We’re in a strange time when there are many countercurrents pulling the economic and market action in differing directions.
Central banks like the Federal Reserve are jamming on the economy’s brakes, while on the fiscal side, Congress and the Administration are hitting the gas pedal using massive deficit spending.
How will this all resolve?
For perspective, we’re fortunate to have macro and monetary analyst John Rubino return to the program.
Follow John at https://rubino.substack.com/
John Rubino 0:00
All of those things are going to combine to either just slow down the economy. So we tap into recession or blow up some different sectors of the economy, and forced the government to step back in and bail everybody inside out. So either one of those is a recipe for turmoil, and that’s probably going to be the story of 24.
Adam Taggart 0:23
Welcome to Wealthion. I’m Wealthion founder Adam Taggart, we’re in a strange time where there are many counter currents pulling the economy and the market action in differing directions. Central banks, like the Federal Reserve are jamming on the economy’s brakes. Well, on the fiscal side, Congress and the administration are hitting the gas pedal using massive deficit spending. How will this all resolve for perspective, we’re fortunate to have macro and monetary analyst John Rubino returned to the program. John, thanks so much for joining us today.
John Rubino 0:57
Hey, Adam, good to talk to you again.
Adam Taggart 0:59
John, it is always great to talk to you, you and I have known each other for a very long time. I call you up on the phone more often than I should. We have great long discussions. My hope for today is that folks kind of feel like they’re just sitting in on one of those informal discussions that we have. So anyways, thanks for coming back to the program. If we can start just with a general question I like to kick all these interviews off with what’s your current assessment of the global economy and financial markets?
John Rubino 1:28
Well, the global economy and the financial markets are a huge mess anywhere you look. And I don’t want to run on and trying to answer this question. So I’m going to keep it kind of US centric here. Because, you know, the US has been generating pretty decent headline numbers lately, if you just looked at the numbers that show up in articles and everything in the headlines, you think we’re in pretty good shape, but under the surface, we’re actually starting to roll over, it looks like and there are two things going on that that I think are going to determine what happens in 2020 forum. One is that during the pandemic, you know, we didn’t go anywhere, we didn’t do much of anything, a lot of people didn’t have to pay rent or anything. So we ended up as in the aggregate in the US, generating a lot of savings, we ended up with an extra trillion dollars or so to play with. And we’ve been spending that money in the last couple of years. And that’s kept the economy of float has kept growth positive and quote unquote, normal. Most of that money is gone now. So you’ve got a growing number of people who have basically run through their savings, they’re putting day to day life on credit cards. And so they’re paying, you know, 20% plus interest on an ongoing basis, which is a recipe for bankruptcy.
Adam Taggart 2:49
And I’m sorry to interrupt but the forbearances that they were enjoying to like not having to pay rent or student loans. Now pretty much all of that has gone into repayment. So their cost line has gone up along with the jump in cost of living in general.
John Rubino 3:02
Yeah, just this month, student loans kicked back in. So you got people who are already scraping, you know, to get by, and now they’ve got this three or four or $500 student loan bill that’s going to hit so we’re gonna see a spike in while personal bankruptcies, and then delinquencies on various kinds of loans and, and a much lower level of consumer spending in the year ahead, just because people are already tapped out and they’re being pushed over the edge by all these new expenses, like you said, Now, at the same time that that’s happening, interest rates are still going up. Today, the the 10 year Treasury just broke for ad in the US 4.8%. And that is a higher rate than prevailed towards the end of the housing bubble a decade ago. So the rate that broke the financial markets in the 2000s, and brought on the Great Recession is back, you know, we have to pay that much for money again. And the the difference is that we have way more debt now than we did back then. So you wouldn’t have expected the system to be able to handle a rate even as high as the terminal rate in the last boom. And yet here we are, you know, and inflation is not down to the Feds target yet. Wages at least in pockets of the economy are going up because unions are now able to strike successfully and get big wage increases. So the Fed doesn’t really have a lot of leeway to to stop raising and to cut going forward. So we’re not going to see capitulation. And, you know, barring shooting war with Russia or China or something like that, but barring that, the Fed has to stay tight for longer than a lot of people expect and that’s going to, it’s already crushing the housing market. But big chunks of commercial real estate are in serious trouble right now. And you know, housing is like frozen. I think that’s what you had somebody on and had a housing expert on a while ago. And that was the term they used frozen. Right for. And several housing analysts use that term. Yeah, yeah. And so, you know, home sales are way down. Mortgage purchase applications are at like, 1990 levels, back in 1990, we had maybe 25%, fewer people than we have now. So all of those things are going to combine to either just slow down the economy. So we tip into recession, or blow ups and different sectors of the economy, and force the government to step back in and bail everybody inside out. So either one of those is a recipe for turmoil, and that’s probably going to be the story of 2024.
Adam Taggart 5:46
Okay, recipe for turmoil. For 2024, that might just be the title of this, this video. So, great, great way to kick this off lots of threads I can pull there. I just want to see if you are thinking similar to me, where you talked about how I think you’re kind of surprised that something hasn’t? Well, at least the housing market hasn’t broken yet, under 4.8% mortgage rates, because that’s what blew things up last time in the last housing bubble, which you were a very close tracker of back then. I mean, I was reading your analysis leading up to the bursting of the previous housing bubble, John. So I know this is a sector, you know, really well. You know, we would expect four point percent sorry, 4.8% rates on the 10 year to be, you know, a much heavier weight on the economy this time round, simply because we have a lot more debt, right, I think around the last housing bubble, we hit around 10 trillion or so in federal debt. Now we have over 33 trillion and growing fast, right, so just the weight of the excess, you know, interest that we’re paying at this 4.8% rate is a lot more than we were paying at that same rate back then. Right. But we haven’t seen it break yet. And we can talk about a whole bunch of reasons why but but my guess is, is sort of like what you were saying were imagine that imagine an athlete, right, where 10 years ago, you know, if you ask them to run up a certain grade, they could run it at a certain speed 10 years later, you would expect them to be slower that that grade would would would be harder for them to still run the same pace at. But this time around, we give the athlete a big dose of cocaine, right. And so they’re able to still pretty much run for a while at their own pace, right. But then eventually, the cocaine burns through the system. And then that person, you know, finds themselves on that more challenging grade without that internal stimulus anymore. And they just start, you know, basically having to kind of like, you know, collapse, is that kind of a good analogy for where the economy is right now.
John Rubino 7:53
That is a good analogy. And to stick with it, there’s one final drug dealer left supplying cocaine, and that’s the US government, as you mentioned before, you know, we’re running massive deficits, still, the economy’s growing, you know, we’re not in any kind of domestic emergency or anything like that, and we’re gonna run $1.5 trillion deficit this year. So that’s a lot of money, just created out of thin air and dumped into the economy. And that’s, that’s another reason why, you know, we’re kind of chugging along here. So. So basically, governments will do things like that, as long as they can get away with it, as long as there’s no political price to pay, they’ll they’ll create as much new currency as they want to borrow as much as they need to, to buy whatever election is coming up and invade whatever neighbor needs to be put in their place. You know, that’s just how governments work. So something has to break to change their mind, and what works, at least at least to get their attention, you know, and make them realize that things aren’t as good as they think. So I’m curious
Adam Taggart 8:53
what’s on your list of contenders for that trigger, that that would, you know, tell the government sorry, you can’t just keep stimulating willy nilly.
