Kind: captions
Language: en
2008 the housing market is euphoric.
Everyone believes it is going to go up
forever. Everyone that is except the
quants who see the truth in the numbers.
They know what the rest of us are going
to find out very shortly. The housing
market is a giant bubble and it's about
to burst. The numbers just don't add up.
The subprime mortgages are a ticking
time bomb. Given the default rates,
collapse isn't just possible. It is
mathematically certain. [music] And then
it happens. Barrister Stern vanishes in
a week. Layman Brothers collapses under
hundreds of billions of toxic assets.
[music] Within days, the global credit
freezes and entire industries flatline.
It was the first time most people
learned the words too big to fail and
the first time they watched the
government print trillions to stabilize
the market. But it worked. Well, it
worked. Like drinking to cure a hangover
works. We printed money and pushed the
inevitable pain into the future. We
layered on more debt, lowered rates to
zero to keep the economy moving, [music]
and we somehow convinced ourselves that
money really could be free. Tragically,
as we're learning right now, it really
can't. The illusion of free money has
now metastasized into [music] something
far more dangerous than 2008. This is no
longer just a housing bubble. It's an
everything bubble. Stocks, real estate,
crypto, gold, AI investments, all of it
pumped to record highs on a decade and a
half of cheap money. The quants see it
all again. Debt is compounding faster
than income. Interest costs are
outpacing growth. Liquidity is pouring
[music] into every crevice of the
market, including hyper speculative
asset classes purchased on margin. The
math of what is coming is clear. And it
won't just be housing or banks that
break this time. It will be everything.
[music] And for anyone who's not
prepared, it is going to be an economic
bloodbath. We're going to cover what
exactly is going on today in four direct
parts. Part one explains why I am
sounding the alarm as the market is
hitting all-time highs. Part two
explains the math that guarantees,
despite the all-time highs, the system
is going to break. Part three is a
surprise you don't want to miss. And
part four is the wise man's path
forward. [music] Problems are only
interesting if you have a solution. So,
welcome to part one. Things look great,
but we are totally screwed. The S&P 500
is up 16.5%
year-to date, and all major indexes hit
record highs in late October. Home
prices are still up over 45% from
preandemic levels despite the rate
hikes. Gold recently hit all-time highs,
and the crypto market cap is back above
$3 trillion.
And the Dow Jones, it just posted its
longest winning streak since 1987.
If you're a part of the 10% of Americans
that own 93% of the assets this year,
you have laughed all the way to the
bank. Money is cheap, plentiful, and
flooding into the market right now,
driving valuations up on everything.
Even Pokemon cards are selling for
thousands of dollars per box. But the
question is, what's really going on? Are
asset values actually going up? Is the
value of the dollar just going down? Is
this a bubble filled by euphoria and
speculation? Or is it actually different
this time? Is the economy somehow so
strong now that it will go up forever?
Is modern monetary theory right and we
can just print money without any
negative consequences? And why, if
things are so good, is the average
person needing to buy things on layaway,
basic things, and why should you care?
Statistically speaking, much to my
dismay, odds are low that anyone hearing
this right now has a meaningful
percentage of their income in assets.
All right, let's speedun those
questions, and then I'm going to tell
you exactly why you should care. Because
regardless of how much of your money is
tied up in assets or not, what's going
to happen next is going to affect
everyone. Are asset values actually
going up? Yes. Asset values are a
function of supply and demand. Is the
value of the dollar going down? Yes. It
is racing to zero. We add a trillion
dollar to the deficit every 100 days. It
will swallow the earth soon. Is this a
speculative bubble? aggressively. Humans
are hyper prone to psychological
contagions. It's one of the key drivers
of markets. Is it different this time?
