Edward Dowd says the 2025 recession is already unfolding, and investors are completely misreading the signals.
In this hard-hitting interview, the former BlackRock managing director and founder of Phinance Technologies explains why the U.S. economy is far weaker than the headlines suggest. Housing is cracking, AI spending has peaked, and the true impact of mass immigration is just now being understood.
Dowd argues inflation will plunge below 2% by Q4, deflation is the real risk, and U.S. Treasury bonds are the best asset to own right now. He also explains why the Fed and asset managers were misled by faulty data, and why the housing downturn will lead, not lag, the recession.
Key Topics:
- Why the housing market is the “white swan” collapse no one’s ready for
- How 20M migrants artificially boosted U.S. economic numbers
- Why inflation is set to fall hard—and what most investors get wrong
- His contrarian call on the bond market and how to position for it
- Gold’s new role in the monetary system (and a potential $10K target)
- The AI boom is over, so what happens next to equities and jobs
- Why crypto remains a risk asset… for now
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James Connor 0:00
So you’re negative on the US economy. Where do you see it going here in the coming like come q4 come December of 2025
Edward Dowd 0:08
are we in a recession? Yeah, that’s what we think. We think it’ll become apparent to everybody by
James Connor 0:18
then. Ed, thank you very much for joining us today. How are things in Hawaii?
Edward Dowd 0:21
Always good, never a problem here for as long as far as I’m concerned,
James Connor 0:26
every time I speak with you, I always wonder, why the hell am I in Toronto? Why don’t I just pick up and move to Hawaii and just hang out on the beach all day and forget about the craziness. I
Edward Dowd 0:37
go to the beach many times during the week just to get away from the craziness. It’s a good distraction,
James Connor 0:43
yeah, very therapeutic. So I speak to people all across North America, which is one of the cool things about this job. And I’m always curious about how inflation and how the price of goods and services are impacting them. How are things in Hawaii, I know the prices must be extremely high, just given the logistics of it all.
Edward Dowd 1:02
Yeah, Hawaii’s always been typically more expensive than the mainland, and they have a high sales tax. And gas here has always been expensive, but I learned over the last couple of years, gas here is like 430 a gallon in California, it’s a couple dollars more expensive. So I’m just shocked that California gas prices are so much higher than, you know, an island in the middle of the Pacific. So California’s got some challenges.
James Connor 1:32
Oh, California is a mess. And you’re right. I just spoke to somebody recently from LA and I believe she was saying they she was paying 550 a gallon. So I’m based in Toronto, and I’m paying $1.35 a liter, if you do the conversions, that’s about 375 a gallon. I just spoke to somebody else last week who is in New Jersey, New Jersey, and they were paying, I believe, 250 or 275 a gallon. So I’m always curious what people are paying for the price of gas, because it’s the one thing that’s constant all across North America. Yeah,
Edward Dowd 2:06
no. So during the COVID crisis, gas had a two handle on it in Hawaii, which was very short lived.
James Connor 2:15
So let’s talk about the economy now, because you have some very interesting views on on the economy. And earlier this year, you released a report called dangers of a deep worldwide recession. And also during the discussion that we had at that time, you said that US was in a lot of trouble, and you thought there was going to be a lot of havoc coming in the coming year. And we’ve seen that here in the last few months, there’s the the amount of turmoil, just because of terrorism, because of the uncertainty associated with trade wars, is is quite something. But I’m just curious now, now that here we are in the month of June, almost, what are your thoughts on what’s happening in the US economy? I mean, maybe you can share some of your concerns. Yeah.
