing is is is collapsing but there isn't a lot of strength and you say well if you don't have that strength what what is there to support stocks? And uh um that that's that's the real question. It's it's a lot of somehow feeling that if the Fed is cutting rates, that's the only thing that's important. And and I'm I'm I'm just always interested that people never look behind that and say, why is the Fed cutting rates? The Fed doesn't do that because they haven't got anything else to do that day. They're doing it because they're worried about uh the economy not having strength on its own. >> That's exactly the question there. So what are they seeing that I don't or we don't see yet? 4.6% unemployment. It seems to be ticking higher and higher, but the the pace is still rational. It doesn't seem exuberant like we don't see 4.6 to 5% unemployment rate jumps. Um like what are they seeing? Like perhaps you can help us understand Dr. Schilling here. What are they seeing? >> Yeah, I you know that's a good question. But the unemployment is a is a very uh interesting situation because uh you're not seeing a lot of layoffs, but you're not seeing a lot of hiring. Uh so the unemployment situation is is not a a very good indicator right now of what's going on. Now this may suddenly change uh tomorrow or maybe even today but it's it's not a situation where uh you've got exuberant job uh gains uh which tell you the economy is is very strong maybe even overheating and yet you don't have a lot of layoffs either. Uh so it's uh the un the uh employment situation right now is just not uh is just not telling us an awful lot one way or the other. >> I was going to say like has has anything really changed your mind in the last 12 months? Is it okay I was wrong or I was absolutely right about this. I have to adjust my my forecast perhaps now for 2026. Was there anything that came to fruition or didn't play out as you expected and you have to oh I might have to rethink this? >> No. I I think that the risks are on the downside the same as I did six months ago, but I don't think they have gotten distinctly more negative or uh have gotten more positive. I think it's still a situation where the economy is moing along here. Uh and and it isn't showing great strength or great weakness. Uh but it's uh it's a it's a you know we may wake up tomorrow and find that there a lot of hidden flaws here but right now there isn't an awful lot one way or the other. No it's it's true like it feels very goldilocksy right um it's not too hot not too cold. We we do see certain like underlying trends change or accelerate but nothing that would scare us right now. Um >> I think that's I think that's correct. I think that's correct. It's it's it's kind of boring. >> It almost is because we seem to sensationalize the slightest information that we get through any of the you know the Bureau of Labor Statistics or so. We seem to sensationalize it and try to make the most out of very little. >> Well, when that that's an excellent point because uh you know, nobody is going to say there's nothing to report today. Why don't you why don't you go go out and take a walk or pour yourself another cup of coffee or whatever. Um, there's always got to be something. You don't you don't see the Wall Street Journal with the front page blank and and a and a message there says there's nothing worth reporting today, so we're going to leave this blank. Oh, no. There's always something. And and that's what uh that's where people like like me come in because we're trying to say what is important and what isn't. and and uh and and uh and and because because the the media, hey, that's what these guys get paid to do is to and and that includes you and that includes me. We're we're all paid to find something new, rare, strange, and exotic. And sometimes there just aren't there just aren't those big things. But what what we we are trying to do is to identify things that potentially could be important and to be ahead of it and war and warn our clients, warn our viewers in this case, uh what what may what may be coming. And and and right now, uh in other words, we're not sitting here like like we were um you know, 10 years ago looking at subprime mortgages which were and I fortunately was on top of that. But that was a situation where it was just hugely overdone and it was just clear that it was going to collapse with great pain and suffering. The only thing you didn't know is how far the exuberance was going to go before it did collapse. Uh but that was pretty clear or or that before that the dot u mania back in the late uh uh the late 2000s it was it was it was clearly overdone and and it was just obvious at least to me that it wasn't going to hold up indefinitely. There's nothing like that uh staring us in the face right now. I've made a career out of spotting bubbles and I just don't see any right now. Uh but that doesn't mean they're not there and we're just not just not uh smart enough to figure them out. >> No. Abs. Absolutely. And maybe one big signal we need to talk about is the debt bomb. And you use that term so I'm just quoting you here. Yeah. But uh it it is imploded. It seems to be like the fuse is getting shorter and shorter here. Um Dr. shilling cuz $1.25 trillion roughly in interest payments this year alone. Um where is it going to end? Like at one point like when is the fuse too short? When is the bomb going off here? >> Yeah. Well, I've I've been very much concerned about and and what what I have termed as a debt bomb. And and what it really means is that the federal government is borrowing tremendous amounts of money. you know, uh, a trillion dollars here, a trillion dollars there, and pretty soon you're adding up to real money. And that's what Senator Dirkson said years ago. Well, it wasn't a trillion, it was a billion that he was he was citing. But um the thing is that the the money is there uh to to be uh lent to the federal government coming from from institutions and individuals