No, it's never different because the
economy responds in predictable ways to
stimulus. It's a complex system, but
it's still a system. And like all
systems, it obeys rules. If you hear
people saying it's different this time,
sell everything. Now, I'm not saying the
economy is perfectly predictable. It is
not. Far from it. But I am saying that
money has something akin to physics. And
what we're seeing right now is not
normal market growth. It is a financial
pressure cooker built on cheap printed
money that drives inflation and extreme
speculation, creating bubbles
everywhere. When the dollar is devaluing
through money printing, smart money
flees into assets. When interest rates
are low, money is easy to borrow, people
borrow and it floods into assets. When
you can borrow money at six or 7% and
the S&P 500 is growing by 16.5%,
you can understand why people borrow
money at historic levels and plow it
into the stock [music] market on margin.
But when you have that much liquidity
flooding into the system, you begin
chipping away at the stability of the
economy as a whole because everything
becomes a bubble and all bubbles burst
eventually. And unlike in 2008, which
was largely a housing and banking
crisis, this time everything is
inflated. Stocks, housing, bonds,
crypto, art, even consumer collectibles.
They are all levitating on the same tide
of easy money created by a government
that never met a dollar. It didn't want
to print out of thin air. Now, do not
get me wrong. Bubbles can inflate for a
very long time. And I get why people
want to get while the getting is good,
but there is a structural mathematical
reason why this bubble is nearing the
end of its ability to keep inflating.
So, welcome to part two, the physics of
money. Since 2020, the US money supply,
known as M2, has grown by more than 40%,
the fastest expansion in modern history.
Roughly one quarter of all US dollars in
existence were created in the last 5
years. Every 100 days, as I said, the
federal debt increases by another
trillion.
The national debt now exceeds $37
trillion, up roughly 11 trillion since
2020 alone. Interest payments on that
debt just crossed $1.1
trillion per year. That's more than the
entire US defense budget. At current
borrowing levels, every one percentage
point rise in rates adds roughly $370
billion a year in new interest costs
alone. If average Treasury yields
returned to just their 2007 levels,
annual interest expense would blow past
$2 trillion a year. That's roughly half
of all tax revenue. Federal deficits are
now running above six%
of GDP during peace time, a level that
we normally only see in an extreme
crisis. US debt to GDP sits around 122%
and is projected to exceed
130% within a decade. The threshold at
which nearly every country in history
has collapsed, gone into revolution, or
defaulted. Meanwhile, the Federal
Reserve has already had to take on over
7 trillion dollars in assets to prop up
the market. And it can't sell them off
without crashing the bonds market. And
if it just keeps printing money to buy
more assets to keep the markets humming,
it will crash the value of the dollar
itself. On paper and in real life, this
situation is mathematically impossible
to sustain. Debt is compounding faster
than the income needed to service it.
Think of it as a debt flywheel that is
now running out of control. And unless
the flywheel of accumulating compounding
debt faster than revenues increase is
halted, there will be blood. Remember,
compounding interest is a perpetual
increasing machine. Left alone, the debt
just grows bigger and bigger by the day
until the country has to default on its
debt, obliterating its ability to raise
sensible debt, which is actually
necessary to run a country. And that's
why economic warning lights are
beginning to flash all over the place.
[music] Markets are really just
confidence Ponzi schemes. Don't forget
that. And as long as people believe,
they work. When people lose confidence,
however, the markets crash. And right
now, it looks like people are beginning
to lose faith. Crypto's momentum is
fading. Gold has fallen off of its
all-time high. Housing is bending under
interest rate pressure. Commercial real
estate delinquency rates are now higher
than they were in 2008. The stock
market, long ago detached from
fundamentals. Michael Bur, the big short
guy that called 2008, right, is saying
it's an everything bubble. Ray Dallio,
the world's most successful hedge fund
manager, thinks we're headed towards
civil war, and legendary investor Warren
Buffett says there are no deals to be
had and is holding a massive amount of
cash. Add to that the fact that there's
over a trillion dollars in margin debt
for the first time in history, and
hopefully it is very easy to see why we
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now, let's get back to the show. If I'm
right, and these are signs that people
are losing confidence in the market, if
any kind of event comes along that
causes distress in the market, prices
can reset violently across virtually
every asset class all at once, causing a
massive loss in individual wealth. For
everyday investors, the risk is massive.