Edward Dowd 2:58
So you know, when we wrote the report in January 9, you know, we were pretty convicted. As we’ve rolled forward about five, six months, we’re even more convicted. We’re really releasing a follow up report that’s, you know, for creed or purchases of the big report, but very reasonably priced. It’s a follow up report cracks in the housing market. We’re seeing our thesis playing out. We expect, you know, eventually the Fed will figure this out. The short end of the curve will go down. The yield curve will reinvert, which is what happens at the beginning of a recession. It’s inverted for a long time, then it reinverts, then you get the recession. So we expect the yield curve to be substantially lower long yields. I know everybody and their brother says the bond market’s doomed and everything’s going to implode. That’s not going to happen. Growth slowing very quickly right now. Real yields are 2% with the recent uptick in yields, it’s crushing the housing market, which it was already on shaky ground in 23 and 24 and our thesis is playing out. This new report, we’re examining new tenant rents, which came down in the fourth quarter, and they’re coming down again in the first quarter to confirm the deceleration. They’re a leading indicator for all tenant rents. They’re a leading indicator for home prices. We’re seeing some other indications in home prices that are very concerning. New permits have been down since 22 continue to roll over. New Homes sale inventories near 2006 seven levels before the great financial crisis, and we’re also seeing that house price inflation since 2020, has outpaced rental inflation, and usually that’s inverse, inverted. So it’s cheaper to rent now than it is to buy a home. So the only way that corrects to get back to long term average is home prices need to come down. And they are. We saw Zillow a. A reported first, you know, year over year, national price decrease of like, point 1% so we’re seeing things rolling over. This will accelerate throughout the year. It’ll become apparent to everybody. We also think the illegal immigration was a big factor in holding up the the headline numbers in the Biden administration years. That’s all going the wrong way. The border inflow has been shut down. The mass deportations haven’t really started yet, but there’s a plan coming to pay people to leave that should generate some deportations, and then they just got funding in this new big, beautiful bill, should it pass for money allocated to deportation. So the economic variable of dropping 20 million people in three years into your country has an economic impact. It was funded through deficit spending and NGOs, and this is going to be one of the biggest fraudulent things we ever uncover in our government as and then also the Biden administration is we’re finding out potentially, either through statistical incompetence or fraud or combination of both, manufactured a million payroll jobs in 2024
James Connor 6:16
you’re not suggesting that the government is fraudulent. Are you and incompetent? Well,
Edward Dowd 6:21
you know, I don’t I wasn’t in the room, but it really doesn’t matter at this point. Doesn’t matter whether it was fraud.
James Connor 6:28
That’s a rhetorical question. So okay, there’s a few things you touched on that I want to examine in more detail. First of all, in terms of the housing market, this slowdown that we’re seeing, and the decrease that we’re seeing in terms of sales volumes and also rent in prices paid, this is all because of the slowing economy.
Edward Dowd 6:51
Yeah, look, we’re also hitting what’s an 18 year housing cycle. There is a long term housing cycle, and the last housing cycle peaked in 2007 eight, and that was about 18 years ago. My partner Carlos Allegra wrote a book in 2021 called the economic cycles, debt and demographics, and predicted that we’d have, due to, you know, due to the housing cycle and demographics, we’d have another housing crisis somewhere in 2526 and here we are, and we’re starting to see the the early indications and evidence of it. And you know, the reason why this is what we call a white swan event, it’s not a black swan. It’s people know about this. And there are other people besides myself that are warning that this is coming. I’m not the only one out there and it’s going to happen. The mainstream media is woefully behind. Real Estate Professionals never want to talk about a slowdown, because they always want to sell and generate transactions. See, the real estate industry is not going to tell you, but this is something that’s endogenous to the economy. It’s coming, and it’s you get. You know, when you step back and look at what percent of housing is the economy, it’s 20% of GDP, and 20 about 25% of consumption GDP, you know, it’s a big part of our economy. And you know, manufacturing used to be in the 70s, but, you know, that’s not as big as it used to be. So when the when the housing sector slows, it’s a big deal. And we expect inflation to be sub 2% by the fourth quarter of this year, maybe even one and a half percent. Housing is 45 45% of the CPI shelter, which is a sub component of that, is 36% so this is coming. Inflation will be going lower. The Fed is behind the curve. Interest rates are real. Yields are 2% so they’re choking off the economy. You know, we have all sorts of, you know, retail sales have been coming in week. Consumer confidence is low. Those are the that’s soft data. The hard data will start following fairly soon. We expect to see job claims tick up. Jobless claims tick up, or we expect to see the unemployment numbers to tick up. And, you know, unfortunately, the Fed businesses and asset managers made bad decisions on fraudulent numbers or incompetent numbers last year, so everybody’s on the wrong side of the trade. They’re overweight equities underweight, you know, treasuries, and I think that the trade of the year is going to be risk off. You know, being US government bonds. If you’re want to be ultra conservative, go just ust bills where there’s no duration risk Warren Buffett’s already there. Now people will criticize Warren, say he was early, but he’s always early. Timing these things is always challenging. I think he was early, and a lot of other people were early, like ourselves, to a recession call in 23 and 24 we didn’t understand what the impact of the immigration was going to be on the economy. Now we do, and that’s a variable we’ve never had in our in our in our country, usually, net elite. Migration is a million a year. This was 20 million dropped in in rapid succession with deficit spending that has a multiplier effect, the likes of which is much greater than Joe six pack. You bring someone from Central America, give them money, they spend it immediately.