here and abroad. And it really tells you that there aren't a lot of other compelling uses for money. Oh yeah, there is speculation u you know there is speculation with uh in the economy. No question about it. And now the AI is the latest the latest uh speculative area and maybe that's going to be the next bubble to break. Uh but uh in the meanwhile there's plenty of money and the federal government has no trouble borrowing it and uh as long as as long as uh investors have no place else to put their money, hey, why not? Uh you know, it's it's it's easy. But uh but you do have some things like AI which are are clearly developing into bubbles. That's probably the greatest the greatest uh expanding situation right now. And it's it's it's no doubt going to result in a lot of grief and and pain. But for a limited limited list of investors, it's nothing like the subprime mortgage situation where you had everybody and his uncle involved in this. Uh there's going to be a lot of people that get hurt on this who the borrowers and the lenders and you know how much capacity do you need? How many uh data centers you need to build in in Canada and places where power is relatively cheap. Um and uh and and and you know I I think that's going to that's going to be an area of of uh of of difficulty. But again it's it's not enough to take down the economy. It it doesn't rank in my view with a subprime bonanza that we had 10 years ago. >> No, you you might be right there because it's it's still too too stable. I would say I keep looking for cracks elsewhere. And we've had guests on talk about the auto market, but it's too fragmented. I think although it's a $1.7 trillion market, it seems too fragmented to really bring the system down. So, I'm curious like are you looking at cracks there? Um where are you where are you fishing? Where are you looking for cracks, Dr. Schilling? Well, I I as I mentioned, I think AI is probably the most most obvious uh right now that that that looks like it could be a considerable considerable crack with with with big with big damage. >> Yeah. >> And obviously there's been huge explosion in investing in AI. And you know, it's interesting because this is basically a service area. Uh it's it's white guys with computers, but it's it's morphed into a goods area because building all the uh all the facilities to generate the power to run these models. Uh so it's it's interesting how what is a service area has tremendous implications for for goods. in this case let's say power generating facilities and and you know I think there's going to be overbuilding there and probably already is uh but again is this enough to take the entire economy down probably not but you anybody who's involved in this could could see a lot of pain and suffering >> oh 100% and if that bubble burst there's too much retail money involved as well because it's they're very liquid with names of course. So, uh it makes a lot of sense. Um I I quickly want to come back to the Federal Reserve starting QE and the bond market because um we're we're looking and we discussed this last time, Dr. Schilling, we're like we're looking for a trauma event, something that would trigger, um the US government potentially to wake up and re sort of or not revalue the debt, but do something about the debt, right? And um like how are you seeing the bond market, the Federal Reserve starting QE now again? Like how is that all fit together? And do you see a possible solution if if if at all? >> Yeah. Well, uh the the Fed right now is is obviously trying to figure this out just like everybody else. Uh but I don't think that they see this as a situation that they've got to step into in a dramatic way. I mean I mean they they see just as all of the rest of us do this tremendous rush into AI and building all these power generating facilities that I mentioned just a minute or two ago. Um but I don't think they see that as the kind of thing that warrants uh a significant tightening of of of credit um because they don't see it spreading to the aggregate economy. And just remember that the Fed um is is a a general sort of instrument on the economy. There are some things they can do specifically like like they have done with mortgage rates for example buying buying a mortgage debt. Uh that that was very specific related to housing. But generally the Fed is operating on the overall basis and uh and and what's going on there with AI and so on has has doesn't have the overall implications for the economy yet that the Fed operating with really pretty blunt instruments feels they ought to step in. So I think they're sitting back like everybody else saying this thing this thing doesn't look like it's it's going to end well. uh but they don't have the uh concerns yet or the tools to deal specifically. They can't they can't say to somebody you can't build a big new power generating facility up in Canada where power is relatively cheap to run to run big AI models. That's not their that's not their bail. That's not their charter. That's that doesn't fall within their purview and the tools that they have. So, um, I think they're concerned, but they they can't do much until it it has much more general implications for the economy. >> No, it's uh the question isn't we'll have to just wait and see. I think that's what Jerome Powell said in general like we feel very comfortable now. We'll see. Now, now we let the data come to us something sort of what he said, right? Um, >> but we have to talk a little bit about the reaction of the bond market here because I'm looking at the 10-year and it is of course tra ticking higher a little bit. It's not rallying in any which direction really. It's just ticking higher. 