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Alasdair MacLeod returns for Part 2 of interview with him, in which he confidently predicts the banking system will need to be rescued by the central banks due to the high interest rates those policymakers are setting.

The rescue will likely result in flooding the system with $trillions in fresh stimulus, further accelerating inflation and the destruction of the purchasing power of the world’s major fiat currencies.

Alasdair then explains how gold and other hard assets can be good options for protect the value of one’s wealth should such a credit and/or banking crisis indeed ensue.


Alasdair MacLeod 0:00
I mean the banking system will have to be rescued on higher interest rates. I would take that as a given.

Adam Taggart 0:11
Welcome to Wealthion. I’m Wealthion founder Adam Taggart. Thanks for joining us for part two of our interview with researcher Alistair McLeod. If you haven’t yet watched part one of our discussion with Aleister, in which he explains why he expects both the US dollar and the major other world fiat currencies, to lose a substantial amount of their purchasing power in the year ahead, head over to our channel at And watch it there first, it sets the context for the investment themes we discuss in this video. Okay, let’s get started watching part two of our interview with Alistair McLeod. One thing we haven’t really talked about yet there was is the central banks, your predicted response of the central banks to the these? Was this credit, worsening? And what could happen if something really breaks there? I’m guessing you think that they’re going to revert to the playbook that they know, which is that they’ll just do a lot more stimulating? Do you think that?

Alasdair MacLeod 1:12
Yes, I do. They’ve got a problem because they’ve lost control over interest rates. I mean, to put it bluntly, act is no longer under their control. And as problems mount, you know, in the underlying economy, as we’ve described the effective interest rates on over leverage businesses, and also on the banks, you know, who have to shoulder the losses. You know, if these very, very big companies like Thames Water are not rescued, somehow, they’re going to be huge, great losses for the banks, banks are going to get into difficulties, because they’re extremely highly leveraged. And if you look at the share prices of the global systemically important banks in the Eurozone, and also in Japan, you see that, and particularly in the euro zone, you see that they’re trading way under book value. I mean, we’re talking about 30% of book value, sort of figure 30 40% of book value. So the market is saying that, you know, Houston, we’ve got a problem solver sort of thing. So that I mean, the banking system will have to be rescued on higher interest rates, I would take that as a given. The problem is how do you do it? It is relatively easy to rescue or to underwrite the system, as we saw with the feds action with the Lehman crisis, you know, they can basically Chuck money at the problem until the problem goes away. But what this involves, is a massive expansion and a massive commitment to credit inflation, just to stabilize the situation. And under those circumstances, I think that we will see, markets react by undermining the purchasing power of currencies, and at the same time reflecting this and a higher gold price. But that’s not the only problem. As I said earlier, the central banks themselves are deeply into negative equity. And the only bank which was sensible in this was the Bank of England under Lord king who got a commitment out of the Treasury to underwrite any losses that might arise from QE. So that all the QE is actually put in a special purpose vehicle, which the auditors can sign off, as, you know, it’s in their at par value bond, because it’s all guaranteed by the Treasury. So, you know, but so far as I’m aware, no other central bank has actually done this. Now, just imagine the problem that arises with the ECB, the ECB is shareholders and the other national central banks. We have had literally in the last two weeks statements coming out of Germany that the Bundesbank has losses on his balance sheet well in excess of its equity, because of the German bonds that it’s been forced to buy under the various QE programs of the ECB. It has also got it is owed by the target to system but 1.2 trillion euros. I mean, it’s a mess, and how but how do you sort it out? I mean, basically, it’s quite easy to recapitalize central bank, and basically, the way it works is central bank makes a loan to the shareholder. So that’s an acid on one side of its balance sheet, and it comes back in not as a deposit, but it comes back in as equity. Voila, you’ve recapitalized your central bank is very, very easy. But how do you do this with a central bank that is owned by a multitude of national Central Banks, these banks will have to go in most cases to their politicians to get permission to do it. Now, can you imagine and the, you know, in the German parliament, you know these ignorant politicians trying to grapple with the concept that there are these huge credit losses which are now on the balance sheet of the Bundesbank. The Bundesbank is owed 1.2 trillion euros through the target to system and the Bundesbank is asking not only to recapitalize itself, but for extra funds. So they can recapitalize the ECB, you know, come on, how is this gonna work? It is they have set up a system, which is almost designed to fail, at the first hurdle, the first real hurdle of difficulty. And I’m afraid that’s going to happen, I think the Euro could well get wiped out by this. In fact, I can’t see how the Euro can survive this coming. credit crunch is a very serious issue. Now, on that basis, you could say that the the the dollar is trade weighted go through the roof. But you know, this is not good news. Isn’t, I mean, the dollar, the dollar could also sort of go down with it, but at a less rapid rate.