James Connor 10:15
Yeah, I hear you 100% I’m not even an American, and I was pissed off with what was happening down there. I just don’t understand a government why they would let millions of people parade into a country without showing any documentation. You have no idea who they are and what their intentions are. It’s just craziness. But you touched on something else I want to dig into deeper, and that is the unemployment rate. Because this is one thing that really hasn’t faltered too much in the US. It’s right now it’s around four, 4.1 4.2% we haven’t seen a big tick up. We have in Canada. Just to give you some back context, at the unemployment rate in Canada is 66.9% it’s been climbing now for the last couple of years, the unemployment rate in the province of Ontario, where I reside, it’s 7.8% it’s at a 10 year high. Youth unemployment is 14.1% okay, just think about those numbers. So it’s starting to happen, and it’s going to happen in the US too, and it’s also having a big impact on the real estate market here. I don’t know when the last time you were in downtown Toronto, but the proliferation of condos is in the last 10 or 15 years. Is craziness. Condo sales are down 30% year over year. Just in Toronto. They’re down 20% in Vancouver, the second largest city in Canada. So it’s starting to happen. When do you think the unemployment rate is really going to start ticking up in the US, and what’s going to be the catalyst? Yeah, it’s hard, it’s
Edward Dowd 11:47
hard to say, but look what really helped our unemployment rate was the illegal alien immigration. We figure of the 15 to 20 million that snuck in, about 2 million got jobs so that that helped with the unemployment rate. We also think they manufactured some numbers, or, you know, the birth rate model or birth death model was wrong at the pls. So it doesn’t matter whether it was incompetence or fraud, the unemployment rate is going to be going up once we roll up. Roll out those numbers, roll off those fraudulent comparisons. So we’re also starting to see Silicon Valley layoffs once completions in the housing market stop, and that’s what’s been kind of holding up. When you build a home, you get a permanent and then you start it, and then you complete it. Completions are starting to roll over. And so we expect to see the construction industry start to lay off a lot of people because there’s no demand for the new homes and multi multi family homes, multi family is going to drive this crisis. That’s where a lot of the excesses have been. That obviously multi family, you know was a probably a good idea when there was illegal immigration, but not so much. Now,
James Connor 13:08
one other fact I want to throw at you, Ed before we move on. But I was talking about the unemployment rate in Canada. The largest department store here and the oldest department store. It’s called the Hudson’s Bay department store. It’s been around since 1670 okay? And imagine that 1670 they were here like trading in beaver pelts. Anyhow, they’re shutting down. They’ve gone bankrupt. They’re laying off 8000 people.
Edward Dowd 13:34
Yeah. And you know, we also have aI coming, which, you know, well, I’m, I think AI hype is ahead of where it is really, so I think AI isn’t going to steal a lot of jobs that as quickly as people imagine, but that’s coming, and then we have robots coming, and that’s all disinflationary and deflationary. So when you have deflation, that’s not good for risk assets.
James Connor 14:05
So you touched on the big, beautiful bill. I gotta get your thoughts on this now. And essentially, it’s just an extension of the tax cuts we saw in 2017 but it’s going to result in lower revenues and also lead to higher debts and deficits. And according to the Congressional Budget Office, it’s estimated that it will add $2.3 trillion to the deficit over the next 10 years, an additional four to $6 trillion to debt over the next 10 years. And some people have said that it’s really the largest transfer of wealth from the poor to the rich that we’ve seen in the history of the US. What are your What are your thoughts on this bill, and do you think it’s going to have any positive impact? Well,
Edward Dowd 14:45
that’s a loaded question of the transfer of wealth, but what I can say is the bond markets were initially disappointed because the doge cuts were not written into the bill. That’s why Elon has done. He’s moved, he’s moved back to private citizenship. I think he’s very disappointed. And there’s a lot of and the tone from best and changed, they’re going from, forget cutting, we’re going to grow faster than, than, than the debt, you know, the growth in the debt. So that’s a 5% GDP. Good luck. I think, I think this is not a good thing. Long term, I think austerity will have to come at some point. I’m disappointed. I was initially very excited about Doge. They uncovered a lot of fraud, but there seems to be no appetite in Congress to actually cut spending. And the thesis is, of course, because the deficits are going to be big, is that yields are going to explode. Well, when growth slows and the yield and interest rates get lower, there’ll be a flight to safety. So yields are going lower for the next in our humble opinion, a lot lower. There may be a problem on the other side of the recovery where long the long end goes. But we think this very negative sentiment on yields right now is not warranted. And we think, you know, this is a be a good if you’re a risk taker and want to buy duration, this is a good time to do it.