4.17% uh yield on the 10ear. It is higher than when the rate cut was announced. Um, what do you make of the bond market right now? What what is it telling you? It seems like the vigilantes are already celebrating Christmas. Um, should we brace for something in the new year? Well, um there there obviously is a lot of concern about about about what happens to rates and as you say that bond market vigilantes are poised to push rates higher and and and rates have moved up a bit. Uh but uh it's it hasn't been a huge explosion. I mean, you know, 50 50 basis points or so, no big no big deal in the greater scope of uh scope of things. So, um, I I don't I don't think we're in a situation where there's a feeling of of any investors or speculators that there's a lot that's going to happen in terms of in in terms of treasury yields. >> So, so you're saying like the bond market seems to be quite content with where it is right now. Right. I'm trying to understand a bit of a direction here as well. Um for the 10-year because the QE side is happening in the T builds more on the 2-year side. Um >> so for 2026 maybe let's let's try a bit of an outlook here as well. Do do you expect like based on what we're discussing like a potential uh recession even in the US? Um how do you expect the bond market to react then? Well, obviously if you get a recession, yields to go down uh for for a number of reasons. One is uh there's a rush for the safety of treasuries. Uh and uh that's really throughout the yield curve uh starting at the short end, which is where the Fed acts and they'll be easing and their actions then spread throughout the curve all the way up to the 30-year. Um and also there's a rush for the for the safety of treasuries. Um and there's a lack of of demand uh in other areas. In other words, there isn't there you get a recession, there isn't a lot of demand for credit to finance much of anything else. So you have a number of reasons that you get a rush for treasuries uh not only safety but demands for for credit and that's that's very typical and you get a recession and you could see 10 years yields drop certainly 100 basis points maybe 200 basis points uh that's that's pretty typical no big deal >> now I'm I'm trying to understand like where the market it is right now because I I mentioned gold in my intro because we we look at the precious metals quite a bit and it seems to be the only asset class rallying right now. The dollar seemingly weaker. Um we just discussed bonds. They seem to be holding steady. No real sense of direction here. Um and even the stock market is somewhat flat right now, but gold is rallying. So is is that noise or is that a signal, Dr. Sh? >> Yeah, I I'm I'm agnostic on on gold. I uh you got you got a lot of forces that can push it around. inflation uh risk of deflation uh uh you you can have the political risk, military risk of you know what the Fed is doing. Um there are a lot of forces and and unless one of them dominates which which does happen occasionally uh but you don't really tend to get overall clearcut cut directions. I am definitely not a gold bug and never have but No, no, you you you mentioned that before. So, I'm just trying to figure out like whether we can actually take anything away from that record gold move or whether it's just maybe, for lack of better term, hype around the precious metal a bit. But >> again, I'm I'm I'm just not a I just don't spend a lot of time trying to figure that out. >> Yeah. Now, um maybe let's try to forecast a little bit or maybe look forward, not forecast, but try to give provide us with a bit of an outlook for 2026. um like what are some of the trends you're watching? We we talk AI of course at length, but is there something that we maybe haven't discussed yet that that we should definitely paying close attention to? Something that you perhaps open the newspaper to every morning is like, oh, I'm watching this for 2026. >> Well, I I think we need to watch the consumer. consumer is uh you know about twothirds of GDP is consumer spending and and uh if if uh and and I don't see any other sector that's going to prop up the economy or cause it to go into the tank. if consumer spending weakens because debt is just to the level where people cut back and of course we'll we'll know in a couple of weeks we get the final tally on Christmas sales uh where we stand because that those are very discretionary kind of spending items. Oh yeah, all the all the kids want big presents for Christmas but parents have to decide if they if they can afford it or not. So, uh, it's a very discretionary kind of spending period and I think that will be extremely important. So, that's one of the things that I'm watching very closely. No, because Black Week spending apparently was quite good surprisingly um given the fact that M US the Michigan consumer sentiment index was actually lower in the month of November, but Blackw week spending was quite good in the US. Is that something you saw as well? I'm just checking. Yeah, I I I I don't think I mean uh if you look at Christmas sales in the past, um they can vary all over the lot. You can have periods where there's a lot of spending early and and uh and then it tapers off or or you've had years when nothing happens until the end and everybody rushes out and drops a bundle to make sure there lots of presents under the tree. Um I I think we really it'll it'll pro it'll be into into next month uh probably late next month if we really have a good good feel on what happened with Christmas spending but that is an very important indicator of the health of consumer spending. >> Absolutely. Absolutely. And we'll see it reflect in the credit card debt of course as well. Um Dr. Schilling like we we played it last time but I want to play a game of higher and lower again with you. um with a due date June 30th, 2026. So um I mentioned the asset class or the category and all you say is higher or lower. It's quite binary. So um so uh headline CPI is it going to be higher or lower by June 30th? >> Uh I think lower. >> Unemployment rate in the US? >> U probably higher. >> Uh the 10-year Treasury yield >> uh lower. 