Adam Taggart 6:17
Right. And of course, you’re talking there about relative values of different fiat currencies, but they could all be falling together, right? Just some are falling at faster rates than the other. Yeah. So to get to get back to the spirit of my question, which, which I think you’ve tackled there nicely is, whatever happens from here, however, if this devolves along the way, in which you think it may help, whatever specific path it takes, it ends up and in much diminished purchasing power of the underlying fiat currencies?

Alasdair MacLeod 6:51
Yes, exactly that, exactly that, and I would love to see a way out of it, I would love to see the ability to kick the can down the road, one more time. But I think it’s sort of getting to the end of that game. And I think if you can grasp that, I think you have to look at the positive side of it. And and sort of think, well, you know, the whole situation is so rotten, it’s actually impossible to plan our lives. While such a rotten system exists, or one of the possible benefits of a collapse of the current system is a new system, which will allow us to progress our lives again. Now, I don’t think it’s going to be an easy transition, I have to say, and at my advanced age, yeah, I dealt with whether I could really benefit from it. But you know, we’ve got children and all the rest of it, I’m sure you have as well, and relatives who you know, who got to survive in this in this world. And I think it’s terribly important for them, that whatever comes out of this crisis, allows them to, if you like, live make a good living progress themselves, which is really what humans want to do. Now, I have to say there’s an awful lot of humans in in Britain who sociologically don’t seem to want to progress themselves at all. But you get the point that we’re all in this sort of stasis. And actually the what you were saying about the US residential property market, how that’s known as status set of stasis is almost a metaphor for the whole economy, for the whole global economy, or the western side of it anyway.

Adam Taggart 8:42
Let me ask you this. So I believe it was one of your fellow countrymen, I believe it was Churchill, who said something like in a crisis, the solutions that get implemented are the ones that are already on the table. And so yeah, that sort of one underscores the importance of trying to get new solutions on the table in advance of a crisis. But let’s assume what you say, happens in the worst way that you can imagine it right. Presumably, at some point, they would go back to the table and say, okay, look, what do we do here? Do we? Do we come up with a new fiat currency, maybe one that’s, you know, a cbdc type thing. So they try to resuscitate a new Fiat regime? Do they say, Look, we used to be on a gold backed currency. And it maybe it wasn’t perfect, but it worked a lot better than this one that just died. And so let’s go back to what we had there. Or potentially do we look at something new, like a blockchain based currency solution? Do you have an opinion one way or the other?

Alasdair MacLeod 9:41
Yeah, I have very strong opinions actually. And when it comes to new forms of fit currency, you know what, whether you sort of bundled it up in some wonderful technology, which nobody understands or whatever, is immaterial, but it’s just like the situation at the time of the French Revolution when the US Sr, was issued. And this was a new currency, and the asthenia collapse because they continue to pursue it. So they came up with another wonderful idea, they came up with it yet a new currency called the mandate territorio. That collapse within six months. Now, fear is fear is fear, it doesn’t work eventually collapses. And the other problem we have, of course, and you’re mentioning, do we go back to a gold standard? Well, the whole of the current crop of macro economists would turn around and say, No, these are the guys who advise politicians, you know, they have been weaned off the concept of sound money. And this, they’re going to have to do some mental gymnastics before they get to the point of actually understanding what is required. This is a this is not a problem to be solved overnight. Now, it is possible that in a real crisis, and the point about crisis is it does actually tend to unite people towards a common objective. What we would need is a statesman, or we would need statesmen in our country more specifically, say in your country, who actually understand the problem. And we’ll say, you know, cut through that, that doesn’t work, we’ve got to return to sound money, we’ve got to return to a situation where we get back under control where the economy actually works for people. And that brings another problem, and that is that the government’s have got to reverse what they have been doing. The whole ethos of government has been, it is there to do the business of everybody. Whereas actually, it should be the business of nobody. It’s, you know, governments are there to intervene. And what they have become is they have become divorced from the true objective of representing and looking after the interests of the whole population. They now look after their own interests, a government is an autonomous body, which literally just taxes us in order to survive. And it pursues its ambitions and objectives, ignoring us this I mean, the democracy in the West is the effectively collapsed along with social values. And how do you reverse well, that you’re going to need statesmen of some considerable ability to be able to do that. And I just don’t see where they are at the moment.