James Connor 16:17
It’s amazing. You were talking about how Congress doesn’t want to engage in any sort of fiscal austerity, but, and I guess, and I totally understand it, because it’s like political suicide, right? What? Like, who wants to say, Okay, I’m going to put up taxes and cut spending like, you’re just not going to do it. You’ll be out of a job pretty quick. But I just want to go through some of the numbers, because the numbers are staggering. And when Trump came to power in 2016 the federal debt was 19 trillion, the deficit was 3% of GDP. And now here we are in 2025 and now we have 37 trillion in debt, and 7% or the deficit. Deficit is 7% of GDP, like when I talk to you in a year or two years from now, like, where are these numbers going to be? It’s never going to end. Well,
Edward Dowd 17:06
I think the deficit initially, if we go into a recession, like, I think we will blow out to 10% you know, we’ll be, we’ll be in a crisis situation. And the problem is, there’s this belief, and maybe, maybe it’s true. You know, Trump’s plan is to bring manufacturing back. That takes time. That doesn’t happen overnight. You know, you don’t, you don’t sign a deal and then have a factory dropping in the middle of Kansas, or wherever it is. It takes, takes time. Deregulation could help a lot with growth. And the idea with the tax cuts is that they want to stimulate growth. And you know, it’s the old, it’s the old. If we cut taxes, it’ll create more revenues, kind of situation, because it’ll generate economic activity, the velocity of money will go back up, yada yada yada. So it’s all dependent upon whether Trump’s plan works. If it doesn’t work, deficits are going to keep exploding, unless we have austerity. And then if we have austerity, since the government is the incremental driver of the economy, it’s about 25% of GDP, we will be in for some tough times. But you know, if you want to have a government that continually grows and takes away your freedoms. This is, this is the path we’re on. The the gargantuan government only gets bigger and the private sector gets smaller than the private sector needs the government. So it it becomes a tool of the government over time.
James Connor 18:31
Yes, the government is always all controlling. So you touched on the bond market a couple of times, and so I want to talk about this in interest rates. And I recently saw an interview with Ray Dalio. He said the most important markets of all markets are the bond markets, because that’s where the trouble first appears. And we’ve seen some wild movements here in the last six months. The 10 year has gone from a low of 390 up to as high as 460, now I think it’s around 450 the 30 year has gone from a low of 430, to a high of 510, over the same sort of time period. But are you concerned about what you’re seeing in the bond market? Because there’s a lot of talk that investors, because of the fiscal situation in the US, that they’re going to be demanding much higher interest rates. Four and a half or five or five and a half is just not going to cut it. Next thing you know that 30 years trading at six or six and a half. What are your thoughts on that? Well,
Edward Dowd 19:29
everyone’s basing this based on the fact that inflation is going higher and tariffs are not inflationary. They’re disinflationary. They can be considered deflationary, because overall, while some prices may go up, demand drops more, and the revenue line goes down. So this will be just, this will be disinflationary. So tariffs are disinflationary. Home prices are rolling over. It’s a big part of the CPI. So right now, I think the sentiment in the bond market is so bad, and I think as our. Call unfolds, and we were proven right, bond yields are going a lot lower because the and a global recession is ensuing as well. There’s global house price issues everywhere. That’s in our big report. We’re going to see a big rotation out of risk into the well known risk free asset, the US Treasury market, and as growth slows precipitously, bonds will become the favorite asset right now, everyone’s inflation expectations are wrong. That’s our call. We’re seeing, we’re seeing a one, one and a half percent inflation rate by the q4 of 2025,
James Connor 20:39
I hope you’re right, because Wherever I look, I mean inflation, even though the rate of change may have somewhat slowed down, it’s still there. It’s very sticky, and I’m going to throw a few numbers at you, but property taxes in the city of Toronto, they went up by 6.9% this year. Just this year alone. They’re up over 25% in the last five years. And I know a lot of people will say, well, that’s not part of an inflation calculation, but in my mind, it is, because that’s taking away 25% of my disposable income. I now got to place it on these taxes. My haircut, for example, I’m paying $50 for your haircut, $50 Canadian tax and tip I used to pay 25 pre COVID Everywhere I go I’m faced with significantly higher prices. Well,
Edward Dowd 21:30
you know, your point on real estate taxes is a good one. And insurance, there’s a lot of things that go into the cost of owning a home. They’ve all gone out, and that’s why the real that’s why the housing market’s going to roll over, because the new buyer can’t afford it. So the only way for all in to be able to afford to buy a home is to have the price adjust and the prices go the prices are going to go lower. There. Nothing’s really moving right now. Inventory is building. The legals are leaving. The marginal buyer is not going to be there. And the legals didn’t, per se, buy homes, but they filled up a lot of units that supported other people who own homes and rental properties and everything’s always on the margin. And right now, home affordability is at the worst. It’s been in a long time. And the only way to suggest, you know, so people can afford the higher real estate taxes, the insurance cost is for price to drop, and that’s what’s going on right now, and that’s going to and construction and all the ancillary services around housing are going to go into the tank. It’s, we think it’s going to become more apparent by the fall.
