Kind: captions
Language: en
you've said that the US is in stage five
and to give everybody an idea stage six
is basically revolution war it's the the
violent restructuring of the economy
and whether we're in the seventh inning
of stage five or the third inning I
don't know but the fact that we're in
stage five which is obviously where
there's massive internal conflict which
Rings way too true um and the massive
disparities which you did a really cool
graph in your video where you show
income inequality and that gap between
the lines you filled in with resentment
and so you have growing resentment you
get populace on the left and the right
you get internal conflict people
fighting and then you get a potential
external power looking at you going
they're weakened by their internal
conflict and that historically is when a
rising power makes its move yeah so I
think there
three things three big forces to keep
your eye on and when you see them in
their cycle then it's clear first are
you earning more than you are spending
and do you want people to look at this
at an individual level or at a country
level well you can it
both I want them to look at it as the
country but the country is nothing more
than the aggregate of the
people and so um when you look at those
three forces I want to make sure that
they're clear and you could align them
up and you could see where you are is
the country earning more than it's
spending and building savings or is it
spending more than it is earning and
creating debt because one man's debts
are another man's assets and when
somebody is holding those assets and
they're producing a lot more of that
money in debt they go down in value
money goes down in value as they produce
it to produce that buying power and then
that gets people um bad returns bad in
it produces a higher amount of inflation
and it produces bad returns for holding
debt or B so in other words cash or
bonds and then people get out of cash
and bonds and that produces Rising
interest rates while there's Rising
inflation and that produces stag flate
so I want them to get the mechanics of
that because that's happening now you
could see it this is not controversial
we are producing a lot of debt we're
spending a lot more than we're earning
and as a result they're printing a lot
of money and the printing of a lot of
money creates a lot of inflation and
with that inflation then nobody wants to
you know cash is trash you don't want to
hold cash um and you get out of that and
that causes rates to rise and that's one
of those three factors so you can see it
happening and you could also see the
cycle of it as shown in the book the
second force that is dealing with is the
internal conflict Force how you are with
each other are you operating cohesively
common Mission and moving in the right
direction the system working or or are
you at each other's throats um uh is the
system threatened because history shown
when the causes that people are behind
are more important to them than the
system the system is in Jeopardy and
that is a risky situation it's a risky
situation because it produces or
disorder and it can produce a form of
Civil War and at those times when you
have that you see greater and greater
polarity in politics it shows up at
greater and greater populism of the left
and populism of the right and populists
uh want to fight for their side they're
not moderates moderates want to work
together to try to find a compromise
that's best for the whole populists um
appeal to their Crowd by saying I am
fighting for you and they will fight
each other and that fight can be at the
threat of the system so in history for
example we saw four democracies in the
1930s choose to become dictatorships as
one side fights to the other because
they become so disorderly and we have a
system right now that you could see that
it is possible in elections that one
side neither side might accept losing
and so the system becomes in Jeopardy
and you see that the moderates leave the
system they you can't be moderate you
have to pick a side and fight and so you
see this in the French Revolution were
moderates in the early part of it that
recognizing that there were problems and
and wanting to work together the
moderates got guility the the the
polarity began the same was true in the
Russian Revolution the same was true in
the Chinese Revolution the Cuban
Revolution and so on those polarity gets
greater and greater as there's a greater
intensity to fight and that is the
internal peace and so you could see
where we are in that internal peace
right now
we see um that uh moderates are dropping
out of uh choosing not to run for
reelection and you're seeing in the
primary system that the fight is who's
over most extreme in representing that
and you're seeing this greater polarity
and you see it reflected in many
statistics the um something like 10 or
15% I forgot if it's 10% of the
Democrats or if it's 10% of the
Republicans I don't remember versus f um
15% wish the members of the other party
would die they don't want them to
measure their uh they don't want them to
marry their uh children I mean there is
a great polarity and you're seeing that
um lead to changes in where people live
they're moving to different areas not
just because of tax reasons but because
of differences in values and so that
kind of you can see it
today happening these things but you
also can see the Arc of them in the book
because that it measures statistics it
shows these things happening so when you
have a a financial problems and you have
this kind of polarity and you have a bad
time you have a lot of fighting
internally so imagine where we are in
the economic cycle we're in the part of
the economic cycle where they have given
the government has given a lot of money