30-year Treasury yield >> lower >> than uh the S&P 500. >> Um I I I would say modestly higher. >> And then last one uh the US dollar versus other currencies, meaning the Dixie. >> Probably higher. >> Okay, perfect. No, appreciate. I usually ask my guests about gold and silver, but you're agnostic, so I'm not going to ask you put you on the spot here. So, >> so I'll leave that to I'll leave that to other guys who are >> exact more more attuned to precious metals. I I sort of confine that to jewelry Christmas presents for my wife and other than that let the precious metals up to other people. >> Absolutely. No, fantastic. Dr. Shing, I tremendously appreciate your time. I I can hear you have a full house. It's going to be an amazing Christmas holiday here for for you as well. I wish you a wonderful time. >> Today also happens to be literally today uh my my wife and and me. It's our 63rd wedding anniversary. >> Oh, congratulations. That's phenomenal. That's cong. That's amazing. I I love that. So, >> still alive and thinking. >> Amazing. Congratulations. You definitely have to celebrate today. So, I'm going to let you go. Tremendously appreciate your time. Um, just maybe for our audience if they c if they don't know where to find your work yet, where can they follow you? >> Yeah. Well, they they can uh uh go to our website agaryshilling.com. Um and u u and we we we can send people our latest monthly uh newsletter insight which gives our views and uh people are interested in receiving that on an ongoing basis they can sub subscribe. Um so uh we're always interested but uh in in people reaction and if they're interested and if what we're saying is interesting to them obviously uh but uh they they can do that or or uh uh give us a call and uh appreciate uh appreciate your interest. >> Absolutely. No, appreciate your time. I'm going to let you go now. Go. Please celebrate. I didn't I didn't know you had such a big day today. Otherwise, we would have rescheduled this and done it at a later time. >> Hey, >> fantastic. >> Amazing. Tremendously appreciate it. Happy holidays. Merry Christmas. It was great seeing you. All the best. And I'll see you in 2026, Gary. Really appreciate it. >> And everybody else, thank you so much for tuning in. I hope you enjoyed this conversation with Dr. Gary A. Schilling. And uh if you did uh a hit that like button of course, but also um join me in the comments congratulating G Dr. Schilling here. 63 year wedding anniversary on the day of recording this absolutely tremendous achievement. Congratulations. Absolutely amazing. And uh uh if you haven't done so, hit that subscribe button as well. It helps us out tremendously and we just appreciate it. Merry Christmas, happy holidays and of course all the best in 2026. We'll be back with lots more here on Sora Financially. We'll be back later with more content this year, but also next year. So, thanks so much for tuning in. Take care out there.
Gold at Record Highs While the Economy Stalls: What Are Markets Missing? Gary Shilling
Summary
Transcript
Gold and silver have hit a new all-time high as we're recording this. Gold is trading over $4,400, silver over $69 an ounce. And uh the question is now, what does that mean? What what can we take away from that? Is it just maybe a short squeeze in the precious metals or is there more at stake here? The S&P 500 is trading fairly high still. The Dixie is hanging in there as well. So, we're trying to read the tea leaves here a little bit with my guest today. His name is Dr. Gary Schilling. I'm really looking forward to catching up with him. He was on the program about 6 months ago and he made some great calls. He called for lower inflation and higher unemployment. But the question is now how did the market deal with that? Because we've seen a couple of rate cuts this year and we need to understand like how is the consumer doing and what does it really mean for markets moving into 2026. So lots to discuss today. But before I switch over to my guest, hit that like and subscribe button. It helps us out tremendously and we just appreciate it. So thank you so much. And Dr. Shilling, it is great to welcome you back on Soore Financially. Thank you so much for joining us during this busy time of the year. >> Good. Glad to be with you. >> Yeah, really looking forward to a recapping 2025 with you a little bit, but then also trying to look forward to 2026. Um, we've had you on the program about six months ago, Dr. shilling and you made some some great calls because you said well inflation is going to trend lower, unemployment is going to tra trend higher but uh the market didn't really um like take that into account because the market S&P 500 is still trading at record levels. Um what do you sort of make of the market reaction to the economic trends the economic data that we've been presented with? >> You're talking about the equity about stock markets? >> Yeah. >> Yeah, primarily. Yeah. Uh well, I've uh I've been uh known uh for a quote I made years ago. I said, "Markets can remain irrational a lot longer than I can remain solvent." And I think we've got a situation here where uh markets are uh and particularly the stock market is is uh going on its on its own. and and I'm not sure it's all that uh all that rational, but uh we we do have uh labor markets that are that are easing. Um uh we we do have a situation where uh the economy is growing but at slower rates. Um, uh, we're not in a recession. At least we don't have the statistics yet that would say so. Um, but I think that we the economy just doesn't have big sources of of of of strength. Um, so, um, it's sort of mosing along here and, um, it doesn't have a lot of it doesn't have a lot of oomph. it doesn't have a lot of factors there that are pushing it. U consumers have had tremendous borrowing. You look at credit card loans, student loans and so on very very high. Um and u uh it's um and and the Fed has been cutting rates, but the question is are they going to continue? Um it's it's not a it's not a great direction to the stock market uh by any stretch of the imagination. >> Yeah. The the question though