Kind: captions
Language: en
Radalio is calling it the monetary order
is breaking down and we're now on the
brink of war both internal and external.
This is due to economic forces the world
over that repeat throughout history. It
includes a decline in confidence in
paper currencies and debt as a category
and they no longer view it as a good
store of wealth. The first chip kind of
fell yesterday when the stock market
lost over $1.3 trillion in value.
>> Some people are claiming that this is
about Trump and Greenland. It is not.
That comes later. That is a problem.
It's a big problem and it's going to
rear its ugly head and it is going to
be, I'm sure, similarly catastrophic.
This just isn't the effect of that. This
is about long-term economic forces that
are finally spilling over in Japan. The
Japanese yen carry trade, which we have
talked about before, has been fueling
the global economy for decades. I was
saying debt fuels this stuff. Well,
you've got to have somewhere that's
giving you debt at great rates. And that
somewhere has been Japan. And as rates
climb, it's forcing people to sell off
other assets that they bought on
previously cheap Japanese debt. Japan's
approximately 7.6 6 trillion government
bond market experienced sharp yield
rises with longdated yields hitting
multi-deade highs. Now this can be
counterintuitive.
As the bond yields go up, the price is
coming down. And as the bond price goes
up, the yields are coming down. What
happens is if people know that, oh, you
can really trust this, you're going to
get paid back over time, then the yield
of that is going to be low. They don't
have to incentivize anybody to pick up
that debt because it's like, hey, this
is a super super safe place. As people
become concerned that the debt is
mispriced or that there's instability,
then the price is going to go up because
they have to find or the yields are
going to go up because they have to find
a way to get people to come in and buy
this. But to make the yield high, the
price has to be low. So what you're
seeing is the um
the prices of Japanese bonds are
dropping like crazy so that the yield
can go up to entice people to come in.
Basically, people are panic selling
their bonds and they're getting out of
the Japanese debt game. Now, part of how
I know this is true is because of the
price action in Bitcoin. The important
thing to understand is Bitcoin trades
24/7, 365 without delay. So you can see
far more accurately what it's based on
because the US stock market was shut for
the holiday weekend and the Bitcoin
price dropped right around the sell-off
of the Japanese yen. So Bitcoin fell
below key psychological levels of the
89,000ish
range during the selloff. Now, if this
had been a Greenland problem, you would
have seen Bitcoin and the markets react
to the news on Greenland. But they
didn't. They end up reacting to the news
on Japan. Now, the extended crypto
market draw down wiped out about 150
billion in valuation with Bitcoin
leading the decline. So, um, keep that
in mind. Bitcoin's drop didn't drop with
the news about Greenland. It was just
perfectly synchronous with the news
coming out of Japan. So, uh, again, this
is not me saying that Trump's attitude,
posture towards Greenland, towards
Europe isn't going to have problems. It
is. This just isn't that one.
>> For the dude who's making pizzas in the
back of the pizza shop and has 10K in
the bank, he heard all of that and he
was like, "Hey,
>> damn." First of all, if the homeboy
making pizzas has 10K in the account,
this is my man.
>> If he owns a pizza shop, I feel like he
needs a little I feel like he needs a
little bit more operating coverage. hear
the word own. I I saw him in the back
like clocking $7 an hour.
>> So when he hears all this, he was like,
"Yeah, this is cool, Tom, but like I
need to worry about these pepperonis."
What does this actually mean
practically? Like if you can sum it up
in two, three sentence. I appreciate the
expanse and thank you for the the econ
bros are like, "Yes, we got it. We'll go
do it." But for, you know, the pizza
flippers, what's give it to us kind of
in a in the Lego uh explain it to me
like I'm five way. If you can borrow
money from mom and dad,
uh, you can go buy pizza toys, whatever
you want. So, a lot of people are going
to come in and buy that pepperoni pizza
from you. When the kids can't borrow
money from mom and dad anymore, and now
they got to work like a whole lot of
chores for a lot less pay, all of the
sudden they're not splashing out on
pizza. It's It's only Nintendo and
Fortnite and Pizza got to go. So now
everybody's going to feel that pinch of
there's just less dollars. People feel
not only do not only are people less
rich, meaning they have less access to
money, even if it's debt,
>> uh but they feel less rich. Got it?
>> And so now they start acting in a way
where it's like, "Ah, I don't want to
spend this money."
>> All right. I'm a groundest again. So, a
couple there was a couple workers in the
chat that was like, "Drew, that's me.