John Rubino 9:02
There are a bunch of them right now. And the banking sector is one because I mentioned commercial real estate a little while ago. And you know, a lot of office buildings are going for half price right now, which means the debt that’s attached to them, the bonds that were made out of that debt, everything that there are losses in the system that have to be taken. And the banking sector now has about $700 billion worth of essentially, unreported losses, you know, they’re on the balance sheet, but they haven’t shown up in the earnings statement yet. And as the commercial real estate crisis works, its way out. Those losses have to go somewhere and they have to be taken by somebody and if they’re taken by, for instance, local and regional banks, that will spook the depositors in those banks causing runs on those banks, causing them to collapse, like happened with Silicon Valley Bank A while ago only spread out over 300 banks instead of three banks, that would force the government to step in. And, you know, the commercial real estate sector itself could be due for a bailout. And then there’s the insurance companies and the pension funds, who all own real estate related debt, and who are all in pretty big trouble. And you know, when you think about what a, what a pension fund does, or an insurance company, broad portfolio does, they basically run a, you know, kind of a 6040, stocks to bonds mix normally. And bonds have had the worst bear market in the last year or two, they’ve had the worst bear market, basically in history. So if you’re running a pension fund right now, and 40% of your portfolio just had the worst bear market in history, and stocks are getting choppy, you know, and some of the big tech stocks are starting to roll over, you got to be terrified. Because, well, first of all, you’re gonna lose your job. But second of all, you’re going to be unable as a pension fund to cover the obligations that you’ve taken on for all the people who are going to retire pretty soon. And lots of those people are retiring right now. So so it could easily be that $3 trillion worth of pension funds blow up in one way or another in the coming year or two, and that forces the government into some kind of a big bailout. So it goes on and on. You know, there’s just a lot of dominoes waiting to fall right now.
Adam Taggart 11:25
So great point, if I can just interject. So I’ve interviewed Ted Seidel, who is I think he still holds the distinction of being the biggest whistleblow blower award recipient for reporting on pension fraud or, you know, pension mismanagement. And he says, John, it is way worse than you even think it is. This assumption that pension funds are sort of running 6040 And, you know, have a bunch of quote unquote, sort of safer bonds on their, their balance sheets, is totally wrong. Because apparently over the past couple of decades to during the era of ZIRP, right, where you couldn’t get any return on your bonds, just like regular people, pension funds, were forced to chase yields. And then Wall Street realized that this was kind of dumb money that they could come and market any newfangled, you know, Wall Street product that promised higher yield to them. And so their pension books apparently, on average, are just loaded up with all these sort of alternative private equity type investments that are horribly illiquid, and much more sensitive to interest rates than just a standard 6040 portfolio. So, you know, he looks at a lot of pension funds is basically dead men walking right now.
John Rubino 12:48
Okay. I’ve always wondered how pensions survived during the desert era, when a big chunk of their portfolio was yielding zero. And they needed to hit seven and a half percent total somehow, you know, because it just didn’t seem possible even with stocks going up. So that’s how they did it. They just, they manufactured returns by buying, basically fake paper from Wall Street. I got I got it. Okay, that makes sense.
Adam Taggart 13:13
And for anybody interested in this, I’ll put up a link here to to the latest interview I did with Ted Seidel, just trigger warning, be prepared for a really interesting discussion. It’s hard to listen to that and then see the pension world. The same afterwards.
John Rubino 13:29
You know, a lot of what pension funds probably lumped into their their fixed income portfolio is junk bond related assets. Shares are really more like equity. I was actually a junk bond analysts way back when, and they basically trade like equities, you know, they’ll pay you a nice interest rate in normal times. But as soon as there any there’s any kind of trouble, their value becomes the equity value of the company. And so they tend to crash in times of financial distress like we’re headed for. So whatever junk is on anybody’s portfolio is going to be one of the big losers going forward. And I suspect there’s a lot of it out there, because junk has held up reasonably well, in the last couple of years better than you would have expected. So yeah, it’s
Adam Taggart 14:17
pretty amazing. I mean, that the spreads between junk bond yields and high grade debt are still quite low, right?
John Rubino 14:25
Um, surprisingly low. They’re probably widening. I haven’t looked lately, but they’ve been low enough that it was notable. I’ve seen some articles written about, hey, you know, look at this low spread between junk and treasuries. That’s interesting, because it doesn’t seem like that’s what you would expect in a period of rapidly rising interest rates and geopolitical tension and all the other stuff that’s going on. You think Joe Biden could be hit pretty hard by that, but and it will be
Adam Taggart 14:54
just gonna say, Do you believe that that’s an inevitability that at some point, we’re going to see those things start to fix Look,
John Rubino 15:00
oh, yeah, absolutely. It can’t be any other way. Because the weakest companies are the ones who finance themselves with junk bonds. And in an economy that’s shrinking with weak consumer spending and spiking interest rates. Most of those companies can’t make any money and a lot of them can’t survive. So yeah, the junk market will be one of the the victims of what’s coming for sure. It’s just a surprise that it hasn’t been victimized yet.
Adam Taggart 15:29
Well, let’s, let’s think about this for a second. I mean, I remember a time not that long ago, where the spread between junk bonds and the tenure or whatever we’re, we’re it was it was almost the same. I mean, it was it was headlines, which is like junk bonds are returning, kind of close to what treasuries were right. And this was many hundreds of basis points ago, on the tenure. So let’s say rates stay higher for longer, and then something starts breaking. You know, you could have junk bonds. I don’t know what they’re returning right now. But but, you know, some moderate premium to treasuries. I mean, they could go into the teens pretty quickly, couldn’t they? Oh, that’s
John Rubino 16:11
that’s how it normally works. Yeah, we’re the spread can approach double digits, and the yields on high yield bonds can definitely go up into the teens, that
Adam Taggart 16:24
these Yeah, well, exactly. Because at some point soon, relatively soon, you know, these companies loaded up on cheap debt, when they could get it right now, they can’t get it anymore, but they’re these high yield, debt issuing companies are now just kind of sitting on their current capital structure, and just hoping rates come back down again, when they have to refinance. But if we stay higher for longer, and then your TierPoint, if spreads really start blowing out, like let’s say there becomes a double digit differential in the market, and then they have to raise capital, then, I mean, their debt costs are going to go up by what I mean, a couple of multiples, right?
John Rubino 17:03
Yeah, and see that assumes anybody will lend them money, even at that rate, even if they
Adam Taggart 17:09
can get the money even Yeah, because you know, somebody
John Rubino 17:11
is willing to pay 14% for a loan, just on principle, you should never give them that loan, right? They clearly don’t deserve that money. And that’s how the market works. You know, I spent one of the worst in terms of jobs, years of my life and in 1989, doing workouts for busted junk bonds for a junk bond mutual fund. And what happens is, you know, a company can’t pay the interest on its junk, and so it defaults. And then the investment bankers and the lawyers and the the poor mutual funds that own those bonds all have to sit around the table, and hash out who you know, pick over the corpse who gets the equity and how much of it. And these bond funds end up taking equity in junk companies, which they didn’t want to do to begin with. So that’s our future for the junk market. It’ll it’ll be that way, again, lots of workouts where companies have to swap debt for equity. And, and, and try to survive after that, you know, it’ll be a mess. And I’m just glad I’m not involved in anything work, because it’s a horrible process.