is like what is propping up the markets perhaps? Where is that euphoria is perhaps the wrong word but uh like the sense of normality perhaps coming from? Is it now the hope of cheap and free money again? We've seen you you've mentioned the rate cuts. Um the Fed has started nonQE QE there. call it quantitive easing but we all know what it is. Um is that the hope that is propping up the market right now or is the economy just doing so great that yeah of course we have to own stocks. >> Yeah. Well, there there is there is that, but you know, it's a very interesting situation because everybody gets excited over the prospects of of rate cuts by the Fed, but they don't spend much time saying, "Why does the Fed cut rates?" The Fed doesn't cut rates just because they haven't got anything else to do that day. They cut rates because they think the economy is not showing a lot of strength and it needs some help. Uh so I I'm I find it very interesting that people look at the at the uh uh results in this case rates cuts but not at the rationale behind it on the part of the Fed. Uh but if the Fed is is cutting rates because they're concerned about lack lack of strong strong growth in the economy, that's what ultimately is important. That's exactly the thing like the the rate cuts are supposed to stimulate my my question as a pragmatic mind is like what is it supposed to stimulate? Is it even because there's a trickle down effect and it takes time like the Fed expects it to trickle down immediately. The consumer is feeling better. Maybe the housing crisis gets resolved. Houses become cheaper of what is it supposed to so maybe rectify in the markets or in in the economy that we don't see yet? Well, I I think the rate cuts are because the Fed is worried about weakness in the economy and they're trying to they're trying to they're trying to offset that and um they always want to be ahead of the game if they possibly can and and so we have a situation where um the Fed is trying to act preemptively because they know that whatever they do is not going to take effect immediately. Uh so they're trying to say they're trying to stay ahead of the head of the game and and they they obviously are concerned about the economy not having a lot of underlying strength and I think that's a the correct interpretation because you look at the various segments of the economy the house housing remains in the dumpster. Uh there's there's nothing there. The uh the housing demand is weak. Um, people don't have the money for new new houses. Uh, there isn't a there isn't interest rates, mortgage rates remain higher than uh it would take to get people really out there borrowing and buying new houses. Consumer spending doesn't show a lot of strength and particularly since people have such heavy debt and the only thing that's been supporting the economy really has been consumer borrowing uh and you know credit card credit card debt now student debt since people now have to again service their their student debts. So uh you look you look at the various segments of the economy and there isn't there isn't a lot of strength. Now there isn't huge weakness either. Uh so it isn't a case of where this thing is is is collapsing but there isn't a lot of strength and you say well if you don't have that strength what what is there to support stocks? And uh um that that's that's the real question. It's it's a lot of somehow feeling that if the Fed is cutting rates, that's the only thing that's important. And and I'm I'm I'm just always interested that people never look behind that and say, why is the Fed cutting rates? The Fed doesn't do that because they haven't got anything else to do that day. They're doing it because they're worried about uh the economy not having strength on its own. >> That's exactly the question there. So what are they seeing that I don't or we don't see yet? 4.6% unemployment. It seems to be ticking higher and higher, but the the pace is still rational. It doesn't seem exuberant like we don't see 4.6 to 5% unemployment rate jumps. Um like what are they seeing? Like perhaps you can help us understand Dr. Schilling here. What are they seeing? >> Yeah, I you know that's a good question. But the unemployment is a is a very uh interesting situation because uh you're not seeing a lot of layoffs, but you're not seeing a lot of hiring. Uh so the unemployment situation is is not a a very good indicator right now of what's going on. Now this may suddenly change uh tomorrow or maybe even today but it's it's not a situation where uh you've got exuberant job uh gains uh which tell you the economy is is very strong maybe even overheating and yet you don't have a lot of layoffs either. Uh so it's uh the un the uh employment situation right now is just not uh is just not telling us an awful lot one way or the other. >> I was going to say like has has anything really changed your mind in the last 12 months? Is it okay I was wrong or I was absolutely right about this. I have to adjust my my forecast perhaps now for 2026. Was there anything that came to fruition or didn't play out as you expected and you have to oh I might have to rethink this? >> No. I I think that the risks are on the downside the same as I did six months ago, but I don't think they have gotten distinctly more negative or uh have gotten more positive. I think it's still a situation where the economy is moing along here. Uh and and it isn't showing great strength or great weakness. Uh but it's uh it's a it's a you know we may wake up tomorrow and find that there a lot of hidden flaws here but right now there isn't an awful lot one way or the other. No it's it's true like it feels very goldilocksy right um it's not too hot not too cold. We we do see certain like underlying trends change or accelerate but nothing that would scare us right now. Um >> I think that's I think that's correct. I think that's correct. It's it's it's kind of boring. >> It almost is because we seem to sensationalize the slightest