Home values could plunge, retirement
accounts could get slashed, and hyped
assets like AI and crypto could vaporize
in a.com bubble style moment with a
massive contagion effect that will
threaten many sectors of the economy.
This time we are not going to be able to
print our way out of it because we have
already done as much of that as we can
possibly do. As the math verifies, for
15 years, every crisis was papered over
with cheap money. The mantra was to push
interest rates lower and lower. But the
economy runs on physics and prolonged
cheap money creates bubbles. Now, if
you're only half listening, this is the
point where you stop and pay close
attention because I'm about to steal
most people's copium. If you are
thinking we can just keep printing money
or tax our way out of this, consider
this. After 2008, the Fed faced an
impossible choice. Let the system burn
or print insane amounts of money and
flood it with liquidity. They chose the
flood, a biblical flood, the kind of
flood that would have drowned Noah.
Quantitative easing, the rainwater was
supposed to be temporary, an emergency
measure to restore confidence after the
banking collapse. But when trillions in
printed money stabilized the market and
asset prices roared back, we learned a
very dangerous lesson. That printing
money works and a little rain can't hurt
us. By 2010, the Fed had already
expanded its balance sheet from under
900 billion to over 2 trillion. Within a
decade, that number would exceed 4.5
trillion. But it worked well enough,
right? So when COVID hit, they didn't
hesitate. They printed even more money
and bought up even more assets to prop
up the market. Between 2020 and 2021
alone, the US printed roughly 27% of all
dollars ever created in the nation's
history. Stimulus checks, PPP loans,
corporate bailouts, over $6 trillion
conjured out of thin air in less than
two years. And once again, it worked.
Markets soared. Unemployment collapsed.
Confidence returned. But here's the
problem. Every time we used money
printing to solve a crisis, we made the
system more fragile. The dose that once
saved us terms of money printing now
barely gets as high. And that's why the
Fed's balance sheet now holds a
ridiculous $7 trillion. The flood waters
are truly getting deep. The economy has
officially become addicted to artificial
stimulus. We just keep deficit spending
and printing to cover any and all
shortfalls. And though we can look
around and see the mass of Americans
drowning in debt, unable to make ends
meet, we just keep pretending that money
printing works because markets keep
rising and inflation is confusing enough
that the average person just accepts it.
But the reality is that debt compounds.
We mathematically cannot just keep
printing money and not end up going bust
as a country. We now spend over $2
trillion more each year than we collect
in taxes. We already spend the 1.1
trillion in interest payments that we
were talking about earlier. And there is
no signs of that number slowing down.
And because money has physics, we are
now trapped. You can't print real
prosperity. You can only borrow it from
the future. And we have borrowed every
dime that we can because that future
always arrives. It's here and it expects
to be paid back with interest. The laws
of money are simple. If you inflate the
money supply faster than entrepreneurs
can create new goods and services that
people want to buy, prices will rise. If
you borrow to pay debt, your interest
costs will rise. And that's where we are
right now in the phase economists call
fiscal dominance. Fiscal dominance means
the government's
spending and debt burden is now so big
the Fed can't raise rates without
seizing the credit market and causing
the government itself to default, which
would cause an economic calamity. The
current bubble can't keep inflating
because the central bank has officially
lost control of its ability to mediate
the markets through monetary policy. And
that is why Trump and Powell are
fighting. Here is how the fiscal
dominance trap works exactly. When the
economy is too hot, people are too
exuberant and bubbles are forming, the
Fed needs to tighten the interest rate
to slow everybody down and slowly
deflate the bubbles. Money therefore
becomes more expensive to borrow. People
can get a higher risk-free rate of
return in treasuries and bonds. More
money goes into government debt where
it's safe and overall asset prices cool
down. That's where we are right now.