So, thank you for asking." I was like,
"All right." So, we grounded that. When
there's not enough a lot of free money
splashing around, people withdraw. So,
that's why the stock market pulled in.
>> Well, people actually So, the nature of
the debt changes.
>> People realize, uh-oh, I've got to pay
back my Japanese debt now because I
can't make the delta anymore.
>> Yeah.
>> So, now I'm at risk. So, I've got to
sell, but I've got to sell now. Whenever
you have to sell now, odds are you're
going to sell at a discount. When you
start selling at a discount, it sends
like economic pherommones into the world
and people realize, uhoh, people are
selling at a discount. Something bad is
happening. I'm going to sell now
>> so I can get the hell out. And you see
these huge dips because people are
thinking short term.
>> People start panic selling. And because
most of the people in the market are
trading on uh margin, so debt, $1.2 two
trillion dollars of margin exists in the
system.
That debt has requirements that hey in
your Robin Hood account or wherever
you're doing it, you have to have at
least this much in collateral. If you
don't, don't worry, Drew. I'm just going
to autoell things in your account to
make sure that I Robin Hood and fine.
It's called being liquidated. And so if
the numbers get off in your account, you
could lose everything literally
instantaneously at the speed that AI can
detect, do the transfer, and now poof,
it's all gone.
>> Mhm.
>> Uh so, and by the way, if that trade
doesn't happen fast enough, you can find
yourself upside down because it can go
into the negative where we weren't able
to sell your assets, but you still owe
us the money.
>> Now you owe me money. Now, on the US
side, we're seeing the US Treasury bond
markets to start to rise, and some
people are saying those two things are
tied. Um, Scott Besson talked about it
yesterday. You're going to see how
interconnected the global financial
markets are.
>> And so, people will borrow Japanese yen
and invest in Nvidia as one very real,
very concrete example because Nvidia is
like just returning like crazy. People
think this is going to last forever. So
they take that money out and they put it
into Nvidia.
>> Borrowing from Japan cost me 2%, Nvidia
gives me 30% returns. I pay the 2% off.
I walk away with that delta.
>> Correct. And so when I become upside
down because either the rate of the yen
that I have to pay back is now higher
than the delta that I'm making, or I
look at the market and I see, uhoh, the
thing that I was counting on giving me a
yield is actually negative. So now I'm
going to owe that debt and I'm trapped
in the market. So the question is, do I
panic sell and take a big loss uh on
what I bought it for, but I can still
pay back my debt or do I hope that uh
fingers crossed that we don't stay in
this position and I've got plenty of
time to go back and pay that off later.
And so people start selling because they
think, well, I've already made a bunch
of money, so I don't need to make more,
but I cannot have the exposure of the
debt in Japan because I don't know where
this is going to stop. And if this is
Japan essentially collapsing
economically, well, this may go like
that for 5 to 10 years. And so it's not
like I have any safety guarantees
whatsoever. So I'm underwater on Nvidia,
but I'm still ahead of my debt. So let
me liquidate.
lost a bit, but I'm not gonna be
negative in my account. I'll pay off my
debt. I'm good.
>> But that then causes a cascade in the
value of Nvidia. And because people do
not understand that the stock market is
a casino, they don't realize that this
is all just paper value.
>> It it's worth whatever somebody says
it's worth, not a dollar more, not a
dollar less.
>> And so when people panic for that period
of time, it's really worth less. And so
people can get trapped. They get
emotional because they don't know is
this going to be down forever or is this
going to be down for 24 hours. So they
panic sell and then that drives the cost
the price down even more. starts
liquidating more people because the
value of their stock which is on AI's
light speed level is like well you dip
below the liquidation point for a
millisecond and tough it triggers a
cascade of events where you get wiped
out
>> and so that's how the red just tumbles
and it keeps getting worse and worse and
worse and worse and worse until
basically everybody's liquidated and
then it stabilizes again but then that's
a lot of people that just got in some
cases lost their entire net worth. Yeah.
So, out of that 1.5 trillion, these are
actual portfolio accounts and things
that are kind of impacting like this is
why I'm as I tried to wrap my head
around the stock market, um, it always
pissed people off, but I would say,
wait, this is like trading baseball
cards. That was my first understanding
of it in my 20s and everyone laughed at
me. Aha.
>> And now the more I learn about it, it's
like that curve. It's like idiot says
this is like baseball cards. Guy in the
middle is like, you don't understand how
sophisticated this is. And then the guy
that actually understands it, it's like,
"This is like trading baseball cards."