information that we get through any of the you know the Bureau of Labor Statistics or so. We seem to sensationalize it and try to make the most out of very little. >> Well, when that that's an excellent point because uh you know, nobody is going to say there's nothing to report today. Why don't you why don't you go go out and take a walk or pour yourself another cup of coffee or whatever. Um, there's always got to be something. You don't you don't see the Wall Street Journal with the front page blank and and a and a message there says there's nothing worth reporting today, so we're going to leave this blank. Oh, no. There's always something. And and that's what uh that's where people like like me come in because we're trying to say what is important and what isn't. and and uh and and uh and and because because the the media, hey, that's what these guys get paid to do is to and and that includes you and that includes me. We're we're all paid to find something new, rare, strange, and exotic. And sometimes there just aren't there just aren't those big things. But what what we we are trying to do is to identify things that potentially could be important and to be ahead of it and war and warn our clients, warn our viewers in this case, uh what what may what may be coming. And and and right now, uh in other words, we're not sitting here like like we were um you know, 10 years ago looking at subprime mortgages which were and I fortunately was on top of that. But that was a situation where it was just hugely overdone and it was just clear that it was going to collapse with great pain and suffering. The only thing you didn't know is how far the exuberance was going to go before it did collapse. Uh but that was pretty clear or or that before that the dot u mania back in the late uh uh the late 2000s it was it was it was clearly overdone and and it was just obvious at least to me that it wasn't going to hold up indefinitely. There's nothing like that uh staring us in the face right now. I've made a career out of spotting bubbles and I just don't see any right now. Uh but that doesn't mean they're not there and we're just not just not uh smart enough to figure them out. >> No. Abs. Absolutely. And maybe one big signal we need to talk about is the debt bomb. And you use that term so I'm just quoting you here. Yeah. But uh it it is imploded. It seems to be like the fuse is getting shorter and shorter here. Um Dr. shilling cuz $1.25 trillion roughly in interest payments this year alone. Um where is it going to end? Like at one point like when is the fuse too short? When is the bomb going off here? >> Yeah. Well, I've I've been very much concerned about and and what what I have termed as a debt bomb. And and what it really means is that the federal government is borrowing tremendous amounts of money. you know, uh, a trillion dollars here, a trillion dollars there, and pretty soon you're adding up to real money. And that's what Senator Dirkson said years ago. Well, it wasn't a trillion, it was a billion that he was he was citing. But um the thing is that the the money is there uh to to be uh lent to the federal government coming from from institutions and individuals here and abroad. And it really tells you that there aren't a lot of other compelling uses for money. Oh yeah, there is speculation u you know there is speculation with uh in the economy. No question about it. And now the AI is the latest the latest uh speculative area and maybe that's going to be the next bubble to break. Uh but uh in the meanwhile there's plenty of money and the federal government has no trouble borrowing it and uh as long as as long as uh investors have no place else to put their money, hey, why not? Uh you know, it's it's it's easy. But uh but you do have some things like AI which are are clearly developing into bubbles. That's probably the greatest the greatest uh expanding situation right now. And it's it's it's no doubt going to result in a lot of grief and and pain. But for a limited limited list of investors, it's nothing like the subprime mortgage situation where you had everybody and his uncle involved in this. Uh there's going to be a lot of people that get hurt on this who the borrowers and the lenders and you know how much capacity do you need? How many uh data centers you need to build in in Canada and places where power is relatively cheap. Um and uh and and and you know I I think that's going to that's going to be an area of of uh of of difficulty. But again it's it's not enough to take down the economy. It it doesn't rank in my view with a subprime bonanza that we had 10 years ago. >> No, you you might be right there because it's it's still too too stable. I would say I keep looking for cracks elsewhere. And we've had guests on talk about the auto market, but it's too fragmented. I think although it's a $1.7 trillion market, it seems too fragmented to really bring the system down. So, I'm curious like are you looking at cracks there? Um where are you where are you fishing? Where are you looking for cracks, Dr. Schilling? Well, I I as I mentioned, I think AI is probably the most most obvious uh right now that that that looks like it could be a considerable considerable crack with with with big with big damage. >> Yeah. >> And obviously there's been huge explosion in investing in AI. And you know, it's interesting because this is basically a service area. Uh it's it's white guys with computers, but it's it's morphed into a goods area because building all the uh all the facilities to generate the power to run these models. Uh so it's it's interesting how what is a service area has tremendous implications for for goods. in this case let's say power generating facilities and and you know I think there's going to be overbuilding there and probably already is uh but again is this enough to take the entire economy down probably not but you anybody who's involved in this could could see a lot of pain and suffering >> oh 100% and if that bubble burst