Adam Taggart 18:14
Okay. But in that process, there’s a ton of losses being taken right
John Rubino 18:18
kind of losses. Yeah. But I mean, the bondholders frequently get wiped out. And they get handed some more or less worthless equity. That’s how it goes, you lose most of your money on your bonds. So this thing that was gonna pay you 9% interest for the next 20 years, ends up giving you a 60% capital loss, and then some equity that you don’t know what to do with, you know, on your balance sheet. So,
Adam Taggart 18:42
yeah, right. And that equity is generally pretty worthless, right? Because the equity holders are even further behind the, the credit holders, right?
John Rubino 18:50
Well, Oh, yeah. One of the original equity holders lose everything, everything right. So if you’re a stockholder, you’ve already been shaped. Oh, yeah. Totally. Their stockholders, they’re gone. But you as a bond holder, get an ownership stake in the company. And as a bond holder, you don’t know what to do with an equity stake in the company in the first place. Because that’s basically non tradable equity. You know, it doesn’t, it’s not a stock or anything, it’s just you a paper that says you own 40% of you and
Adam Taggart 19:17
20% Somebody that may or may not even be operational anymore. Yeah. Oh, yeah. Yeah.
John Rubino 19:21
Although, you know, a lot of those companies survive once they’re debt free, because, you know, they’re they finance themselves with debt, and then that debt goes away, in bankruptcy or whatever. And, and they can kind of chug along not having to pay any interest. So some of them survive, and some of that equity becomes worth something at some point in the future, but it you know, it’s not a thing you want to be involved in, if you can help it so the people who own those junk bonds now, in a lot of cases are going to wish they’d sold those junk bonds tomorrow, you know, and just got out at whatever they have to pay or whatever they have to take right now because a very ugly process is about to kick in and that Mark it.
Adam Taggart 20:00
Okay, I’m kind of jumping to the end of the discussion here to a certain extent, but clear, you see sort of a big reckoning coming, and I want to keep fleshing that out for folks. But once it hits, do you see the opportunity there? For some wonderful bottom feeding, if you will, of getting into, you know, the next phases, best companies or high performing companies at really good valuations?
John Rubino 20:28
Well, that’s very possible. I mean, what happened in 2008 2009, is that equities got smashed. And there were a lot of, you know, really good dividend payers, really, future successful tech companies, those kinds of things available for a song, you know, they were very cheap, they were available for a couple of years there. And the people who recognize that opportunity, and jumped in and made five times their money going forward in the next decade, something like that could happen again. This time around, though, and every time in the future until it actually happens, you know that the system is breaking the the fiat currency system does not work. And it’s, it is going to come to the end of its life, the system, everything dependent on the system is going to crash. And then we’re going to have to rebuild something from the rubble. And so it’s not clear what exactly that means for equities while it’s going on. It’s just that that’s a huge wildcard because it’s not normal, you know, it’s not a boom, and then a bust, and then re liquification. And then another boom, this is something new, where we have to rewrite the rulebook and decide, you know, like life is junk bond workouts I was talking about this is for the entire global financial system, right, where we have to figure out who gets what, out of this thing where the obligations and liabilities vastly exceed the value of the collateral.
Adam Taggart 21:57
I like that concept of global workout. I mean, I don’t like the fact that we’re maybe heading towards that. But that helps me understand that. We’re going to talk about the monetary side to it. And let me jump to, again, sort of the end of the discussion, then we’ll come back. I imagine one of the more important yet harder to divine questions to answer right now is, how many booms and bust do we have left before the monetary reckoning that you just talked about? So you know, as an investor, you’re trying to figure out here, okay, am I playing for the next down cycle by which there’ll be another upcycle? Or is it you know, no, I got a plan for the demise of the whole fiat currency system, because that’s the next big shoe to drop. Do you have an opinion one way or the other? Well,
John Rubino 22:48
I lacked credibility on the whole timing issue, because I thought the last time around was the was the end, I thought 2008 2009 was going to bring about a monetary reset. And force us to go back to some kind of commodity based currency in other words, and the fiat currency era. And that didn’t happen. We were able to borrow another, you know, what’s the total now? Do you think, Adam, it’s probably $20 trillion, right, globally, that we added to the the liabilities of the financial entities of the world? And I’m ready to
Adam Taggart 23:23
probably probably well, all I know is the US federal debt, jumped by 20 trillion itself from Oh, eight to now. So we’ve got 20 trillion there to start with.
John Rubino 23:33
Okay. Yeah. And then everybody else in the world did the same thing. China quintupled their debt. And that’s basically what pulled us out of the, the Great Recession is the second biggest economy in the world decided to buy up all the natural resources in the world pushed everybody’s price up, and that that jump started the economy.
Adam Taggart 23:52
And this time around, because they’re now lever it up. Yeah, we’ll
John Rubino 23:54
see. That’s the question. I mean, I don’t want to go out on a limb and say, This is it. This is the end of the fiat currency era, because I already did that once, you know. And then 10 years later, that’s on video out there. So and I had black hair. So it was definitely a long time ago. But it does seem like there’s, you know, the daddy is not going to come home and fix things. There’s no adult supervision in this market. There’s nobody that can fix this stuff. Because, like you said, China is out of the global economic locomotive phase of its existence. Now, it’s not gonna borrow another $15 trillion, and buy up all the natural resources because it’s an out now be a time to expand on your original question to me because we can go around the rest of the world. And look at what a mess everybody else is because China engineered the biggest real estate boom in history, and that boom has gone bust now, and they don’t have the slightest idea what to do about it,
Adam Taggart 24:57
or it’s it’s going bust right. It’s still unfolding. Right. Well, yeah, well, they’re
John Rubino 25:01
big construction companies that were immense, they were bigger anything than anything the US has, by analogy, they’re basically insolvent. And they, you know, they’ve sold all these houses, which may have may never be built to people who are not paying on those mortgages. And so there’s no there’s no money left flowing back into the system for these big construction companies. And so they’re defaulting on 10s of billions of dollars of debt, each and the Chinese government just, they don’t know what to do about it. At one point 70% 74% of Chinese household wealth was tied up in real estate, because that was one of the few assets the Chinese people could buy, you know, they, they could sort of buy stocks, but they couldn’t get their money out of the country, and they could kind of buy gold, but real estate was much easier. And it was in a rockin bull market. So they poured their money into buying not one house, not two houses, but five or six houses and condos and everything, it was sort of like the Airbnb boom here, but spread across 1.4 billion people, you know, and
Adam Taggart 26:11
and nobody was using these structures are depreciating.
John Rubino 26:15
And the quality of the construction of a lot of cases was horrendous. So those buildings are just, they’re not just sitting there empty. They’re deteriorating at an accelerating rate, you know, so they might not even be there when there’s money to actually finish them and move into them. And so, again, China doesn’t, you know, they’re, they’re kind of quasi communist dictatorship, they have no idea how to handle massive market busts, you know, they don’t understand the concept of letting the free market clear this out. And I’m not sure you could even do that. With the amount of debt that’s on hand, they’re now moving over to Japan. Speaking of lots of debt, they took on more government debt on a per capita basis than any other country in human history. And they got away with it for a really long time. But now they’re not getting away with it anymore. They’re, the Yen is tanking, it’s up to or down to 150 per US dollar, which that you got to go back to 1990 to see a yen that week versus the dollar and interest rates in Japan, which were zero when the 10 year Treasury until very recently, are now up 2.8%, which doesn’t sound like much but in the context of debt that is 250% of GDP. It’s a big interesting
Adam Taggart 27:34
kryptonite. Yeah. This is why we were talking earlier about the difference in debt, pre global financial crisis to now right, which is just interest rates are so much more pernicious when your debt level is bigger, and nobody has a bigger debt level to per capita than Japan. So even even point 8% can be fatal.