James Connor 22:41
You mentioned earlier that you think tariffs are deflationary. Walmart just came out with their key one numbers recently, and their margins are being squeezed, and they said in the next quarter, you’re going to see they’re going to have to pass on the cost to the consumer because of these tariffs. And of course, there were some back and forth with the President, but, but maybe you can explain that, or explain why you think they’re deflationary when Walmart is saying that they’re going to have to pass these costs on to the consumer,
Edward Dowd 23:15
yeah, so good luck to them passing the costs on. So here’s what happens in and and this is, this has been proven in microeconomics. It’s been written about. I’m friends with Dr Lacey hunt. He agrees with us. He, he explained this to me better than we could explain it to you. On a microeconomics level, the company level, you have a price hike. It’s a tax. It’s essentially a tax. And you, if you’re, if you’re, if your product is elastic, that means there’s substitutes for it, and people will substitute, because you’ll raise the price, but the quantity demanded will go will, will, will not rise as much as the price, it’ll it won’t keep up. So you’ll have a revenue hit and then a margin hit. So overall, the it’s demand destruction, and there’s going to be people substituting prices, substituting products. The more inelastic your product is. Like commodities, you know, you know fuel you got to put gas in your car, the better off you are. But if you have price elasticity, you’re going to see lower revenues on a company level, and it’s a margin squeeze. So this is also going to hurt corporate profits. Overall demand decreases because it’s a tax, and people navigate towards the goods that aren’t taxed and substitute or go without you.
James Connor 24:45
Mentioned Warren Buffett earlier and during the recent Berkshire Hathaway AGM, Warren Buffett expressed a lot of concern about the US dollar and the debasement of the US dollar, and he said that if people control the current. Currency, meaning the government, the natural course of the government is to make the currency worthless. And we’ve also already seen a big pullback in the US dollar here in the past year, major pullback in the last five years, with all the printing going on. But what are your thoughts on the US dollar, and where do you see it going?
Edward Dowd 25:18
The dollar? This is hard for people to understand, but since the great financial crisis, the dollar has been in a multi year bull market each there’s a four year cycle to the dollar. My friend Tim wood writes about it extensively. And from, you know, from Low to low, and every low four year cycle low, the next four year cycle low is above it, so it’s higher highs and higher lows. That’s what we call a bullish chart, timing wise. And Tim wood wrote about this last year, the dollar is coming into a timing ban for its four year cycle low, as long as it stays above 8910 that bullish trend continues. So we’re going to get a very strong dollar coming out of this, and that will be a problem globally, for the emerging markets. So the dollar, I think the death of the dollar, which is always overhyped, is about to go the other way. We’re going to see a nice bottom put in now, if it goes below 8910 I’ll change my tune, but it hasn’t yet. And the timing ban is, you know, either soon or next quarter, but the dollar is going to strengthen as we come out of the recession. I’m
James Connor 26:34
sorry, that’s 8910 on the D, x, y, yep.