Adam Taggart 12:33
Yeah, on that point, and I’m not trying to make a partisan comment here. So this is a general political comment. But you look at here in the States, you know, next year is an election year. Right. And right now, the two very prominent front runners are the same ones that we had in the past election. Yeah, absolutely. We just don’t seem to have a deeper promising bench of great statements. We’re ready to step into the the wings here.

Alasdair MacLeod 12:59
Yeah. And you’ve also got the problem. We’ve all got the problem that for Biden to be reelected, he cannot afford to lose the Ukraine war. I mean, you know, he said, he, when he came in, he lost Afghanistan. And to bookend his presidency with the loss of Afghanistan, and then the loss of the crane. I mean, this is inconceivable, it really is to American politics anyway. And, and also NATO, because I think if NATO fail on this, I mean, they’re dead as well. So there’s very, very big things happening. And I, I am genuinely, extremely worried about the level to which this proxy war in Ukraine is likely to accelerate. Because neither party, the Russians or the West can afford to

Adam Taggart 13:54
lose it in question here at neither URI or geopolitical analysts, so let’s let’s make sure that we’re talking a little bit outside of our area of expertise here, is a detente and just sort of, uh, let’s just cool things off and keep them where they are right now. Is that possible? Or would that be seen as an unacceptable win for Russia right now by NATO?

Alasdair MacLeod 14:17
I suspect to be seen as an unacceptable win for Russia. I mean, as I’m sure you recall, Kissinger, who’s now over 100, I mean, I think two years ago, he said, Well, you know, this is got to be negotiated. He’s dead, right? Look where we have got, I mean, this is this is, you know, we’re running into the buffers now. And we’re talking about hypersonic missiles. And God knows what and I mean, one of the most unattractive phrases about this is how the Ukrainian war is a meat grinder. You know, the Ukrainian people are just caught in the middle of this. I mean, it’s just this horrific. I mean, it really is. And, you know, it’s time all this stuff stuff. Got it really is when when, when the Americans or NATO, all of us were effectively thrown out of the Middle East by Mohammed bin Salman, guess what the whole area has become peaceful, you know, the Hutus are no longer fighting the Saudis.

Adam Taggart 15:19
I mean, that means Syria. I mean, nobody started with Syria, peace with

Alasdair MacLeod 15:23
Iran, you know, Qatar, the Qatar is now talking to the Saudis and then are talking to I mean, you know, it’s just peace has rained. And, you know, the one thing that’s happened is, you know, we’ve withdrawn from it. It’s, I mean, any, if you ever need evidence that our foreign policies have been to basically divide and rule. I mean, this is it, we’re no longer dividing, and you now got peace, which the world is moving away from us, Adam, it really is. And, you know, I think this this this war, I think it is extremely serious. And I just cannot see how the two parties can back down and I just can’t see how the two parties can say, just sort of draw some sort of imaginary line and say, right, you know, okay, we’ll just sort of stay here. Right. That’s not

Adam Taggart 16:18
optional. To your point. It seems like what needs to end it as a negotiated settlement. But it seems like that’s the unacceptable outcome. It is right now.

Alasdair MacLeod 16:29
Yeah, it was tried, it was actually tried by Putin. The Turks tried to try to broker this. But the Americans turned around and the British turned around said no, because it did not suit them. They want to dismember Russia, they want Putin out. And their policy basically is running into the long grass, it’s all quick sounds, you’d like to call it. This is, this is an extremely serious situation. And I think everybody should be very aware of how serious this is, and how difficult it is for either party to back down from this.