and credit to people they've put put it
out well no surprise that's leading to a
lot of inflation okay inflation takes
buying power away from people and it
also means that then there's going to be
higher interest rates and that's going
to squeeze people and so that makes that
wealth Gap and that wealth issue uh more
difficult so th that's the second force
and the third force is the rise of a
great power the
geopolitical force that's going on that
we're seeing today with China and Russia
and so on and how that's changing
because when the country when the power
of a country diminishes okay when we get
weaker financially or how we are with
each other and so on there are greater
vulnerabilities and there's always the
competitive power that learns how to
become stronger and competition always
happens there's the establishment and
then there's the new compet comptition
and as they get stronger they get
stronger in all ways militarily and
commercially and so on and that's the
dynamic that we're seeing yeah so we've
got Taiwan looming in the the sort of
political background you said many times
in the book that that's a an indicator
that you'd really be looking at if there
was a a fourth Skirmish over Taiwan that
you would get increasingly worried we
definitely need to talk about inflation
in a minute because I want to know what
people should be doing in that
environment
but first like the and I don't know if
people are like me but the thing that
got me to stop and really start paying
attention to this was how far into stage
five we are that was the thing that
compelled me that I have to slow down I
really have to look at this because I
actually don't like thinking about money
despite my long-standing pursuit of
success that's really been about
something else for me money has been a
byproduct of that um and that's in the
book and I don't know if your number has
changed but in the book you say that you
give a 30% chance of the US falling into
Civil War I think in the next five to 10
years and that uh a major conflict with
China at 35% in the next 10 years and
you said look it's a guess but you lay
out a lot of data before you say that
it's just a guess so it's obviously a
very well-informed guess one do those
numbers roughly hold for you still and
if they do how do we pump the brakes on
this um I I would say those numbers
probably are a little bit higher now I
would say I was afraid you'd say that
things are progressing a little bit
quicker um the do you mind ballparking
me if if we're not at 30 are we 31 are
we
40 yeah let's let's say
um let's say 35 to
40% um on on each let's say and who and
I'm not I'm not being precise but the
events that happened in the
Ukraine um and that is is U bringing all
this up development internationally up
um at a little bit quicker Pace it's the
same Dynamic there is there are two
sides and there'll be neutral countries
just like in the war there was the
allies and the Axis powers and then
there be neutral countries and so that
part is
developing um the the US uh conflict
part is probably progressing a little
bit quicker um so I mean the let's say
the odds of that um on the on the youu
um on the world order um the
developments in the Ukraine maybe I
should put those in perspective would
you like me to do that pleas absolutely
um okay
um there is a a very close relation ship
a common objective of the Russians and
the Chinese so um there is a
um a competition in the world and
there's a dominant world power which um
is perceived as being overly controlling
so the Chinese believe that the policy
of
containment of the United States um in
other words just right Within their
borders that there isn't a
region uh that's suitable for them um
much the same ways uh the United States
there's always a geographic region that
is an area of influence uh the United
States in the area uh like the Cuban
Missile Crisis um Cuba um when there's a
threatening
power um in Cuba we reacted to that
those that kind of geopol itics um they
believe that the United States is sort
of containing them and they are growing
in power so that there's that dynamic in
Russia uh has the same kind of view and
so that there's a common let's call it
enemy uh comp competitor and there are
five types of Wars uh there's a trade
War there's a technology War there's
a geopolitical influence War there is a
capital war and then there's a military
shooting War um and we are in the first
four of those
Wars um in uh in this competition um
with China or with Russia with
China well we're not in a shooting war
with
China we are in um a shooting war of
sorts
in Russ with Russia and the Ukraine
we're providing arms and so they're
shooting and so there's a military war
going on and uh and we're in it in our
way so we're at those particular uh
spots um and the capital War um is
sanctions we hear the notion of
sanctions and what that means is they're
economic and the way they work is to
shut off um to produce economic Pain by
either
um not letting them get at their money
or um not letting them get to Goods that
they can import and these have happened
through time um in Japan that was what
set us up for uh the bombing of Pearl
Harbor because the United States cut off
Japan's oil supp supply was in the
process of doing that and also
confiscated its uh bonds much the same
way is happening now and that put them
into a corner that led them to um bomb
Pearl Harbor and then we went to a
military war so that's where we are now
and that also is risky because it
threatens the value of the dollar
because um the right right now debt is
dollars any currency the way you hold it
is you hold it in the form of debt you
don't hold it just in paper and um uh
because it there's a rising inflation
and because there's a lot of printing of
money and because there's also a greater