John Rubino 27:59
Yeah, yeah. And see they’re in a box now where their currency is falling in a disorderly way. And normally, you would you would address that by raising interest rates, right to make your bonds more attractive. But if Japan does that their interest cost at the government level at least goes through the roof, and it threatens to bankrupt the government. So do you know to deal with their interest costs going up? They should push interest rates back down, right, but that’ll crash the end. So they’re in that box that countries were always supposed to find themselves in, but hadn’t up until now? Well, there’s the country that’s
Adam Taggart 28:33
so this do you see this as an important milestone, then on the the road to the great global fiat currency reset, where we’re finally seeing countries sort of, in a box they can’t escape from?
John Rubino 28:46
Yes, yeah, the bust that can’t be inflated away, if they can, can no longer be kicked and cannot be inflated away? Yeah, the thing you can’t fix and see what it looked like 2008 2009 was something that was unfixable because the numbers were so big, but we we fixed it at the cost of all that extra debt. So it’s that’s the equivalent of losing your job and putting your life on credit cards for three years. You know, you maintain your lifestyle that you come back to a million dollars of credit card debt. I’m charging you 20% A year and you’re bankrupt. Well, that’s kind of what we did globally. And so yes, China looks like it’s a problem that can’t be fixed. And Japan looks like a problem that can’t be fixed. So you know if anybody out there has the solution to Japan situation where the currency is tanking and interest rates are rising. Let’s hear it but it doesn’t sound like there is one.
Adam Taggart 29:40
Okay. Hey, can I can I toss one curveball your way? Which is one of the things I’ve heard is you’re right, you know, the usual suspects can’t ride to the rescue this time, right. One of the potential White Knights that I’ve heard is the generational wealth transfer from Boomers to their children. And that would be a global phenomenon. And I don’t have the numbers in the top of my head, especially outside the US, but there’s a lot of wealth right now, that is, you know, amassed in the hands of, of, you know, a, a percentage of the population that’s, you know, 65 and older, right? Relatively soon, in fact, it’s already kind of ongoing, you know, that money is going to come out of all their savings vehicles, and pass down to their progeny and get out into the economy. Right. So how much potential Do you think that has to kind of keep the game going for more than we might otherwise think possible?
John Rubino 30:48
Well, that’s a real thing. And you know, there’s this entire generation of 45 year year olds out there thinking, God, you know, I love my mom and dad, but would they please just die, so I can have a house, you know. And so that’s, that’s a real thing. And that’ll happen over time. But to get from here to there, see, we’re not just going to keel over baby boomers, what we’re going to do is we’re going to, you know, we’re going to hang in there longer than you expect, in a healthy way, and then we’re gonna get sick, and then we’re gonna get sicker. And while that’s going on, Medicare is going to charge the taxpayers of the country, absolutely insane amounts of money to keep us going. And that’s going to offset the eventual inheritance of the universe, those guys that are going to get our houses or baby boomer houses in our stock portfolios, are in the meantime, going to have to pay to cover Medicare, which is just going to balloon out of control.
Adam Taggart 31:48
Totally get that let me let me mention one thing, just so you can address it and your answer. Let’s assume for a minute that the boomers don’t plan to pass it along. Let’s assume they’re just like, I’m spending it all while I still can. Right. And so while they’re still healthy, they’re traveling, they’re going out to dinner, they’re, you know, they’re just profligate, right? They’re they’re going out in a blaze of glory. on a net basis, what do you think wins out the stimulative effect of the economy, or the drag from things like Medicare?
John Rubino 32:20
Well, you know, I think if we’re borrowing to cover Medicare, then there won’t be the drag, as long as governments can continue to borrow to cover Medicare, right? So and spending it in a restaurant and giving it to our kid. I mean, the money goes to different people. But it’s sort of the same thing, right? Where either way, we’re giving our money away, we’re putting it into the economy, and that stimulative. But we will be the first generation that does that. Usually, you know, the older you get, the more conservative you get with your investments. And actually, I don’t want to go there. I don’t want to necessarily say that’s true, because people do spend more as they get older, but a lot of the time it’s on first of all, it’s on travel. That’s that’s usually your your late 60s, early 70s. You know, you go do the things you didn’t get to do while you were working. Right,
Adam Taggart 33:13
and start and start interrupted, again, I’ll let you address this, which is that wealth isn’t evenly distributed amongst this population. Right. So it, there’s a percentage that has the vast majority of it. Right. So while the rest of the senior population, yeah, they’re having to clip coupons and really watch their spending. But those that have the majority of the assets, and certainly the majority of the financial assets, it’s all discretionary to them.
John Rubino 33:38
Yeah, it is. And at some point, well, I mean, they’re already spending it. So it’s not clear how much more they’re gonna spend, you know, if you’re already a multimillionaire, you pretty much do what you feel like, right? So what you feel like is level not to change all that much with time, unless your health changes dramatically. And that’s, that changes everything. But as long as you’re still you, you’re you’re going to spend money. And see that’s one of the functions of rich people basically to redistribute money from one place to people who don’t have it like you if you order a yacht to be built, right. Well, all the guys who build that yacht for you get your money then. Right and, and so that’s a process that’s ongoing right now. But, and when that happens, there will be lots of big inheritances passed down through the generations. But, you know, in a lot of cases, the people who get that money I mean, if you have an extremely rich parents, you probably already have some money yourself, you know, they’re not going to let you be destitute until they die. So
Adam Taggart 34:42
I mean, a big thing that’s happening right now, we’ll talk about housing in a second, but like, a lot of parents aren’t waiting to pass it down as part of their estate. They’re stepping in now while their kids are in their late 20s 30s and saying we’ll buy your house for you, or at least we’ll give you the downpayment. Yeah,
John Rubino 34:59
we’re my wife. are actually doing that we’re helping our kids out with houses and other things, you know. And so that’s one part of the process. But I don’t I mean, it is stimulated when that happens, that actually helps. But I think the offset is that either taxes have to go way up or government borrowing will have to go way up to cover our medical care, while we’re doing this other stuff with our money. So I don’t think it’s a, you know, it really depends on the effect of all that borrowing. Because if the all that borrowing causes a depression, then it was the opposite of stimulative. Right, what happened? And if we’re able to keep borrowing, and that keeps the economy going, then it’s temporarily stimulated, that debt will come back to blow up on us eventually. But if we’re able to keep borrowing that could, you know, that could be a stimulative aspect of an economy that would otherwise for demographic reasons, slow way down. So yeah, and you know, that’s, that’s all possible. But I don’t think we get there because I think the the amount of debt that we’ve taken already, is going to be the dominant force in the economy going forward, and demographics will be much less of a force than then it would be if we were healthy, and we’d have this, you know, this generational changing of the guard. But if we’re going bankrupt, then I don’t really think it matters, who has the money that’s going to vaporize when all these assets get hit the way they’re going to? You know, I think boomers made all this money and boomers will lose a lot of his money in the next really aggressive equities bear market.
Adam Taggart 36:41
That’s very true. I mean, a lot of the boomer wealth is an assets that are priced at the margin.