there's too much retail money involved as well because it's they're very liquid with names of course. So, uh it makes a lot of sense. Um I I quickly want to come back to the Federal Reserve starting QE and the bond market because um we're we're looking and we discussed this last time, Dr. Schilling, we're like we're looking for a trauma event, something that would trigger, um the US government potentially to wake up and re sort of or not revalue the debt, but do something about the debt, right? And um like how are you seeing the bond market, the Federal Reserve starting QE now again? Like how is that all fit together? And do you see a possible solution if if if at all? >> Yeah. Well, uh the the Fed right now is is obviously trying to figure this out just like everybody else. Uh but I don't think that they see this as a situation that they've got to step into in a dramatic way. I mean I mean they they see just as all of the rest of us do this tremendous rush into AI and building all these power generating facilities that I mentioned just a minute or two ago. Um but I don't think they see that as the kind of thing that warrants uh a significant tightening of of of credit um because they don't see it spreading to the aggregate economy. And just remember that the Fed um is is a a general sort of instrument on the economy. There are some things they can do specifically like like they have done with mortgage rates for example buying buying a mortgage debt. Uh that that was very specific related to housing. But generally the Fed is operating on the overall basis and uh and and what's going on there with AI and so on has has doesn't have the overall implications for the economy yet that the Fed operating with really pretty blunt instruments feels they ought to step in. So I think they're sitting back like everybody else saying this thing this thing doesn't look like it's it's going to end well. uh but they don't have the uh concerns yet or the tools to deal specifically. They can't they can't say to somebody you can't build a big new power generating facility up in Canada where power is relatively cheap to run to run big AI models. That's not their that's not their bail. That's not their charter. That's that doesn't fall within their purview and the tools that they have. So, um, I think they're concerned, but they they can't do much until it it has much more general implications for the economy. >> No, it's uh the question isn't we'll have to just wait and see. I think that's what Jerome Powell said in general like we feel very comfortable now. We'll see. Now, now we let the data come to us something sort of what he said, right? Um, >> but we have to talk a little bit about the reaction of the bond market here because I'm looking at the 10-year and it is of course tra ticking higher a little bit. It's not rallying in any which direction really. It's just ticking higher. 4.17% uh yield on the 10ear. It is higher than when the rate cut was announced. Um, what do you make of the bond market right now? What what is it telling you? It seems like the vigilantes are already celebrating Christmas. Um, should we brace for something in the new year? Well, um there there obviously is a lot of concern about about about what happens to rates and as you say that bond market vigilantes are poised to push rates higher and and and rates have moved up a bit. Uh but uh it's it hasn't been a huge explosion. I mean, you know, 50 50 basis points or so, no big no big deal in the greater scope of uh scope of things. So, um, I I don't I don't think we're in a situation where there's a feeling of of any investors or speculators that there's a lot that's going to happen in terms of in in terms of treasury yields. >> So, so you're saying like the bond market seems to be quite content with where it is right now. Right. I'm trying to understand a bit of a direction here as well. Um for the 10-year because the QE side is happening in the T builds more on the 2-year side. Um >> so for 2026 maybe let's let's try a bit of an outlook here as well. Do do you expect like based on what we're discussing like a potential uh recession even in the US? Um how do you expect the bond market to react then? Well, obviously if you get a recession, yields to go down uh for for a number of reasons. One is uh there's a rush for the safety of treasuries. Uh and uh that's really throughout the yield curve uh starting at the short end, which is where the Fed acts and they'll be easing and their actions then spread throughout the curve all the way up to the 30-year. Um and also there's a rush for the for the safety of treasuries. Um and there's a lack of of demand uh in other areas. In other words, there isn't there you get a recession, there isn't a lot of demand for credit to finance much of anything else. So you have a number of reasons that you get a rush for treasuries uh not only safety but demands for for credit and that's that's very typical and you get a recession and you could see 10 years yields drop certainly 100 basis points maybe 200 basis points uh that's that's pretty typical no big deal >> now I'm I'm trying to understand like where the market it is right now because I I mentioned gold in my intro because we we look at the precious metals quite a bit and it seems to be the only asset class rallying right now. The dollar seemingly weaker. Um we just discussed bonds. They seem to be holding steady. No real sense of direction here. Um and even the stock market is somewhat flat right now, but gold is rallying. So is is that noise or is that a signal, Dr. Sh? >> Yeah, I I'm I'm agnostic on on gold. I uh you got you got a lot of forces that can push it around. inflation uh risk of deflation uh uh you you can have the political risk, military risk of you know what the Fed is doing. Um there are a lot of forces and and unless one of them dominates which which does happen occasionally uh but you don't really tend to get overall clearcut cut directions. I am definitely not