Edward Dowd 26:38
Okay, yep. So that that level holds, we’re still in a bullish uptrend long term. And then I suspect once the next cycle begins, we’ll go to new highs sometime out in 2728 and you got to remember, we’re the reserve currency of the world. This brick stuff is not going well. And you know, we have, you know, 90 15 trillion in dollar denominated debt overseas, and 80% of all FX transactions have the dollar on the other side. Reserve currencies die slowly, and the dynamic is, the more credit that’s created that that’s dollar credit that’s created. That’s when the dollar depreciates, because credit is money, and we’re going into a deflationary credit cycle. So there’ll be debt destruction and less credit, less, less more demand for dollars. So we expect coming out the other side of this kerfuffle, the dollar will strengthen
James Connor 27:42
and when so you’re negative on the US economy. Where do you see it going here in the coming like come q4 come December of 2025 are we in a recession?
Edward Dowd 27:52
Yeah, that’s what we think. We think it’ll become apparent to everybody by then. We’re thinking this really starts to our call on housing, our call in the economy really will manifest the beginnings of the headlines in the in the financial press sometime in the fall, and it will show up in the hard data. So, you know, that’s why we put the report out in January, to get people ahead of the curve, and the stock market will eventually figure this out. I mean, obviously we believe the AI bubble has already burst, and this is a counter trend rally, and we’ve seen peak AI spending. I don’t know if you know this, but in the first quarter of 2025 about 1.2% of our GDP growth, because it was a negative number, but this added to the growth, made the number less negative, 1.2% positive from data spending, and that was a 70% year over year increase above the prior year. That’s what we call peak second derivative is going to roll over. So the AI bubble, we think, is peaked, peak spending, and it’s going to go the other way.
James Connor 28:59
And how severe Do you think the recession is going to be? It’s hard
Edward Dowd 29:03
to call. I mean, I mean, look, we’re not calling for a systemic crisis. It could go systemic housing is a big part of the economy, in the banking system. You know, there’s about 12 trillion in mortgage backed securities on banks balance sheets. It depends on the Fed. Depends on how quickly they lower interest rates. It depends on whether or not, you know, banks balance sheets are better than they were in the than the great financial crisis. You know, I think there’s also talk from Besson and the Federal Reserve and the regulators to lower the capital requirements for US debt, so that banks like JP Morgan and Citigroup and Morgan, Morgan Stanley, and you know, Bank of America could buy more treasuries, because after the great financial crisis, the rules were pretty onerous. You had to have reserves against. What was traditionally viewed as risk free assets, so they’re going to loosen those so the banks can buy more of our debt. So when people always say, who’s going to buy our debt, we are. So that’s coming.
James Connor 30:10
So let’s talk about the global economy now, because your report also made reference to that. China’s the second largest economy in the world, representing 20% of global GDP, then you have Europe. That represents another 20% and of course, we know Europe’s a rough shape. It doesn’t matter if you look at Germany, France, the UK, it’s they’re all on the brink of a recession. I mean, if the US goes into a recession, what’s going to happen to the rest of the world? Well,
Edward Dowd 30:37
the rest of the world is already in pretty bad shape. China hit a demographic wall in 2020 if you look at their yields, they’re indicating that they’re in a deflationary slowdown, and their economic numbers are all fraud anyway, so it’s always hard to tell, but commodity prices, if you look at commodities, they peaked in 2022 they’ve been rolling over ever since, slowly, so commodity demand is rolling over. Oil is going to roll over. We think there’s a housing problem globally, and real home prices have already started to decrease in Europe and China, and it’s only going to get worse as time goes on, because what’s holding up their economies has been completions. So again, once the completions stop, because there’s nothing in the pipeline, and that’s already indicated by permits. We looked at Chinese new permits versus completions, and we’re getting close to the end, so there’s going to be this kind of that’s when the layoffs happen, and that’s when we have the consumer demand drop. So that’s that’s coming, and it’s kind of, it might be synchronized, it might not, but we’re going to have a big and, you know, housing is a big part of the global economy. We’re going to see a big slowdown in, you know, you know, the PMI numbers and manufacturing, there’ll be layoffs, but, you know, it’s a cycle, and you know they’ll the yield curve will steepen, and interest rates will go down, and you know, we’ll have a recovery sometime in 2627
James Connor 32:12
so let’s talk about the S P and what this means to equity valuations. And just to provide a recap of the S P peaked in February at 6100 it came under pressure. Went all the way down to 4800 in April, and now it’s had a massive rally. Now we’re back to 50, 906,000 sorry to believe it’s back there. But what are your thoughts? Are you surprised by the strength of this rally that we’ve seen here in the last few weeks?