That's what we need to do. But the Fed
can't raise rates right now because we
already have too much debt. If the Fed
tried to raise rates right now to cool
asset inflation, the cost of servicing
the $37 trillion in national debt that
we already have would spike, forcing the
Treasury to issue even more debt just to
make the interest payments. That would
mean printing even more money, which
would drive the debt and the interest
payments higher, creating the need to
print even more, and on and on it goes
in a flywheel of death. On the other
hand, if the Fed tried to cut rates to
alleviate the burden of the interest
payments and ensure the government
remains solvent, the cheaper credit
would now flood the system with more
money and the bubbles would continue to
inflate until everyone loses faith in
the system. As we have already covered,
we're already seeing the first signs of
this happening. People are losing faith.
Either way, right now, no matter what
the Fed chooses, it is a
self-reinforcing doom loop. Lower rates
create bubbles. Higher rates create
defaults. Either path feeds the same
fire. That's the problem of fiscal
dominance. So the question now becomes,
if it's inevitable that these bubbles
are going to burst, when are they
actually going to burst? Welcome to part
three. Timing is everything. The
government is now borrowing $50 billion
every single week. In the past 18 months
alone, the US Treasury Department has
raised roughly $2.5
trillion dollar in new debt, largely
purchased by the flood of excess private
cash that had been sitting idle in the
money market funds. [music] That pool of
easy buyers is now almost entirely
drained. But the government's need to
issue even more new debt hasn't slowed
at all. In fact, it's speeding up. As of
today, [music] the Treasury is on pace
to issue over $2.9 trillion in new debt
this year alone, which is the largest
peace time borrowing binge in American
history. But this time, there's no spare
$2.5 trillion in private money sitting
around to buy it. That means the debt
issued this year and in future years,
[music] if we make it that far, will
need to be financed by pulling liquidity
out of banks or the stock market or
other risk assets by offering yields
high enough to attract new buyers. But
as we covered in the previous section,
the Fed can't raise rates without
breaking the system. So, how do you keep
raising new debt? Said simply,
eventually you don't. And even if you
did, you'd be pulling money out of the
part of the system that's already
working. It does not take a genius to
understand that someone with nearly
[music] $40 trillion in debt who
counterfeits their own money, spends
like an unhinged hoarder on meth and
borrows $50 billion a week, isn't
exactly creditworthy. So eventually,
eventually people stop extending them
credit. Eventually the constraint isn't
liquidity or rates, it's confidence.
People will not extend credit if they
don't think they're going to get paid
back. Markets can absorb almost anything
except [music] disbelief. When investors
stop believing that the Fed, the
Treasury, or the dollar itself can
manage this mountain of debt without
destroying the currency, that's when the
system breaks. And it does not happen
gradually. [music] It happens all at
once. A sudden loss of faith that
freezes the financial world overnight.
But the trillion dollar question isn't
if it'll happen, it's when it will
happen. [music] And the only honest
answer is no one knows for sure. But
here's why the answer mathematically
must be soon. Right now, interest on our
debt is the third largest line item
behind only social security and
Medicare. [music] And based on the
latest Congressional Budget Office CBO,
projections from its budget and economic
outlook, interest payments will eclipse
Medicare before the end of this year,
2025. For fiscal year 2025, the
government collected 5.23 trillion in
tax revenue. That means the interest
payments alone already eat roughly 20%
of all tax dollars collected. And here's
a fun fact. The interest payments in raw
dollars are expected to roughly double
in the next 10 years. But in reality, I
cannot imagine that will actually happen
because who in their right mind would
still be buying the debt at that point?
And if people stop buying the debt, the
government will be forced [music] to
default. And that is financial
Armageddon. We will return to the show
in just a second. But first, let's talk
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[music] And now, let's get back to the
show. So, here is the cold fact we all
have to face. When your debt is this
large, there's only one real way out.
You have to grow your revenues faster
than the debt obligations compound.
Everyone is going to scream tax the
rich. But even if you confiscated 100%
of their wealth, forget tax, not not
even just their income. If you
confiscated their total net worth in a
fantasy land, you would still only get
about $7 trillion. [music] And if you
tried to do it in reality, even if you
jailed everyone so they couldn't leave,
the value of everything that they owned
would plummet as you flooded the market.