fear on a number of countries that they
too could be sanctioned there is a
selling of dollar denominated debt so
you're seeing that the bond market is
going down and interest started
escalating recently
yeah that's right and so there is that
that Dynamic that's going on the capital
Wars um are the ones that accelerate
immediately before um the uh the
military Wars usually the coffers are
empty they're printing a lot of money
and then they're trying to use uh
economics as a weapon so we're we're in
that part of the cycle now um in terms
of how this will
transpire I think there are um there are
three big questions that we're going to
learn about or get answers to pretty
quickly um the first is does uh Putin
and Russia uh win or lose um I'll
describe win as um what he wanted at the
outset which is when for Russia would be
to have um um the Ukraine H um be some
not non-threatening position such as a
neutrality a guaranteed
neutrality and for Russia to have
control over Eastern
provinces and for Russia not to be um
economically
devastated um instead to be maybe have
it something like a 10 or 12% decline in
GDP and for Putin to be in power if
those four things happen
then the cost of his actions will have
been worth the uh what was obtained from
that and that would be viewed as a
win um it would be then also a loss from
the Western countries the world is
looking at the power of American
sanctions um because American sanctions
are the greatest power the United States
has
if it was a military power it the world
has uh come to the position that a
number of countries have had um an equal
ability to do harm to the United States
militarily as the United States was have
have to do to them and so we don't have
a dominant military power anymore but we
do have a uh dominant um sanctions power
so if we're still ahead of China
um in the United States ability to
influence have economic sanctions is
much ahead because it controls the
world's Reserve currency that's a
biggest asset but in weaponizing the
dollar um it is leading those to get
around and not want to hold dollars
because they get worried that they're
going to be
confiscated so so we will see if that do
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um sanctions power we'll see how
powerful it is if it isn't very powerful
that's going to be a problem um because
others will perceive our weakness well
and they'll also realize then
um uh then you only have military power
I mean think about this way if this war
is not a difficult War for the United
States and Europe for the most important
that it produces higher oil oil prices
and the like but um while Russia is
throwing in military we are throwing in
sanctions and these sanctions don't
cause LI cost
lives um it's not a military war uh so
we're fighting it with sanctions and
they're fighting it with um with
military if you didn't have that how
would you fight this
war it would be a much more difficult
situation and the third thing that we're
seeing is how the world is lining up the
world is lining up uh which you know
there are in Wars typically a axis and
ex uh and allied
powers and you could see by the actions
that are taken by as to which are lining
up um who voted in favor of what at the
United Nations who is allowing what
rules uh
who was trading with the other party who
um Russ actually put out a list um who
are friendly and adversarial
countries um you'll see at the next G20
meeting uh who will be in favor of
Russia attending that meeting and who
will be in favor of it not attending and
that's making clear how the sides are
lining up so you're seeing those sides
line up and all sides are in preparation
for
war okay so all right we've got that
escalating things are moving faster um
between us and China than we thought
escalating tensions here in the US um
inflation is one thing I want to really
touch on so what do you do in an
inflationary environment as somebody
who's not I don't consider myself a
Savvy investor and so I always wanted I
used to joke with my money manager I
want to be as close to my money buried
in the backyard as possible and uh
obviously for inflation reasons I have
since learned that that is a terrible
strategy um but what do you
do well first thing is you realize that
uh holding cash and dead assets is a bad
thing so a lot of um
money uh is in cash because people think
that cash is the safest
investment but they are measuring that
in the amount of money that they get
nominal returns and they say it doesn't
wiggle much but think about it um it's
lost as of the most recent statistics 8
and a half% over the last um inflation
is 8 and a half% and they receive
virtually no interest rate in cash and
so there was an 85% loss of buying power
as a result of
inflation and so psychology should
change and is in the process of changing
to realize that you have to think in
terms of buying power not the number of
dollars you have and you have to think
um how much uh are your is your buying
power and so the worst thing is to be in
cash like I say cash is trash and to be
into and to be out of the bonds um the
next thing is to have a diversified
portfolio of
assets um the
diversification um means um some assets
that are um uh inflation hedge prone for
example you're better off to own an
inflation index bonds than a regular
Bond um what makes something an
inflation index like what what are the
nature is that going to be gold and
precious metals tangible things like
what are the things that are resistant
to
inflation um yes and inflation index
bonds because their returns are tied to
inflation
interesting I don't I don't understand
that well enough to know what how one
would do that is that worth going into I
don't know what the punch line is going
to be yeah um I think the punch line is