Edward Dowd 32:40
No, I’m not at all. And I’m going to explain so when, when, when the tariffs came, the people freaked out and what people needed. And we, you know, we put out a free piece on the tariffs, and we said, look, this is an Exogen exogenous shock. That means we did it to ourselves. So Trump made these crazy, outlandish tariffs, but people seem to forget, you know, he could remove them, so equities deflated very quickly on this fear and and honestly, the stocks were already coming down because the AI bubble had already burst, but he accelerated that there was a lot of de leveraging and you know, so, you know, people were asking us, is this? It is? This is? And I said, we said, No, this is, there’ll be a counter trend rally, because Trump will, then the next news flow will be signing deals, and that’s what we’re getting. So the counter trend rally has taken us back to valuations, and what led the rally was the momentum tech stocks coming off this low in April, not healthy. They’re not at new highs. I’m going to watch the markets, but this is more gain. I’m more bearish on the stock market than I was in February, because you need, you need to see structure. And what I mean by structure is we’ve never had a crash from a top. There’s never been in the history from an all time high. What you get is you get a deep sell off, then you get a counter trend rally. Then the potential from a crash comes from the failure of that rally. Now I’m not calling for a crash. This could be like the 2000 market top, but this valuations are still atrocious, and the real economy underneath all this, and no one’s talking about the housing market, for the most part, it’s going to become apparent in the next six months. So the Trump administration is, you know, today, you know, said they’re going to suspend the European tariffs until July. The markets are rallying, so the market’s very short term focused on tariff news, but they’re kind of missing the ball here. There’s a their real yields are 2% economic activity is rolling over, and housing prices are going to roll which will. Down the rest of economic activity. So this is, this is kind of set. I don’t think there’s any chance the Trump administration can avoid it, and unfortunately for them, tariffs will be blamed for this. But you know, this was, this was baked into the cake. Yeah,
James Connor 35:14
you touched on real estate prices, residential real estate prices. One of the things I wonder about is commercial. And so in Toronto, downtown Toronto, there’s a very large office complex. It’s owned by Brookfield. It’s two office towers. 12,000 people work there. Okay, prior to the pandemic, 12,000 people were showing up to work every day. Now it’s 6005 years after the fact, and there’s only 6000 people showing up. And I wonder, like you know, as soon as these leases are up, are people just going to cancel these leases and these office towers are going to be sitting empty? What are your thoughts on the commercial real estate market? Do you have any concerns? Well, the Federal
Edward Dowd 35:53
Reserve has concerns. They put out a report in November of 2024 that they’re concerned that banks are extending and pretending on these loans. So none of the banks have taken real big losses on these portfolios. We’ve seen prices in downtown areas clear. Got some, some as low as 96% loss. So we know the Fed knows, and everybody knows there’s a commercial real estate problem, but it’s kind of pretending that it’s not there. When you throw on top a housing problem, it’s, you know, this is, this is when it becomes untenable. So the banks have been lying about their books. The Fed knows that you can go look at the federal it’s the federal. The Federal Reserve New York office did this. So they know, we know it’s just a question of when the economy and the write offs come. I want
James Connor 36:49
to get your thoughts now so you’re negative on the stock market, you’re positive on the bond market. You think you should get long bonds. I want to hear your thoughts now on both gold, which is done very well in the last couple of years, up 25% 2024 it’s up 25% this year. And I also want to get your thoughts on crypto. Well,
Edward Dowd 37:07
crypto, let’s start with crypto. Crypto until it proves itself otherwise, is correlated to risk assets. So you know, long term, you know crypto is here to stay. Short term, if at for a ride on our risk off call, it’ll participate in a risk off, sell off. End of story, gold is interesting. Gold, also in the great financial crisis, participated in the risk off scenario. This time may be different, primarily because gold is now becoming real money again, Basel three has made gold, physical gold, not paper gold. This is important distinction, physical gold, tier one capital banks can now lend and create money against gold. And this is, you know, we made gold a commodity in 71 when we took the dollar off the gold standard. Now gold is slowly being reintroduced into the monetary system again. So it’s hard to say what will happen to gold. I think gold, long term, is a great investment, because if the global financial system is going to reset by telling you that gold is tier one capital, it’s kind of a hint that gold will be part of whatever the reset is. I don’t know if crypto is, but I’m betting gold is definitely going to be part of it again. And so there’s a rush to physical gold by banks. Used to be just central banks that care. Now commercial banks will care, and other people will care. You know, the shadow banking system will
James Connor 38:39
care. And do you have a target price for gold? You know, I’m not,
Edward Dowd 38:43
you know, I have a friend who is much better at this than I am. He thinks 10,000 by 2030 Yeah,
James Connor 38:50
I have to admit, I’ve never played cryptocurrent or Bitcoin, but I have to say I’m very impressed. And I pull out anybody who’s made money off it. It’s had one hell of a move, but it’s hung in very well this year. In spite of all the turmoil that we’ve seen, it went from 100,000 down to, I believe, 75,000 maybe 80,000 now it’s trading at or near all time highs 110,000 Are you surprised by the strength that we’ve seen?