>> Yeah, I've gone on that journey. This is
like trading baseball cards. This is a
casino. They are only worth what people
say they're worth. Um, even something
that pays dividends can trade below what
you would make just collecting the money
off the dividends. Doesn't matter. It it
only trades at the price that people are
willing to pay. That means this is a
psychological game. That means you are
gambling on what the emotional state of
people is going to be. Period. End of
story. Anyone that says any different
than that is [ __ ] lying to you now.
Or they just don't understand it, which
I will never get.
>> They're lying to themselves based off
the story that everybody somebody else
told them.
>> Correct.
>> Now, the stock market has huge
advantages. It's good. It's amazing.
Debt has huge advantages. It's good.
But oh my god, this stuff becomes a
problem.
>> The Japanese bond market breaks. US
stocks are going to take a tumble. Are
is the S&P 500 dead? Should we go to
gold? I have six months of cash in my
bank account. Should I leave that in
there? Should I move it? I
>> I will walk people through the way to
think about it, the mental framework.
>> I'll tell you what I'm doing. I do not
advise people to uh attach their boat to
my way of thinking. They need to
formulate their own way of thinking.
>> Uh that way we don't both get wiped out
uh should I be making poor decisions.
>> Uh but it goes like this. So, what do we
do in a time where countries don't trust
each other. So, the world order is
unstable. I don't know who's going to be
friends today and who's going to be
friends tomorrow. I don't know if people
are going to war. I don't know what
that's going to do. Um, I don't trust
people to pay back their debt. So, you
start setting the table like that. And
you go, okay, well, in times of massive
uncertainty, what are the usual plays?
One, recognize with massive humility
that you cannot predict the future well.
So you want to have a diversified
portfolio that diversifies across
economic forces. So what are the
economic forces? You've got things like
high risk. So when you've got high risk,
you've got a lot of volatility. That's
going to be the area that pulls back
first. That's why you see these
lightning crashes in the price of the
stock market in a way that you're
probably not going to see in something
like gold. Gold typically isn't going to
go up super fast. It's not going to go
down super fast. not by huge swings
because what gold has shown over time is
in times of uncertainty people go there
not because they expect a massive return
they go there to protect themselves
against inflation and so they're just
moving to that saying h this is where
you park your money when you're like I
don't know what the [ __ ] going to
happen so it is as close to I'm going to
bury my money in the backyard is you're
going to get but I want to bury my money
in the backyard in a way that it can't
be inflated away
>> so cool gold has been that forever
Bitcoin is trying to be that Bitcoin
trades more like a tech stock right now.
But I think that it's got long-term
legs, but that's a me thing. So, people
need to be thoughtful. They need to
formulate their own opinion about what
they think about how the human mind is
going to react to Bitcoin. I have a
thing that says the world is only
getting more technical. Um, when you
start thinking about wanting AI to be
able to do whatever the hell you want it
to do, you're going to give it digital
money. You don't want that digital money
to be owned by the government. I think
everybody sees now. People alive today
will see how rapidly a government can
become unstable.
>> And so I think they're going to go,
yeah, don't want anything controlled by
the government. Government has a history
of seizing gold. Uh when protesters
started getting shot in Iran, the price
of Bitcoin went skyrocketing there
because they just started gobbling up as
much as they could.
>> Uh and so it's like, and sorry, prices
aren't local. They started buying
rapidly there. it it was it outdid the
local currency.
>> Yeah.
>> So, um they
think people will look at that and go,
"This is decentralized. I like that." Uh
it's far easier to move than physical
gold. That's my beef with physical gold.
Um also, I feel like I can quote unquote
see it. Whereas gold, I'm just taking
somebody's word. No, no, no. You really
do own physical gold, Tom. It's all
good. So, I'm like, uh. So, anyway, you
start doing that. So, um, my portfolio
looks like I still own quite a bit of
debt, but it's all extraordinarily
short-term. It's all US debt primarily,
though I do have some corporate, but
I've been slowly backing out of that for
the last year. Um, the reason there is
that I know that they'll at least print
money to cover that. And so, at least US
government debt is saying every holder
of dollars will suffer as Tom suffers.
So I'm like okay like there's some
balancing thing there. Uh but I am going
to be migrating more and more out of
that into things like uh gold gold
mining stocks, silver, silver mining
stocks. Um Bitcoin I'm already massively
deployed. ETH I'm already massively
deployed but I might start picking up
some more there. um international
uh exchanges so that I'm ex I'm still in
um risk on markets because I think
that's important because you don't want
to miss out on something that goes up
because again I don't think I can see
the future clearly.