John Rubino 36:47
Mm hmm. Yeah. And if a lot of its real estate, you know, the real estate market looks looks like it’s sitting on
Adam Taggart 36:54
the edge of a cliff. But even stocks are priced at the margin. Yeah, all of this stuff is make
John Rubino 36:59
believe wealth, because it’s based on borrowed money that was created out of thin air. So when, you know, the final term comes when the bust that we can’t fix happens. And I think money Heaven is a term I’ve heard you use before all that all that wealth goes to money, heaven, it just disappears. It doesn’t change hands as much as it just ceases to exist. As vaporizes. Yeah. Yeah. So I think that’s, that’s a much more likely scenario, than the 45 year olds getting suddenly rich, unfortunately, because they just, they deserve a better deal than they got from Baby Boomers.
Adam Taggart 37:37
All right, good point. And I just want to define for people this money having concept really quickly, just because it is important. So when I say something’s priced at the margin, it basically means whatever the last transaction was for, that sets the price for the entire market, right. So like in a, in the housing market, imagine a cul de sac, where all the homes are identical. The market value of all those homes together, is set by the last home to sell. Right, that sets the comps for the entire neighborhood. So if suddenly, a house in that neighborhood sells for 15%, less than the last transaction will all of a sudden all the homes in that neighborhood are worth 15% less, and there’s a whole bunch of market value that was there the day before that isn’t there anymore, and it didn’t go to anybody, it just vaporized and went to money heaven, same things happens, you know, with with a company with its stock, it has a certain number of shares outstanding, well, if a share a share of stock sells for $20 Normally, but all of a sudden, the prospects for the company changes. And the next sale of that stock to somebody on the stock exchange only goes for $10. Well, boom, 50% of that company’s market value, whatever it was, is just gone. And it didn’t go into anybody’s pocket. It just literally just disappeared. That’s the concept of money heaven, which is hard for people to understand, because they always think of, well, there’s a winner and a loser. There’s $1 That went from one hand to another. But But market value is very much subject to this pricing on the margin phenomenon.
John Rubino 39:10
Yeah, and see, we define our wealth by these assets that are priced at the margin, because we think our stock portfolio is a real thing. You know, we think our house is actually worth 1,000,002, you know, and but it could be worth $400,000 in a bear market for housing and that money will not have gone anywhere. It’ll just disappear. You just become less wealthy.
Adam Taggart 39:34
And is that a good parable? It’s hard to read. But I feel like when I hear you talk, John, that that is like a parable for what you see. In the future when we sort of talk about this reckoning, that there’s just a bunch of if you if you were to sort of sum up the totality of global prosperity right now. I hear you sort of saying a good chunk of that’s just gonna go to money heaven when all the chips are done that that we have this sort of inflated sense of Have what our total net worth is as a as a world. But a lot of that’s just based on silly assumptions and puffery. And you know, when when things start getting real, we’re gonna realize that a pretty sizable chunk of that prosperity was Phantom. And it’s just, we just realized it’s gone. And we can just do a lot less than we thought we were going to be able to do.
John Rubino 40:21
Yeah, basically, we created a bunch of new currency, dumped it into the market, people who got it went out and bought things at ever higher prices. So you know, quote, unquote, wealth, or, you know, our net worth as a society went way up. But that’s just a paper value. Because as soon as we hit the point where, and it only, it only holds true, as long as the currencies in which we’re valuing this stuff remain stable. But as soon as we hit the point where we have to inflate away our currency’s value, in order to protect all the debt that’s out there to keep it from going bust, and the value of the currency starts falling, then the value of all the assets that we’re measuring with that currency goes down. So all of a sudden, you know, something that’s a million dollars is 300,000. In real terms, you know, we might be talking about higher dollar values for something, but the actual value in terms of its purchasing power, or how it translates into other assets, goes way down. And so you know, a house might still be a million to
Adam Taggart 41:35
a million dollars, but a million 1,000,002 might not buy very much. Yeah, million
John Rubino 41:38
two might buy you a used car at that point, or something like that. And so.
Adam Taggart 41:44
So John, I don’t know if you follow Matthew piping Berg at all. But my sense is, you would really enjoy his commentary. And the last time he was on this channel, which was just like two weeks ago, he like you just at the end of the day, he just sort of focuses on the debt issue. And he says, he’s a student of history like you are. And he says, at every single point, previously, in history, when a nation has gotten into a sovereign debt crisis, it has always sacrificed the purchasing power of the currency to deal with the debt. Like no exceptions. I believe you feel the same. I think it’s a big part of your the book you wrote with James Stark, the money bubble, which is just, that’s just kind of the way it goes, you know, with the current playbook that we have. Where, when debts get out of control, you got to basically either willingly embrace austerity, and allow defaults to ripple through the system. And that’s something that’s just anathema to human nature, and certainly to politicians, and so they always sacrifice the currency as a result. Am I true? That is true that you kind of feel similarly.
John Rubino 42:56
Oh, yeah, if you’re running a government, and you’ve got two choices, you’ve got 9% inflation next year, or you’ve got a 1930 style deflationary depression, that happens immediately. And because you’re in charge, you’re the Hoover, Herbert Hoover of that generation. And you’ll be in the history books for the rest of your life as the guy who destroyed the global economy. If you’ve got that choice, obviously, you take the 9% inflation, right. And then next year, you get the same choice. So you take 12% inflation and, and in the moment, it’s a no brainer from the point of view of somebody running a country. And that’s kind of where we are right now. Right? We’re accepting higher and higher levels of inflation as normal, because the alternative is a mass default on debt all over the world. And that’s unthinkable we can’t let that happen. So, so yeah, we will inflate the amount of currency in the system to whatever level we have to and as long as we can do it, so the game only ends when we can’t do it anymore when the tools no longer work. So that’s the big thing that might happen soon.
Adam Taggart 44:05
In, kinda, I yeah, I feel like I can totally understand why politicians do that. Right. Because they’re just in the the game of trying to pass the hot potato on to whoever comes after them. Right. We as a citizenry have a role in this story, right, where, you know, we can demand our politicians face different solutions. But but we have the human nature trap of saying you know, like, it’s almost sort of like being stuck in a in a bad abusive relationship, right? Where you’re like, if your spouse is providing for your family, if they’re the breadwinner, and you’re not, there’s this fear of like, well, if I leave them today, you know, I’m kind of destitute and it’s just not worth it today, to make that that big decision. So I’ll put up with whatever today’s abuse is And, you know, reassess again tomorrow. And that’s how you find yourself years later still stuck in this really horrible relationship, right? Where are we as people? You know, you said, like, you know, yeah, we’re just absorbing this inflation that’s going on these these huge rises in the cost of living we’ve seen over the past couple of years, because the alternative is to basically, you know, push for, hey, we need a different monetary system. And for that, there’s going to have to be big default, you know, big losses taken, and we’re going to have to, like, you know, reset everything. And on a day to day basis, I don’t think the majority of people are willing to face that, right. So you just put up with whatever today’s abuses. And I think this is sort of why history is so predictable here, because you have both the leaders and the populace, none of whom wants to take the pain today.
John Rubino 45:56
One, yeah, I mean, if you’re a, you know, an individual in one of these societies, and you’re facing basically the same choice that the government is, would you vote for the guy who’s going to cause 9% inflation next year? Or do you vote for the guy who’s going to cause a mass debt default, that throws you out of your job and throws your spouse out of their job and leaves you on the street starving, you’re gonna take that 9% inflation, and you’re gonna vote for the guy who gives it to you,
Adam Taggart 46:20
right? Even though you might be way better off in two years, voting for the guy that makes all the pain happen upfront, but just nobody’s going to do that.