[music] Wealth is a trapped asset. It is
not that easy to turn into actual
dollars. [music] But even if you were
able to get the fantasy payload, you
only buy yourself a couple of years. A
couple of years. So instead of calamity
happening in, let's say, six or seven
years, [music] you become an evil
dictatorship that strips your citizens
of their freedoms and you steal all of
their and calamity still happens
[music] but in eight or nine years. Boy,
do I hope that sounds as obviously
stupid as it is in reality. So that
leaves growth. It is your only hope. We
have to grow our way out of this problem
[music] if we want to delay what is
currently mathematically inevitable.
That's exactly what the Trump
administration is attempting to do. All
in an effort to lengthen [music] the
runway. They've got a three-part
strategy that looks something like this.
Part one, tariffs. Tariffs are
essentially just taxes under a different
name. They're designed to raise revenue
without having to call it taxation. It
has raised additional revenue, and the
additional revenue is definitely
helping, but it comes at a cost that
could further weaken the system because
tariffs also raise prices, which acts
very similar to inflation. This will
further pressure the Fed to tighten
rates to try and tame true inflation,
which is also concurrently driving
prices up. Part two is deregulation. The
administration is trying to cut red tape
and remove barriers to innovation, which
spurs growth by kickstarting
productivity and attracting investment
back into US industries. The logic for
sure is sound because if we can make it
cheaper to build, innovate, and hire, we
can grow GDP faster than we are now and
generate more taxable revenue and
personal incomes. But the positive
effects of deregulation take time. And
the compounding effects of debt wait for
no one. And it is not enough to grow.
You have to grow faster than the debt
compounds. And so far, there are no
signs, no matter how much deregulation
you do, that we're going to be able to
pull that off. The third part of their
playbook is to create new demand for US
debt. Behind the scenes, this is
probably the most novel and
consequential idea that they've got, the
push to back stable coins with US
treasuries. I cover this in detail in
this video, so you can learn more about
it. But for now, just think of it as
using sensible crypto regulation to
create international access to dollars
through stable coins. It would be a huge
win for people around the world that
don't have access to a stable currency
in general and US dollars specifically.
And if the regulations force stable
coins to back onetoone with US
treasuries, it would be great for
protecting the public who have to fear
Ponzi schemes. And perhaps most
importantly, it would incentivize
[music]
the private sector to hold more US debt.
It's a very clever strategy, which will
help a little, but honestly, unless we
balance the budget, it only buys us a
little bit of time. It does not actually
diffuse the bomb. Better than nothing to
be sure. But we still have a bomb that
is counting down. But it is the kind of
thing that makes the job of predicting
when exactly the credit markets will
freeze and the US will be forced to
default, ushering in the economic
apocalypse, that much harder. [music]
Now, before I put a final answer to how
long this thing is going to take, let me
add one more log to this raging inferno
of warning signs. Once a government
spends more on interest payments than it
does on defense, [music] infrastructure,
or healthcare, every election becomes a
zero sum fight over a shrinking pie.
Each party stops debating [music] how to
grow the economy and starts fighting
over which side gets what. The nation
turns inward and begins attacking
itself. The debt becomes the underlying
cause of a domestic civil war. First
fought through policy, then eventually
fought through outright [music]
violence. And that's what history has
shown over and over and over. As
countries cross 130% debt to GDP, they
break [music] into outright violence,
revolution, or just full-on collapse.
And right now, the US is currently at
122%. [music]
A number expected to cross 130% within a
decade. That's why social unrest and
political violence are on the rise in
the US. When the pie shrinks, people
fight to ensure they get as much of the
pie as possible for their team. And if
our debt trajectory keeps climbing,
America is just going to race further
and further down the path of violence
until ultimately revolution tips the
tables of all of the debt system. The
economic apocalypse happens and America
finally hits the reset button. Now, if
history is any guide, despite the reset,
this is a brutal period of violence
where exactly no one wins. But the final
question remains, what will ultimately
snap the system? When's that going to
happen? What actually turns
unsustainable into active [music]
collapse? There are a few possibilities.