>> Uh I'll stay in the US just not overly
indexed on the US. Um and just try as
much as possible to spread my risk
around with a profile that looks like
somebody who is paranoid that the world
order is no longer stable. Do you do any
money markets like savings, that type of
thing, or do you just keep cash as cash
in?
>> We'll get back to the show in a second,
but first, let's talk about a problem
you just can't solve on your own. You
need to quit your job for like 6 months
just to remove your data from the
internet. Your personal information is
on hundreds of data broker sites right
now. Your address, your phone number,
your email, even your social security
number. You can remove it yourself, but
it would take hundreds of hours to track
down every site and submit removal
requests. And that's just round one.
Your data reappears constantly, so you'd
have to repeat the process every few
months. It is designed to be impossible.
Incognito solves this problem. They
track down your data across hundreds of
sites and remove it automatically. You
authorize them once, then they handle
everything. They keep removing your data
as it reappears. Just go to
incogn.com/impact
and use code impact for 60% off an
annual plan. Try it risk-free for 30
days. Now, let's get back to the show.
Well, no, no, no. It's all in shortterm
government debt. So, treasuries, bonds,
>> and sorry, by the way, just I saw one
question in the chat. So, they're like,
"Okay, good for you, but what about us?"
>> Um, that is for you guys. So this is
where I am always emotionally
traumatized that people do not think
that they have enough money to invest in
the stock market and you
downgrade your life in whatever way you
need to in order to start saving money.
And listen, I understand if you've got
kids and all that. The emotional pain of
that may be worse than just dealing
rolling the dice on economic
uncertainty. I totally get that. I've
got nothing but empathy for it. Um, but
no matter what, you need to find a way
to save money for your own emotional
reasons.
>> Uh, everybody hopefully at this point
knows the story of the janitor who
retired a millionaire because he just
lived super frugally and socked away,
you know, whatever. uh $25 out of every
paycheck. I forget what it was, but it
was a ridiculously small amount of
money. But over the 40 years that he
worked, that compounding interest became
incredible.
>> And so when you're playing a 40-year
game, then you really can start to make
money. Getting rich quick is not going
to happen. So right now, the thing that
I would most aggressively people to form
a mental model around is how do I
protect myself from instability? M
>> and the things that protect from
instability are the things that we've
been talking about. They are going to be
uh commodities, productive assets. And
part of the reason that commodities like
gold are so important is there's no
counterparty risk or at least you can
limit it. Um so
that bitcoin again. So don't buy silver
now because it's hot. Don't buy silver
now thinking that it's going to go up in
price. buy silver now because you have a
mental model that goes something like uh
60 to 70% of the value of silver is
determined by industrial use. It's used
in high-tech manufacturing. It's going
to be important in robotics and AI.
Therefore, it's likely to maintain its
value. That this is not a thing that
people can just one day go, "No, we
don't care about silver anymore." So, if
I had money in silver, while um the
price may not go up and it may even go
down, it's not going to go down if
inflation, all hell breaks loose and
inflation goes crazy, that's going to
probably remain relatively stable. It
will have drawbacks as all things do. Um
but that's probably going to be
relatively stable. When you think about
inflation can get into the double
digits, um that's where that kind of
thing gets scary. So, I don't know what
other words to say to people other than
I get it. Like if you don't have a lot
of money, I understand that you're going
to be deploying small amounts of money
to the things that I said. Uh but part
of what makes the stock market the
magically delicious thing that it is,
you can buy a fraction of a share. So
get in. There's such things as penny
stocks. Not that I'm advising that. I'm
just saying that for somebody to say
they can't get into the market because
they don't make a lot of money is
nonsensical and is exactly how you get
wiped out because you're not looking at,
okay, well, how do I how do I put a $100
into gold? whatever.
>> Uh, but find ways to start socking away
some money and protect yourself as much
as possible from inflation.
>> Um, and Mark Cuban said it best. Uh, the
most guaranteed return you can do is pay
off debt because if you're paying 23% on
a credit card, you get 23% returns if
you just pay your credit card off and
that money could go into your pocket
instead of to Capital One, American
Express, wherever you send it to. So,
>> yes, and I agree. I've penny stocks
should not have even come out of my
mouth. I am not telling people to buy
penny stocks.