if you take a look at it uh it's it's
simple it's uh like a regular Bond
except um its payments are linked to the
inflation so they compensate you for
inflation so the is this a Government
Bond yeah Government Bond okay and there
are some tax advantages to them too so
look into them okay and why don't people
just flood into that well I'm I think
it's it's one type of asset the flooding
into any one thing is a is an issue but
the but moving from the nominal Bonds in
which the government just says I'll give
you this amount of money and it has the
unbel UN unbelievable and unlimited
ability to print the money it gives you
um it would favor inflation index
bonds um and it can be other assets uh
you know some people would say something
in terms of cryptocurrencies or it might
be um th those other assets um I think
what's your take on crypto so crypto is
a huge part of my portfolio I think
you'd be mortified to see uh just how
much so but yeah what are your thoughts
on crypto um I
think I think that too much PE people
pay too much attention to one uh at at
the extreme of the other you know um
that either somebody's all crypto um or
they're all gold or they're all
something and I uh I believe that that's
a challenge I think that um uh crypto
like gold is not a productivity earning
asset and it can be controlled by
governments uh in lots of ways it's been
outlawed in a number of places and it
also can be monitored the Privacy um
element is not uh secure from
governments doing monitoring and and so
um and the size of crypto is about the
size of um Microsoft you know it's all
crypto combined and so to um be overly
concentrated in it in my opinion is a
mistake um but to have some of it uh is
a good is a good thing so the question
is always uh what amount of it
so that's um you know I have a little
bit about it I'd probably shock you
about how little I have You' shock me
about how much how much you have uh but
having some of it um so the um and other
things I would say is that geographic
location is important in other words not
just all in us and US dollar assets um I
would say that the three things that
that again I'm looking at if I go down
countries is first um are they earning
more than they're spending do they have
a good income statement in balance sheet
this is going to be very important in
the period ahead ahead because the
amount of credit that's going to be
available to bridge the gap between
spending and
earning uh cash flows and so on is going
to be quite narrower so a lot of
companies even that were able to raise
cash
um and not have good cash flow because
of maybe growth expectations in the
future we'll find it more difficult
that'll be true for individuals it'll be
true for um countries so is it does it
have a good income statement and balance
sheet will be important the second is um
places how are they working with each
other is there civil civility or is
there Civil War on the brink of Civil
War because countries where they work
well together they're productive are
going to have a real competitive
Advantage orderly places safe places to
be um are what are countries on the rise
in that so obviously I I'm shocked to
say this out loud but the US would be in
a bad place in terms of that um what are
places that have great stability
there well um there are Parts in the
United States that are wor better than
Parts other parts of the United States
meaning like local government bonds or
something like that well I'm I'm out
talking about the uh like where you want
to be and then that'll be but yes the it
could be bonds it could be places I'm
talking now the places the um uh for
example we just had the shooting in New
York
City um on the
subway and and New York City is becoming
more dangerous Chicago is becoming more
dangerous places Chic San Francisco's
becoming more dangerous um you're seeing
people leave some places for other
places um you're seeing them leave I
don't know to Texan Texas is Austin or
uh to Florida and so on so there are
differences in um in within the United
States and differences from the United
States you mean people need to think
about picking up and moving and actually
going and being in a different place
yeah and those are also the better
places economically because when when um
people do leave and they do that uh
those who leave um are higher income and
higher taxpayers and as a result there's
more of a hollowing out that takes place
in that which creates an economic
problem as well as you know a lifestyle
problem so I think you're going to see
greater differentiation in places which
affects where you want to be and where
people um who can afford to be there
want to be and also affects what their
economies and markets are like and
that's so then the United States um so
um yeah and the third element is um so
um are they financially strong in other
words income more than expenses and good
balance sheet are they civil with each
other so they're working together rather
than hurting each other and number three
is are they um um in a position where
they're likely to be in a war or are
they likely to be out of a war um you
you know you don't want to be in a war
so and those places investing wise
history is shown um do worse because
they have to spend more money there's
more uh problems more pain that's being
exchange neutral countries in Wars uh do
very well as it turns out uh so elements
of diversification so it's a long-
winded answer to your question but I
would not want to be in debt or cash and
and those instruments I would want to
diversify well with a bias toward uh
inflation protected assets and I would
want to uh diversify between locations
countries uh um in terms of the
investment based on the criteria I've
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