John Rubino 46:31
Yeah, the idea of your kids starving for two years to get there is just, you know,
Adam Taggart 46:37
it’s understandable, human nature.
John Rubino 46:39
See, now the solution to this is to never let yourself get into this situation in the first place, which is where sound money comes in. If you’re if your currency is based on something real like gold, you can’t take on the kinds of debts that put you in a place where you have this choice, you know, this horrible choice between destruction today and absolute chaos tomorrow, you know, and, and we didn’t do that we did an experiment starting in 1971, where we gave governments the power to create currency out of thin air with no consequence. And it took till today, you know, it took 6070 years to get to the point where,
Adam Taggart 47:20
hey, I’m only 52. I was born in 71. Don’t make me 60 years old yet.
John Rubino 47:25
Well, okay. 71. That’s 35. Oh, it’s 50. Something high? Yeah. 52. Yeah, okay. Well, but we go further back to 1913, if we wanted to have the Fed, but But yeah, this experiment with currency that governments can create out of thin air took a really long time to conclude. And I would argue that we basically concluded right now you know, that what’s left now is just the flailing of a dead system.
Adam Taggart 47:58
And if I can make one observation on that, which is, so I was born two weeks, two and a half weeks before Nixon took us off the gold standard. So for my entire life, right, my entire conscious life. The dollar has been the dollar that we’ve had since then, right? And so it’s easy for somebody my age to say, well, that’s just the way the dollar has always been, right. But it wasn’t, it was a very different instrument, the day I was born, versus two and a half weeks later, right. So to your point is we started this experiment 50 years ago, most people alive today, don’t realize that it’s an experiment. And it’s only really now we’re beginning to realize, Jesus, that experiment didn’t really work out very well did it?
John Rubino 48:42
Well, that’s why it’s so hard to change something like this, because for most people, it’s just the environment. You know, he would never question that the government controls the dollar, any more than you would question that? Well, the sun comes up over there, and it goes down over there. It’s just that’s what happens every day. So most people don’t think in those terms, oh, we’re going to reset the monetary system that that’s, that’s a thing that only gets debated when the current system is demonstrably broke. In the, in the observation of the majority of people, in other words, we all have to come come to that conclusion before we can have a debate that can actually be acted on. And I think that’s happening, I think, a growing number of people because remember, we had 10% inflation last year, officially and maybe 12 or 14% in real terms. And that was a wake up call for a lot of people, they realized that it’s possible for the price of their day to day life to just spike beyond their means. And and they want to know why that happened. And so I think that we’re not far from a lot of people becoming educated about monetary issues, and a lot of other people becoming just full on gold bugs, you know, we’re not far from that. So if you between the crypto guys the gold bugs, and the, you know, the former normies, who have actually sat down and thought about what’s happening and have come to the conclusion that this system is broken, we might have a majority emerging out there, you know, and that that’ll change everything when it happens.
Adam Taggart 50:15
Well, and so you and I, you know, we’ve talked about Neil house concept of the fourth turning, right, which may be the vehicle by which the masses wake up to this, right. That’s where you see the status quo break down to then be replaced by some new order, right. So, you know, Neil Howe basically pegs us is right in the middle of a fourth turning right now, when that would go out through 2030, maybe a couple of years into the 2030s. From here, so let’s say about 10 more years. So you know, who knows, John, we may get your global monetary reset in the next 10 years or so what’s interesting is, you know, the crypto folks totally on this, right. That’s the whole premise for why a lot of these cryptocurrencies were created in the first place, is a better form of money to deal with the ills of the fiat system. gold bugs, obviously have known this for a long, long time. But then there’s what I would consider sort of the Oliver Anthony crowd. And John, you may remember, he’s the singer who just came from out of nowhere, about two months ago, because he wrote a song Richmond north of Richmond, which just finally, you know, succinctly put a into words, in put his finger on the, on the wound of so many in working class America, where they’re just like, I’m just working my butt off, and I’m just drowning, right, like something’s happening with the money, right. And he specifically talks about the money in the song about her money just isn’t worth anything anymore. He used a more colorful word than that. But, you know, I think when the average, kind of just average Joe is beginning to have these conversations about the loss of purchasing power of the money, that awareness that you’re talking about is coming, that is dawning, like that’s, that’s where it gets into the popular psyche.
John Rubino 52:08
Yeah, a lot of people recognize that the system doesn’t work for them anymore. And, you know, Trump, that’s why we had President Trump because he gave voice to that idea. You know, he stood in front of a bunch of former auto workers and said, you know, we’ll get your plant back from Mexico or China. And, and that’s why there was a political movement that coalesced around that idea, because there were so many people who recognize that the system didn’t work for them anymore. You know, globalization was great. If you’re a you know, a corporate lawyer, or an investment banker, or you own a company that can set up a factory in China and pay people $3 an hour is great for you. Terrible for the guys who used to work in your factories. And the people who now you know, have to work in Costco or Walmart or someplace when they used to be making middle class money.
Adam Taggart 52:59
That was run Ross Perot’s giant sucking sound of jobs hitting, you know, down to Mexico, right?
John Rubino 53:05
Yeah, yeah. So that that’s been a theme that, you know, has grown in intensity over time, because people got it during some people got it during the days of Ross Perot, more people got it. With Trump. And now, we, you know, what’s really interesting is that unions need to see how many strikes we have going on out there, all of a sudden, labor is starting to get back some of what was stolen from it in the past. And that’s, you know, all the people who aren’t part of a union are seeing that kind of understanding that there’s, there’s a class thing going on out there. It’s not black versus white, it’s not pro abortion versus anti abortion. It’s the the 60% versus the 1%. And that that’s as that grows, that becomes a really potent political force. And, you know, what Trump taught us was that there’s a platform out there that you can win on. That is not right, and it’s not left, it’s populist, you know, there’s a handful of rich guys screwed you over. We’re gonna go out and we’re gonna get back what they took from you.
Adam Taggart 54:17
So do you expect that to be an even bigger part of the political environment in next year’s election cycle?
John Rubino 54:26
Oh, absolutely. I think so. I mean, it depends on who, who does it. The best job of explaining a populist platform, and there are some people out there doing it now, you know, Trump is there, he’s doing it. The vape Ramaswamy tells a good story, and so does RFK Jr. Yeah. So they’re, and they’re all finding some success because of that, because the market is primed for that kind of message.
Adam Taggart 54:54
You know, it’s interesting to me is, you know, past election cycles, sure. You have politicians that will make inflation part of their, their platform, if that’s an issue, you know, at the time, it was a huge part of Ronald Reagan’s platform, right, which is, you know, look at all the inflation we had under Jimmy Carter, I’m going to come, you know, help clean house. What’s interesting is, is I’ve not heard any politicians attack the root cause of it, which is the money system itself, except for one politician. And that’s Ron Paul, smiling. And what’s so funny is is for those of us that watched his campaign closely back in 2008, and 2012, I think, you know, he was just so marginalized for those ideas, right? Who is this crank up here, grandpa talking about, you know, money, and we need to audit the IRS. And you know, like, get this guy off the stage. He’s wasting valuable time, you know, we need to talk about the important issues. And of course, you know, he had his finger dialed into something hugely important back then. Do you see the actual topic of money itself, the nature of our money itself, becoming a bigger, bigger political topic as time goes on here?