Adam Taggart 17:04
Okay. And just to underscore, your main point about this is this is a source of uncertainty and instability, that if that could spiral in a bad way here, and if it does, that’ll just exacerbate everything that you’ve been talking about in the past hour here, because we’re at the end of the hour here. Alistair, I hate to start landing this, I have to start landing this plane. And I hate to say that, because I know there are many folks here that would love for us to go for another hour. So let me wrap up by asking you this question. What, Where do you see the biggest? So we talked about a lot of concerns and risks, and and I’m not trying to sugarcoat any of that. And you’ve given folks some some prudent steps to take, right, from an opportunity standpoint, provided that hopefully the world keeps working from here, where do you see the biggest opportunity for investors right now?

Alasdair MacLeod 17:59
Well, apart from just getting the hell out of credit, which I think is my number one thing and you know, you buy gold, not to not to sell it, you buy gold, basically, eventually you will spend it, or when things come down and credit gets tied back to gold, then you can start deploying your your wealth resources. I’ve been actually very impressed with the quality of mineral exploration companies, and particularly gold and silver companies. And the reason I say this is that over many, many years, as a broker, I have seen these come and go, I have seen the money wasted, on sort of PR and all the rest of it. I mean, I used to go for lunches, and the Savoy and all the rest of it, it cost these guys fortunately, didn’t really have the money to do it. And, but that’s all changed, actually. I think these companies are now they’re managing their cash flows very, very effectively. And the whole sector has been completely ignored. I mean, it really is. So I would think, and this is something which, you know, Rick Rule, I think, would probably agree with me. You know, it’s, it’s an area where, you know, a little bit of expertise and understanding the management, understanding that really what you’re doing is you’re it’s a good play on the decline of paper currencies. This you know, that could be a you know, pretty good way of playing it.

Adam Taggart 19:31
And so sorry to interrupt but just just for non UK viewers, when you say gearing, that’s basically say it leverage leverage. It’s like a leveraged way using Gary. Chet is using leverage. Yes. Yeah, exactly. Exactly. I meant to make you mentioned hearing about a half hour ago and I meant to make that comment. I didn’t so sorry, I just said to interject with it.

Alasdair MacLeod 19:51
Well, it’s nice to have an American who speaks both American and English.

Adam Taggart 19:57
Alright, so I think you would you I’d say then this may be a good time to gain exposure to the the mining space, particularly the precious metals mining space. And you can do that the risk return of the best risk return way to do that is just to own the index, right. And what I hear you saying is, is the risk return of the index has gotten better now, because the companies aren’t as poorly managed as they were. So if you just want to capture the data of this space, which still could be pretty prodigious, you just buy an index like GDX, and you just hold and write it. But to your point that that ngrick would add on to that, which is, because there are a lot of better run companies, now you can kind of build your own portfolio of them, and capture a lot more the alpha because the index has all the good and all the bad companies in there. So if you feel like you can gain an advantage by creating a portfolio of hopefully the best of the best, you could really have some pretty serious alpha if things go this way.

Alasdair MacLeod 20:58
Absolutely. I mean, I think I have a problem with investing in indices, because what you’re doing is you’re, you’re usually buying a fund, which gains its performance through derivatives. I mean, there’s some funds, which actually do invest in the underlying stocks. Yeah. But I have a problem with derivatives in the world that I see if we have banking problems, we’ve got counterparty risk entering the derivative market, and there’s no no way of knowing where that’s going to stop blowing up. You know, it’s a huge, huge thing. So I would actually own shares in individual mines selected on the basis of your skill as an investor determining the prospects for that particular miner.

Adam Taggart 21:44
Okay, and as I’ve said many times on this program, if you’re new to this space, it is highly volatile. It takes a good while to become a informed and knowledgeable enough investor to do really quality picking here. And so until you reach that status, I highly recommend you place your focus on selecting the best expert to follow and there are many VoiceBase we just mentioned, Rick Rule is one of them. But there are plenty others, who, you know, they’ve been investing in this space for decades. They know the companies very well, they know the names really well, which is probably the most important factor and play. They read the mining results, they have the expertise to understand the geology. So you know, as an early investor, you try to pick somebody good to watch over their shoulder and trade over their shoulder width. You’re nodding as I’m saying all this?