Edward Dowd 39:16
Well, it’s this. It went to a new all time high, and it participated in this rally with the NASDAQ. It’s 95% correlated to the NASDAQ. Now the bet by crypto folks, long term is that Bitcoin decouples from risk assets and becomes a safe place in a in a storm of, you know, Fiat disasters that could happen. And I’m not saying, you know, but, but I base, you know, my decisions off of history, and the history and the correlation is so strong that if there is, if our bets risk off. I’m not saying, Get rid of your Bitcoin if you’re a long term holder, but if you’re thinking of it as a. A store of value to protect you in a risk off, sell off. It’s not it’ll do. It’ll it’ll participate. So if you, if you want to save some dry powder for picking up bargains, you know T bills are your best bet. You know, three month t bills, because you get your you get your money back, no matter what, you can sleep at night. Yeah, and you’re earning annualized 4.3%
James Connor 40:24
that’s why Warren Buffett’s doing so well at the age of 95 he sleeps
Edward Dowd 40:28
well at night. But you know, so I’m not, I’m not disparaging crypto, and I see the case as to why it might decouple, but that’s not proven yet. Gold is there’s something, there’s something systemically going on with gold, and there seems to be a natural bid underneath it that wasn’t there in the great financial crisis. So this is an interesting dynamic, and I suspect the monetary authorities are going to make gold a big part of whatever resets coming. Ed,
James Connor 40:57
we started this conversation by talking about Hawaii, and this is where I want to end it. There’s many great islands there. I believe there’s 137 islands, eight main ones. But what’s your favorite Island?
Unknown Speaker 41:08
The one I live on, Maui.
James Connor 41:10
And why is that?
Edward Dowd 41:13
It’s, it’s, it’s, it’s not too populated, like Oahu, which is like, you know, la on an island there, it’s big enough that you can be isolated, but it’s also small enough that you can get around and do anything you want pretty, pretty fast. So the big island is great, but you gotta drive, you know, to get to do anything fun, you gotta drive for an hour on Maui. It’s anywhere from 20 to 40 minutes to get to any part of the island. If you’re centrally located, there’s about 160,000 permanent residents, and it’s a great community. Yeah,
James Connor 41:55
when I was when I went to Maui, my wife wanted to check out this Haleakala,
Edward Dowd 42:01
yeah, the dead volcano, yeah.
James Connor 42:04
So we left like two in the morning. We she wanted to get there before the sunrise. So we got there, and I was, I don’t know what the elevation was, but I was shocked by how cold it was.
Edward Dowd 42:15
It’s 10,000 feet. It’s the fastest incline or in the world, it takes you about an hour to get up 10,000 feet. It’s one of the fastest inclines up
James Connor 42:27
Yeah, have you ever ridden your bike up there? No, I don’t do
Edward Dowd 42:31
that. That’s that’s for people who like to take their life into their own hands. Well, Ed, this
James Connor 42:36
was a great discussion. I want to thank you very much for spending time with us today. If somebody would like to learn more about you and your services, where can they go?
Edward Dowd 42:44
Yeah, our our big economic report is available on our website at finance technologies.com with a pH instead of an F. We’re also have a couple other follow up reports for sale. Like I said, we’re dropping today, a very reasonably priced cracks in the housing market report, for those interested and what’s what’s to come. So thank you very much.
James Connor 43:08
And you’re also on you’re also on Twitter. What’s your I’m
Edward Dowd 43:11
on Twitter, or let’s call it x, x, at Dowd, Edward, D, O, W, D, Edward. And on getter at Edward, Dowd, Ed.
James Connor 43:19
Once again, thank you. Thank you.