John Rubino 56:17
Oh, it has to be Ron Paul, by the way. So I clearly from day one, there are videos of him as a young man saying stuff like that in like the 1970s 1980s. So he was right all along. But he was just way ahead of his time. And yeah, when the the financial system breaks down, we have to have a national and global conversation about what money is and what its function is. Because right now, people don’t know that they think it’s just it’s something that the government makes and gives to you. And and that’s
Adam Taggart 56:47
always been the same forever since time immemorial.
John Rubino 56:49
That’s right. That’s right. And so the conversation has to center around, okay, what, what is, if we’re going to keep having dollars, what are dollars going forward, and you know, how does money work, and it’s, you know, hopefully, the truth will come out, which is that it’s a store of value, it’s a means of communication. It’s a medium of exchange, and it has to, for it to work, it has to hold its value over long periods of time, you have to be able to communicate ideas about value into the future for a capitalist society to work. And for that, your money has to mean the same thing today, as it does 10 years from now. And the only way to get that is to, to limit the quantity of new currency that can be created by the government, by linking it to something and you know, that’s that’s the story behind bitcoin, right? There’s only going to be a certain number of Bitcoin, once the, the creation stops, and that’ll be it forever. So we will know what the supply of our money is going to be. And with the old gold standard, where currencies were linked to gold, and governments can only create a certain number of say, dollars in relation to the amount of gold they have. And when those currencies were just names for a certain weight of gold. That limits the the increase in the money supply to the increase in the gold supply, which is one to 1.5% a year. So those systems where you have a fixed amount of money that’s even possible in the system is is completely different. It sounds kind of like it’s the same as our system, you know, we still have paper currency, we still have debt, et cetera, et cetera. So it sounds similar, but that that the feature of the supply constraint is crucial. And that’ll be one of the big debates that we have going forward. Well, how do you know, even if we fix everything today with a big devaluation? How do we keep it happening again, from happening again, if we just hand it back to the government, and they go right back to running giant deficits and fighting wars everywhere, blah, blah, blah, you know, our grandkids will be right back in the same spot. So how do we stop that? And that’s where the gold standard guys will come into the argument and say, well, here’s how you do it. You know, like, we did it for the for 200 years up until 1914. So hopefully, that will be the winning side of the argument. But you never know, in this world. We could get just go full on communists or socialists or something like that, where we can just get rid of money and everything is just whatever commodity you’re allowed to have based on your, your tickets at the end of each day, or whatever.
Adam Taggart 59:33
Well, so that that’s one question. I just haven’t had the chance to ask and we can’t get into it because it requires time that we don’t have right now but which is kind of the the geopolitical future, right, which is when we talk about a good chunk of the world’s current net prosperity going to money heaven because it’s a lot of it’s based on malinvestment, or just bubble pricing of Both are money in overvalued assets. Presumably there will be an increasing increasingly aggressive competition amongst countries for what remains. And to your point about, like, we don’t know how this is gonna go even in our own country, we don’t know how this is going to go between countries going forward. And, you know, there’s potential for to get pretty bad. Hopefully we get to avoid a lot of that stuff, but it probably just gonna get rougher, there’s going to be sharper elbows, you know, at a minimum for what remains. I hate to just mention that move on. But any quick thoughts on that?
John Rubino 1:00:42
Well, yeah, that’s absolutely how it goes. financial crises lead to geopolitical geopolitical crises. And it makes complete sense. I mean, if your country is going bankrupt, and there’s a giant mob heading towards your, you know, the Capitol, presidential palace, yeah. And, and you can help things by stealing somebody else’s oil or taking their farmland. Obviously, you got an incentive to do that. Right. So yeah, borders get very porous, and very questionable when when everybody’s going broke. And, you know, in well, that you can trace World War Two, in part back to the hyperinflation in Germany, Germany went bankrupt. And then they, they ended up installing authoritarian leaders in order to stop the bleeding. And, you know, we got World War Two. That’s normal. That’s, that’s not an outlier in human history. That is how it goes. Another reason we’re looking at this from another angle is if that crowd is coming towards the presidential palace, because of your own mismanagement of the country. Well, what do you do you just let them break in and hang you? Or do you say, well, look at that other country? That guy, that guy running the country is evil? He’s the next Hitler, you engineering outside threat? You do? Exactly, which is what we’re doing right now. You know, the US is doing that. I think it’s diluting its case, by doing it with everybody, you know, we can’t have 12 Different Hitler’s out there, or we’re gonna lose focus. But yeah, the US is doing that right now. And other countries will do that, too. It’s just how human nature works under that kind of stress. So we’ve created the conditions in which, you know, financial crisis that leads to a monetary Reset, reset might be backburner news, you know, it might be something that doesn’t show up on the front page, because so many other crazy things are happening in the world. And I hope that’s not the case, I hope we just, you know, decide that a gold backed currency is the lesser of multiple evils and just do it one day, you know, it could could happen in a very peaceful way. But I don’t see it happening that way. Because governments would then have to give up massive amounts of power in order to make that happen, and they need a gun to their head to do that. So I think crisis happens first, monetary reset happens second.
Adam Taggart 1:03:08
Okay, boy, we really got into some Dark Territory this time around. But John, it’s always fascinating talking with you. I could go for another hour, I’m sure there’s a lot of people that would love for us to do that. Gonna be fun at some point to have you come on. And we do this in a live setting where we get to let the audience ask questions as well. I mean, I can ask questions of you to the cows come home. But I’m sure that a lot of people have been listening who have their own pet questions, I’d love to ask you. Are you open to doing that at some point?
John Rubino 1:03:35
Oh, absolutely. Adam, because you know that this has been kind of all gloom and doom today so far. But there’s a lot of other things we could talk about that are, you know, investment thesis oriented, where, okay, you know, crazy stuff is happening. But in the past fortunes were made during times like that, well, how do you become one of those people? You know, what should you be doing? And how do you prep personally, for all of this stuff? How do you maintain your health in a way that it that keeps you free? Because if you’re not healthy, it doesn’t matter whether you’re free to do it, right? And, you know, how do you do all these. So there’s a, you know, the whole theme of developing resilience, financially and personally, kind of flows from all the gloom and doom because if we have hard times coming, we need to focus and we need to take things very seriously. And start doing the things that will position us in a way that will help us get through it and allow us to help our families and friends get through it. So once you start focusing at this world with that kind of a lens, then you know, it’s never a happy situation. But it’s kind of exciting because there are a lot of things you can do. There are a lot of positive things you can do in the moment that take you closer to these very positive goals and take your mind off the crazy stuff. That’s yeah,
Adam Taggart 1:04:56
it’s great quite John and as I said at the beginning, you and I have known each either for a long time, you’ve known me pretty much my entire time prior to Wealthion, running a company that focused, you know, primarily on developing resilience. And I’ve known you to be a practitioner, you’ve made a lot of changes in your life where you have, you know, every one has been sort of upgrading your own level of personal resilience in terms of your, your health, your homestead, you know, your community, all that type of stuff. So you’re kind of a living example of what you just talked about. Alright, well, looking wrapping up, I’m going to try to bolt on to this discussion we’ve had in just a minute or two, John, if you can just share with people on the investment side right now, right, you think about all these issues that you and I’ve been talking about here for the past hour, when you look at, you know, assets to invest in in the next six months, year or so, given the the conditions you see on the ground right now? Are there? What are your favorite assets? And are there any assets that you just wouldn’t touch with a 10 foot pole right now?