Alasdair MacLeod 22:31
Yeah, absolutely. Now, that’s absolutely right. And, yeah, I mean, other than that, an interesting one, I think in this country is I feel that farmland is very underpriced. I mean, back in the 70s, I was looking at putting together a mutual fund as it were, of farmland for pension funds, and similar institutions, long term investors and the prices of farmland, so really top notch farmland, we’re looking at about two and a half 1000 pounds an acre in those days. Now, that’s what it’s about 10 to 12,000 pounds an acre, sort of thing. I mean, this is that has not kept up pace with the depreciation of, of the currency. So there are I think there are things out there, if you look for them, such as that. And of course, the advantage of farmland is that food producing at the moment is energy producing with windmills and solar panels and all the rest of it. But you know, at least you’re producing something which is extremely basic to human life. And in a real crisis. That could be important.

Adam Taggart 23:42
Okay, great farmland. It’s really interesting. It’s a, it’s, it’s a challenging asset class for the average investor to get access to, I’ve had a couple of farmland experts on this channel continue to have some in the future. One of which, in full disclosure, I’ve been an investor in previous funds from this company. Their model is purchasing really high quality farmland, with great senior water rights, which is really important, especially here in the States, where we have huge droughts and large parts of the country. And their model is then converting that conventional farmland over time to organic status. So you basically have to be willing to have a lower return in the first couple of years as they’re, they’re bringing this they’re converting this fields over, but to the differential, as you were making x percent at a conventional price, you’re now making some multiple of x at the organic price, and there’s so much demand for organic food in the world. It is dwarfing the amount of acreage that that actually can use or get accept. So anyways, for folks, if you’d be interested in learning more about the latest fund that’s coming out from that company? Let me know in the comment section below. If so, I will look into trying to bring them on this program in whatever SEC compliant way we can do that. And you have to be careful with some of these these these private deals. All right. You’re not exempt saying all this, but but again, that that sounds like an asset class that that. I know, it’s a great interest to our audience, but it sounds like you think it’s time a really still be here?

Alasdair MacLeod 25:19
Yeah, I wasn’t sort of talking so much about investing in farmland, if you’d like in a passive sense, I’m just sort of looking at, you know, the potential asset value of farmland. And I think that, I mean, what we’re doing in this country is that successful farmers are going is becoming vertically integrated. In other words, you know, they have farm shops and things like that. So they’re selling to the public at retail prices,

Adam Taggart 25:44
which otherwise they’re building their own retail distribution.

Alasdair MacLeod 25:47
Yeah, yeah. And some of them are doing it incredibly well. I mean, they really are, I mean, we’ve got a couple down here, which have sort of, you know, right at the top of the list in terms of quality, and all the rest of it, and they’re pleasant places to go to.

Adam Taggart 26:02
Well, I’m glad to hear that. It’s such an interesting time in foreign land investing. And I’ll be quick on here, because this wasn’t the focus of this video. But um, a lot of the folks that I know live in there, once they look at it, on one hand, it there’s a real challenge facing the future of farming, where I think the last time I heard this stat, it was like the at the age of the average farmer in the US is like, 67. Yeah, so they’re really aging out, their children aren’t going into the field. And so we’re kind of losing the expertise of the space. At the same time, the technology revolution, apparently, sort of, you know, took its time to get into like the digital technology revolution took its time to get into the agricultural space, but it’s now their big time. And so there’s all sorts of advantage advances in you know, remote sensing, so you can, you can look at it your your fields now from the satellite, and basically determine where water needs to go. And you know, what minerals are, are in short supply, there’s, there’s smart watering systems that can determine when the plants need to be fed, or watered, but But at what depth that water needs to be controlled. So you can save on water costs, but also optimize what the plant needs. There’s, you know, robotics that are coming that are that are making harvesting a lot more cost effective. In fact, crops that they never thought could ever be harvested by something other than human because they’re so delicate, like strawberries being a great example. They’re now actually our solutions that go out there and can actually pick fruit that delicate. So it’s a really interesting, transformative time in the space. And of course, when you’re talking about kind of investing low in Maslow’s hierarchy of needs, which I started get the sense you think is important for the type of future you see coming here. You know, investing in food production is about as low as you can get on that.