A failed Treasury auction would do it.
That's when investors just refuse to buy
our debt without much higher yields.
This would serve as a signal that
confidence really is gone. It's the
modern version of the Nixon gold shock.
The moment the world realizes the US
promises are not going to be honored. In
the 70s, though, we still had plenty of
tricks up our sleeve for dealing with
the crisis. Now we have few to none
other than AI becoming a miracle of
productivity that allows us to grow our
way out of this. A credit market freeze
would also do it when repo markets seize
because there's not enough collateral to
roll overnight loans and liquidity
vanishes in hours. Or inflation could
just reacelerate if prices spike again
and the Fed is forced to tighten into an
already weakening economy. that would
trigger a cascade of defaults across
both public and private debt. The
Treasury would then have to choose
between honoring its obligations or
stabilizing the system. Either path is
going to end in what Ray Dallio calls an
ugly deleveraging where debt
restructuring on a national scale
happens under emergency circumstances
and the market just gets [music]
slaughtered. If any one of these
catalysts hits, the everything bubble
doesn't just deflate slowly, it pops and
the reset [music] begins. Now, how long
do I think this is going to take? Based
on the things we just walked through,
I'm going to say no more than 10 years.
But honestly, the debt flood waters
arising so fast and the system is so
structurally unsound. I'm trying to
build my ark now. So, welcome to part
four, surviving the flood. Where we go
from here? Every collapse is also a
transfer of wealth. Money moves from
people with debt to the people who are
liquid and can buy the distressed
assets. Money flows from the emotional
to the disciplined. So the question
isn't whether the system resets or even
when it's going to reset. It's whether
you're going to be solvent, educated,
and ready when it resets. First of all,
please do not try to outsmart the
market. Accept radical uncertainty.
Getting the timing right in the [music]
market is next to impossible. Even heavy
hitters like Michael Bur and Peter
Schiff have been criticized for
predicting 20 of the last [music] two
recessions. And the biggest names in the
game, people like Soros, understand how
unpredictable things can be left to
their own devices. So big secret, they
don't leave things to their own devices.
They get involved in international
politics. They fund campaigns, NOS, and
foreign governments. Soros is famous for
literally breaking the back of the
British pound. And guess who helped him?
The current Secretary of the Treasury,
Scott Bessant. These guys know how to
play games that the average person is
just not prepared for. When you're
playing in the market, you're going up
against people like that. Have the
humility to know there are people and
forces at work that are effectively
impossible to map accurately. Worst of
all, you can be right on the direction
of things and still get the timing
wrong. I remind myself of this
constantly. And if you're leveraged,
getting the timing wrong is the same as
being wrong. [music] So your edge is
discipline, preparation, position
sizing, having personal rules, hedging
your bets, and being patient. Think
Dalio's approach of systems and
diversification over trying to outsmart
the quants and the ultra wealthy who can
sway international markets or Buffett
who takes a fundamentals and price
approach eternally being patient and
looking for good deals and only moving
when there's a deal to be had. Here are
the kinds of operating principles to
consider if you're going to take this
approach. Build a portfolio around
uncorrelated asset classes that won't
all go up or down at the same time. It's
going to limit your upside. That is
true. But it's also going to limit your
downside. This is what Ray Dallio calls
an all-weather strategy. Remember that
financial assets have fundamentals that
make them attractive in the long run.
Focus on those fundamentals and look for
quality assets at the right price. Look
for businesses and assets that can
withstand funding stress and price
shocks. Never forget that liquidity is
oxygen. Debt gives you leverage, but it
also puts you at risk. Keep cash on hand
to keep your options open. The levered
die first. Inflation is a risk to watch
out for, but it's not nearly as risky
for the average person as debt. Build
your portfolio based on rules, not on
your certainty around where the market
is going because you're inevitably going
to be wrong about that. The only thing I
can guarantee you about the future is
that it will surprise you in some way
even as it adheres to timeless patterns.