John Rubino 1:05:59
Well, the things you don’t want to touch are the things that depend for their value on the value of the currency. So if we’re going to inflate the dollar away, then you don’t want to own for instance, 30 year bonds, that are going to pay you dollars each year, because the dollar value of those dollars will tank and so that that means, you know, the big investment banks, the big commercial banks, anybody related to the value of the dollar, don’t be there, get rid of them. And then on the other side of the spectrum, there are for instance, commodities, as we get out of financial assets will will move capital into real assets. So there are things like farmland, which will probably go way up in value. And you know, the best quality rental houses are liable to hold their value at least and generate cash flow, and gold and silver. If we’re again, if we’re going to inflate away the currency, then the old forms of money that can’t be inflated away, get very, very valuable. And we’ve got 3000 years of human history that the back that up and hold from the Roman Empire to to France in the 1700s to Germany in the 1920s. It’s happened over and over again, always and everywhere, gold and silver hold their value, and get much more value valuable in the inflated away currency terms. So stack, you know, get physical gold and silver. Look at the best quality mining companies and others who are in the gold and silver space, and make them the core of your portfolio and probably the commodity within an even better story than gold and silver is uranium. The world is facing a massive energy crisis going forward. And a lot of countries are realizing that they neglected nuclear power, and they’re trying to go back to it. So that means massive, massively increased demand for uranium going forward, beyond the what today’s minds can put out. So that means massively higher prices to incense more production. So the highest quality uranium miners ought to do really well. And they have been doing well lately. Gold and silver miners have gone down. Uranium has gone up lately. So they’re less cheap, but they’ve still got great futures. Copper is another good story. So you know, there are stories out there, there are themes that that can potentially make people a lot of money, if they understand the dynamics behind those themes and get the right instruments lined up. So that’s all and you know, that’s, that’s not simple. That’s a couple of years of study to get to that point. But they’re really productive years. You know, that’s time well spent. If you figure out how to create a really effective, well chosen commodities portfolio, and that’s something we can all be focusing on the longest journey starts with a step. So start here and then start learning and going forward.
Adam Taggart 1:08:51
All right, well said on the farmland part. Just letting folks know. I’ve had in years past the managing director of a sustainable farmland fund, come on this channel talk about farming as an investment class. But his company is now just opened a new fund much larger than their previous ones where essentially what they do is they take, they buy conventional farmland, and then over a three year process, they convert it to organic farmland status. And usually when it was conventionally farmed, it was just mono cropped once they convert it to sustainable status or organic status. They grow a multiple of crops and raise livestock on it. So you have a much more diversified revenue stream but at the core of their economic model, it’s we’re taking land that was not being well used where you know, conventionally farmed, it was being soil was being stripped mined every year and you had to bring in lots of fossil inputs to healing the land, adding soil year after year, so you’re actually improving the quality of the farmland every year. But essentially, the base economic model is is that conventional farmland yielded X amount of revenue per acre. And the the organic farmland once it’s been converted yields two or 3x per acre. So it’s one of these kind of rare opportunities where you can feel great by by increasing the economic output of the land, while at the same time improving the soil, like actually healing the soil and growing a lot more, you know, diversified healthier foods on the soil. So if that’s of any interest to folks, let me know if there’s enough interest in the in the comment section below to this idea, what I can do is invite them to kind of maybe do a special webinar where we’ll you know, we’ll have him give an update on on farmland as an investment class. But then if folks are interested in learning more about the fund, he can answer any questions about that fund, too. All right. Well, John, this has been awesome. You mentioned a few things that are relevant to our upcoming conference that’s just coming in a couple of days, we’re going to have some experts that are on uranium and precious metals. I’ll tell folks about that in a second. But most importantly, for folks that have really enjoyed this discussion, and would like to follow you and your work, John, where should they go? Okay, I’m
John Rubino 1:11:21
at rubino.substack.com. And the newsletter I publish, there’s, it’s got some obligatory gloom and doom in it, but it’s mostly about actionable things that that we can all do to protect ourselves from what’s coming.
Adam Taggart 1:11:36
Okay, great. Well, folks, if you really enjoy this conversation, and wish it were extending for another hour, and you’re feeling disappointed about that, go to John’s substack. And subscribe. Huge fan of John’s as you can tell, and I love his work, I personally get his substack as well. He’s just a wonderful mind and a great guy to boot. Alright, John, hold on for one second, I just want to give folks two links to go to and then I’ll let you have the last word. So folks, as mentioned, the Wealthion fall online conference is coming up this Saturday, Saturday, October 21. If you haven’t registered for it, yet, you only have a couple of days left. So to go register for it, go to wealthion.com/conference. We have our best faculty ever. If you can’t watch live on Saturday, don’t worry, we’re recording everything, replay videos of all the presentations, all the live q&a sessions will be sent to everybody who registers within 24 hours of the event ending or even sooner, we’re generally get it out sooner than that. We’re going to try to do that again this year. And let’s see, oh, as I said, Yeah, we’re gonna have specialists, they are in natural resource stock investing. So Rick Rule, basically, I just recorded with him. I don’t know how many dozens of stocks from his own personal investment list he shared with us, but it’s a massive amount. And we’re having Justin Houston and Bloomberg join, they’re going to talk to you in brick is going to talk about energy in general. But they’re they do a deep dive on how to invest in the nuclear space. Right now. Jeff Clark is providing a bonus video where he walks through his top choices for gold and silver mining stocks. It’s his latest update on the ones that have his attention most right now. So just lots and lots and lots of actionable information. So go register for that conference, if you haven’t already. And if you are trying to figure out how to invest for this type of future that John and I have been discussing here, I highly encourage that you work with a professional financial advisor who is good, but who also understands and takes into account all the macro issues that John talked about here. Not many do. But if you have a good one who’s doing that for you, great. Stick with them. If you don’t, or you’d like a second opinion from one who does take all this into consideration, and consider scheduling a free, no strings attached consultation with the financial advisors that Wealthion endorses to do that just fill out the very short email@example.com. As mentioned, these consultations are totally free. There’s no commitment to work with these guys. It’s just a free public service. They offer to help as many people as possible position as prudently as possible for the many events that John thinks are likely to happen from here. If you’ve enjoyed listening to John here, we’d like to have him come back on this program again soon. Please let them know by hitting the like button, then clicking on the red subscribe button below, as well as that little bell icon right next to it. John, I’ll let you have the last word here. Any parting bits of counsel for the audience?
John Rubino 1:14:35
Out? Let me say your conference sounds great. I didn’t know you were having all those guys come in, but to two things. The uranium insider newsletter is how I got started when I was looking into Uranium stocks. They’re excellent. You can you can pretty much just build a uranium portfolio from that newsletter. So it’s well worth the money and then Rick Rule is sort of the same thing. You can basically just take this stuff mics that he talks about in his interviews, and just buy some of each and you’ve got a pretty good precious metals portfolio there. So, so those guys along with the rest of the guys that you’ve got coming are definitely worth the time.
Adam Taggart 1:15:13
Yeah, you’re very kind my friend. Well, John Locke, thanks for giving us so much of your time. And it’s just always such a pleasure. Thanks for coming on, sharing all your insights with us. Thanks again for being such a great friend in general. Really appreciate you coming on John, everybody else? Thanks so much for watching. I’ll see you