Alasdair MacLeod 27:54
D. That’s one way of putting it. All right. Well, like

Adam Taggart 27:57
Alistair is always this has been a fantastic conversation. For folks that want to follow you in your work in between your next appearance on this channel. Where should they go?

Alasdair MacLeod 28:07
Well, gold Hit the research tab. And I publish an article every Thursday, which I think comes out sort of late morning, your time, early afternoon, maybe when I say your time, I mean ESP sorry, rather than Pacific. And I do a market report covering precious metals, trying to put a slightly different spin on it from you know, the normal sort of reports that you get, and that comes out on Friday at about the same time. So there’s the two times to look at.

Adam Taggart 28:41
All right, great. And now sure when we edit this, as always, we will put up the link there to gold So folks know exactly where to go. Your publications are always essential reads in my book, and folks highly recommend you go check out gold money if you’re not already familiar with Alistair in his work. Alright, Alistair, this has just been wonderful. Thanks so much, my friend look forward to having you back on the program again, especially after that key meeting that’s coming up in August.

Alasdair MacLeod 29:06
That ready is very much my pleasure. Thank you for having me, Adam.

Adam Taggart 29:11
All right. Well, now’s the time where the channel where we bring in the lead partners from new harbor financial one of the endorsed financial advisory firms by Wealthion. To comment on their key takeaways from the discussion we just had with Alistair as well as dive into what the markets been up to over the past week. And some interesting things have been happening. I’m joined as usual by John loader and Mike Preston Mikey went first last week. So John, why don’t we start with you? What were some of your key takeaways from the discussion with Allister?

John Llodra 29:38
Hi, Adam, great to be with you again. And Thanks all for tuning in here really enjoyed Alistair’s conversation. You know, the last several weeks, much of what we’ve talked about has been the amazing jaw dropping strength in the tech stocks and the AI, memes and things like that. And Alistair I think brought us back to a real I think proper context of have a big picture here. And he framed the broad economy and markets right now as as kind of a bifurcation along the lines of the West. We here in the Western developed countries and Japan, and the BRIC countries, including Russia, China and emerging Asia. And the real thing he pointed out was the underpinnings of a likely debt crisis, a credit crisis here in the developed economy. And absolutely, we have seen a ton of credit expansion in the wake of the great financial crisis. And here we are at a juncture where that massive increase in debt is running headlong into a very, very sharp and steep rise in interest rates, not on the short notice on the short term. But we’re starting to see some breakouts in longer term interest rates that are beginning to look a little concerning and these had the telegraph of, you know, inflation being a bit more entrenched and central banks, especially federal Federal Reserve needing to be a bit more hawkish than the market has, for a long time, believe them to have the spine to be Alistair talked about. Central banks have gone to the playbook time and time again, which has massively increased their liabilities on their balance sheet to the point where most central banks are effectively insolvent. In fact, I’d like to pull up a chart here that are one of our most admired analysts that we talked about all time, John Hussman just put out today, and I’m just showing this up here on the screen here. This is basically his his estimate of the insolvency, if you will, of the Federal Reserve. Now it’s technically not insolvent. And hopefully, that’s now now risen, but you can see here over time, this is basically a chart that shows the the net value above cost of the federal reserve asset holdings, which are largely treasury bonds and mortgage backed securities and things like that. The whole thing of the last decade is basically the Federal Reserve has printed money out of thin air, basically bought off from the market, these treasury bonds and and, and mortgage bonds. Now, that’s all well and good until like any bond holder a rise in interest rates is the death knell causes the value of those bonds to plummet. And this is what you see here. Basically, the, you know, after accounting for interest permitted by the Fed to the Treasury, which is really what they’re supposed to be doing, they have net insolvency here estimated about 250 billion or so a big number, maybe not so big for the Federal Reserve. But the bottom line is, technically the Fed isn’t insolvent, because they can just defer paying interest on those on those holdings to the Treasury until they dig out of this hole. So So basically, this is a big bank rolling by the the taxpaying public of these paper losses on the Fed’s balance sheet. And, you know, unless we get a dramatic drop in interest rates or whatnot, this is, this seems like an intractable situation. You know, I have some other charts that we can talk about that, that look into the market impacts of, of interest rates and some of the moves there, but we’ll, we’ll hold that for later. But that’s the big takeaway. You know, we’re, we’re super obsessed with the strength in the market since October, especially in a very narrow segment, the Texas Tech stocks. But behind this, this backdrop is this really concerning problem that that ultimately has to tie the hands of central banks in terms of how much more of the stimulus they can do in the wake of a crisis that unfolds. So let’s