Again, you can be directionally correct
and still get clobbered by bad timing.
All right, that covers the Dallio and
Buffett approaches, at least in a
nutshell. But there's a new voice that
shares Dalio's historical lens,
internalizes the influence that debt and
policy have on economic movements, and
puts together a game plan for investing
during fiscal dominance. That phase
where government spending and debt are
so insane and over the top that the Fed
can no longer come to the rescue. It's a
plan popularized by Lynn Alden, and it
goes like this. There are three pillars
to her diversification strategy. Pillar
one, profitable growth equities. This is
about 50% of your portfolio and is
focused on businesses with pricing
power, real margins, and the ability to
grow cash flow even when the market is
distressed. Pillar two, defensive assets
in the form of cash and cash
equivalents. These are short duration,
high quality, and instantly deployable.
They provide optionality and safety when
volatility hits. This should be about
20% of the portfolio. Pillar three is
inflation protection in the form of
commodities and hard monies. Think
energy, commodities, precious metals
like gold and silver, the companies that
pull them out of the ground, and things
like Bitcoin. This is going to be about
30% of the portfolio. Exact percentages
will vary based on your own assessment
of the markets, expected returns, etc.
But that gives you a rough idea of how
to hedge against uncertainty during
fiscal dominance. Now, why these
approaches work in an everything bubble
is because they acknowledge the inherent
uncertainty of timing while accepting
that the math is clear. The debt
flywheel guarantees that the bubble is
going to burst because the economy is
full of wild distortions right now
brought on by government interventions
that have walked us into a trap where we
break the system no matter what we do
short of extremely unlikely levels of
unprecedented growth. Burn into your
psyche that you don't beat a debt cycle
with clever trades. You survive it with
[music]
positioning that acknowledges the
inherent uncertainty around timing. If
you're trying to nail the exact top or
bottom, you're competing with
supercomputers, AI, and people rich
enough and well-connected enough to move
global markets. You will lose that game.
You win by preparing for the fact that
in a true ugly deleveraging, wealth
moves from the leveraged to the liquid.
So, your job right now is to get liquid
enough to capitalize on opportunities,
stay disciplined enough and avoid
emotional moves and stay in the market
enough to not get eaten alive by
inflation should this all play out on a
longer thanex expected timeline. What
you should staunchly avoid doing is
allin, all out flips based on headlines,
reaching for yield and junky hyper
speculative assets based on FOMO, using
margin to buy the dip, assuming
everything will just keep going up
forever and saying anything even
remotely like this time it's different.
Math is math. It's never different. In
the end, what's happening right now is
not about fear. It's about the physics
of money. We've acted for so long like
we can deficit spend forever and that
money can be printed for free. But now
the bill has come due and we realize
there's no free money. The only way to
avoid the devastation of compounding
interest is to pay off your debt. But
we've pathologically refused to even
balance our budget, let alone pay our
debt. So now the flood waters really are
rising. Barring historic levels of
growth we have no reason to believe will
happen. The economy is going to break
under the weight of our debt. The final
boss of the economic game is always
compounding interest. It eventually
demonstrates to the market that the debt
will not get paid back. That debt
holders will lose their money. And when
that happens, confidence disappears. And
when that happens, the government can no
longer raise money through debt. And
when that happens, the country defaults.
And when that happens, it's game over.
So plan now. Build an all-weather
strategy now. Because when the flood
happens, it will be a flash flood, and
only those on an arc are going to
survive. All right, if you want to see
me explore topics like this in real
time, be sure to join me live Wednesdays
and Fridays at 6 a.m. Pacific on
YouTube, X, Twitch, or Kick. You can
join the debate or just chill in the
community. I hope to see you guys there.
Till next time, my friends, be
legendary. Take care. Peace. If you like
this conversation, check out this
episode to learn more. On December 7th
of 1941, Japan launched a surprise
attack on Pearl Harbor, sending much of
the US's naval fleet to the seafloor and
killing thousands of Americans. The next
day, [music] the United