a gold bug and never have but No, no, you you you mentioned that before. So, I'm just trying to figure out like whether we can actually take anything away from that record gold move or whether it's just maybe, for lack of better term, hype around the precious metal a bit. But >> again, I'm I'm I'm just not a I just don't spend a lot of time trying to figure that out. >> Yeah. Now, um maybe let's try to forecast a little bit or maybe look forward, not forecast, but try to give provide us with a bit of an outlook for 2026. um like what are some of the trends you're watching? We we talk AI of course at length, but is there something that we maybe haven't discussed yet that that we should definitely paying close attention to? Something that you perhaps open the newspaper to every morning is like, oh, I'm watching this for 2026. >> Well, I I think we need to watch the consumer. consumer is uh you know about twothirds of GDP is consumer spending and and uh if if uh and and I don't see any other sector that's going to prop up the economy or cause it to go into the tank. if consumer spending weakens because debt is just to the level where people cut back and of course we'll we'll know in a couple of weeks we get the final tally on Christmas sales uh where we stand because that those are very discretionary kind of spending items. Oh yeah, all the all the kids want big presents for Christmas but parents have to decide if they if they can afford it or not. So, uh, it's a very discretionary kind of spending period and I think that will be extremely important. So, that's one of the things that I'm watching very closely. No, because Black Week spending apparently was quite good surprisingly um given the fact that M US the Michigan consumer sentiment index was actually lower in the month of November, but Blackw week spending was quite good in the US. Is that something you saw as well? I'm just checking. Yeah, I I I I don't think I mean uh if you look at Christmas sales in the past, um they can vary all over the lot. You can have periods where there's a lot of spending early and and uh and then it tapers off or or you've had years when nothing happens until the end and everybody rushes out and drops a bundle to make sure there lots of presents under the tree. Um I I think we really it'll it'll pro it'll be into into next month uh probably late next month if we really have a good good feel on what happened with Christmas spending but that is an very important indicator of the health of consumer spending. >> Absolutely. Absolutely. And we'll see it reflect in the credit card debt of course as well. Um Dr. Schilling like we we played it last time but I want to play a game of higher and lower again with you. um with a due date June 30th, 2026. So um I mentioned the asset class or the category and all you say is higher or lower. It's quite binary. So um so uh headline CPI is it going to be higher or lower by June 30th? >> Uh I think lower. >> Unemployment rate in the US? >> U probably higher. >> Uh the 10-year Treasury yield >> uh lower. 30-year Treasury yield >> lower >> than uh the S&P 500. >> Um I I I would say modestly higher. >> And then last one uh the US dollar versus other currencies, meaning the Dixie. >> Probably higher. >> Okay, perfect. No, appreciate. I usually ask my guests about gold and silver, but you're agnostic, so I'm not going to ask you put you on the spot here. So, >> so I'll leave that to I'll leave that to other guys who are >> exact more more attuned to precious metals. I I sort of confine that to jewelry Christmas presents for my wife and other than that let the precious metals up to other people. >> Absolutely. No, fantastic. Dr. Shing, I tremendously appreciate your time. I I can hear you have a full house. It's going to be an amazing Christmas holiday here for for you as well. I wish you a wonderful time. >> Today also happens to be literally today uh my my wife and and me. It's our 63rd wedding anniversary. >> Oh, congratulations. That's phenomenal. That's cong. That's amazing. I I love that. So, >> still alive and thinking. >> Amazing. Congratulations. You definitely have to celebrate today. So, I'm going to let you go. Tremendously appreciate your time. Um, just maybe for our audience if they c if they don't know where to find your work yet, where can they follow you? >> Yeah. Well, they they can uh uh go to our website agaryshilling.com. Um and u u and we we we can send people our latest monthly uh newsletter insight which gives our views and uh people are interested in receiving that on an ongoing basis they can sub subscribe. Um so uh we're always interested but uh in in people reaction and if they're interested and if what we're saying is interesting to them obviously uh but uh they they can do that or or uh uh give us a call and uh appreciate uh appreciate your interest. >> Absolutely. No, appreciate your time. I'm going to let you go now. Go. Please celebrate. I didn't I didn't know you had such a big day today. Otherwise, we would have rescheduled this and done it at a later time. >> Hey, >> fantastic. >> Amazing. Tremendously appreciate it. Happy holidays. Merry Christmas. It was great seeing you. All the best. And I'll see you in 2026, Gary. Really appreciate it. >> And everybody else, thank you so much for tuning in. I hope you enjoyed this conversation with Dr. Gary A. Schilling. And uh if you did uh a hit that like button of course, but also um join me in the comments congratulating G Dr. Schilling here. 63 year wedding anniversary on the day of recording this absolutely tremendous achievement. Congratulations. Absolutely amazing. And uh uh if you haven't done so, hit that subscribe button as well. It helps us out tremendously and we just appreciate it. Merry Christmas, happy holidays and of course all the best in 2026. We'll be back with lots more here on Sora Financially. We'll be back later with more content this year, but also next year. So, thanks so much for tuning in. Take care out there.