Adam Taggart 33:48
keep this chart up just for a sec here, John. So this is super interesting to me. Because it shows that the Fed is a unique actor, right? It can print up currency to buy assets, right. And that’s largely what it’s done through almost the entirety of this chart series here, right. So in many ways the Fed can directly influence the price of its balance sheet, right? Because if it if it if it buys assets, that, you know, by certain assets of which it is accumulated on its balance sheet, the price of those assets rise, if it’s out in the market, aggressively buying bonds, it’s raising the price of bonds and all the bonds that are on its balance sheet go up in value, right. So it’s really interesting here the Fed has a an unfair advantage in terms of influencing its its balance sheet, market value. What’s also demonstrated by this chart, I believe, is the importance of assets being priced at the margin, which we talked about a lot in this program. All right. And so the Fed in many cases had been the marginal buyer, right? It had been the one willing to step in and pay top dollar for a lot of assets, bonds and mortgage backed securities being two really big ones, treasury bonds and mortgage backed securities. And you can see here when it stopped, right, all of a sudden, the value of those markets, the value of those assets just plummeted. Right. And it’s because the next marginal buyer was only willing to buy at a substantially lower price than a price insensitive fed here. Right. And, you know, to your point there jump with the Fed is sort of boxed in by inflation. And it can’t really step up right now and continue to buy assets because it’s trying to tame inflation. It shows you how extremely quickly the situation can change, right where it was flushed to the tune of billions, just two plus years ago. And now it’s in negative equity value territory.

John Llodra 35:51
Yeah, absolutely. And probably not coincidental that Janet Yellen, Treasury secretary’s over in China right now on a trip of probably some Trump’s attempt at Goodwill, you know, at least a pleased by our treasuries door, exactly. I mean, we have relied on on international governments to finance our binge on debt here. And that that bridge is getting very tenuous. And so yeah, we’re an interesting, interesting inflection point here. And this is the kind of stuff that plays out over many years, if not decades. But nonetheless, you got to be aware of, you know, how drastically the landscape has changed just in the last decade.

Adam Taggart 36:30
Well, what I want to talk about a bit in today’s program, and Mike, I’m gonna come to you in a second, but just to give a preview, really is the lag effect. Because that I think, is at the core of what Alistair and I were talking about in the interview, which is that the impact of a lag effect is finally really starting to be felt. Alistair gave a number of examples of that, but we were talking, we talked a bit about the mortgage market over in the UK, because it’s, it resets much faster than the mortgage market here in the US. And they’re already seeing, you know, severe constraining of consumer household spending for those houses whose mortgages are rewriting to today’s new mortgage prices. Same thing with with some of the levers are geared companies there that Alistair was talking about. So point point being is is, you know, that’s going to increasingly affect people’s ability to buy financial assets. And we saw some data coming out today that maybe we’ll talk about in a little bit. But, you know, super strong jobs, ADP jobs report, you know, some additional continuing claims data that show a slight decrease in continuing claims. So basically, you know, very strong jobs market. Yeah, just showing the Fed that the Fed still has a lot more room to go on tightening, and also, you know, some some additional inflation data that’s showing that inflation is, you know, obviously, still sticky. And as we’ve talked about recently, on this program, just from basic facts alone, it might start where it looks like it’s going to start rising again, starting in July, at least for a couple of months. So, you know, all these things show that the Fed just does not have the wiggle room to even consider pivoting or reversing policy yet. So that that negative equity chart that you just put up there, John, you know, seems odds are pretty high that it’s going to continue decreasing for the foreseeable future. All right, Mike, heading over to you. What would you add to John’s takeaways from the conversation with Alistair?

Mike Preston 38:33
Yeah, Alex just talked a lot about the fact that we’re on the verge of a credit crisis. I think he’s probably right. You know, that chart that John just showed, shows the power of monetary magic that we’ve been living through. And you’re right, it’s the Fed has had great power to influence asset prices, stock market, bond market, real estate market, but not forever. We came to believe it was forever. And I think we’re gonna find out that it wasn’t Alistair talks about the fact that we’re likely on the verge of a credit crisis. And our only real hope at this point, is to hope that interest rates come back down. But we don’t think the Fed really has the power to do that. And it’s not just the Fed, it’s everywhere else in the world. Alistair talked about the guilt, the 10 year gilt hitting four and a half percent causing pressure over there. It’s everywhere around the world inflation is setting in and interest rates are going up. And so it’s very unlikely that we’re going to see significantly lower rates real soon, although I do think rates are likely to go down eventually, probably after a stock market drop or collapse and a follow on reversal to QE but I don’t think that happens after a very large market event. At that point, we probably see rates come back down but the credit crisis is likely baked in the cake. And that’s what Alistair said and we agree with him. He talked about some other things as well. He says that the the entire equity markets been very distorted by the fangs. We all know that if you look at the Russell 2000, or the Dow, they’re barely up on the year, they’re essentially flat, they’re up a couple percent. The NASDAQ is way up led by these stocks, essentially, the speculative names are leading this, this rally. And by the way, we’re still below the January 4 2022 peak in the s&p by about a percent or so. So we haven’t taken out the high but there’s this belief that everything’s returning to normal. You know, it’s the FOMO was back we’re seeing in the people we’re talking to. And the s&p is up maybe 15%. Year to date, the NASDAQ’s up 35% or so. But it’s the speculative names leading this leading the rally. And so we’ve we have postponed the inevitable for far longer than I think I would have ever imagined. And you talk about the lag effect, interest rates started going up 16 months ago, normally there’s a 12 to 14 month lag, here we are 16 months later. And still the markets are hanging out near the highs what’s going on. It’s this general belief that we’re headed back to the new normal, there is that pervasive belief, this feeling. And we can tell because we’re really close to when we’re talking to people all day long. Aleister talked about a big issue that probably is not on a lot of people’s radar. And that’s the meeting on, I believe, August 24. In South Africa, the leaders of the BRICS nations are meeting to talk about a payment system, a payment system that I believe was originally thought to be backed by a commodity basket. But commodity baskets are very hard to to manage, they’re not fungible, I think it’d be the right word, and that they’re different. You know, there’s lots of different types of crude for instance, many different types of crude oil of varying quality and value, and even different types of agricultural commodities. So the speculation is that gold will be introduced back this. And so the BRICS nations, I think, are are going to be moving in this direction. It seems like Aleister believes that might be the case is likely because of the weaponized weaponization of the dollar and the sanctions that we have been put in place over the last bunch of years. And Allister points out that the BRICS nations account for about 64% I think he might have said BRICS plus China, but 64% of the people in the world, which I actually didn’t know, I thought was pretty shocking. But this movement, particularly if there’s a vote to implement this type of strategy, backed by gold, could be very positive, positive for gold. And, as I think John pointed out, DC, major changes that we’ve been all talking about, for years, take a long time, you know, it’s like very, very slowly, then all at once, perhaps, I think we have to be careful about that. Because things can happen quickly, if this new currency or this new payment system, it’s not a currency, they’re not going to print notes and such comes comes to bear, then it’s going to be an issue, they’re going to need a bond market to back that the real, the real hard thing about replacing the dollar dollar is that there’s a huge amount of US dollar debt out there. And it’s all used as collateral, and is used as a means of making payment and clearing payments, you can’t introduce a new currency without a bond market. So the speculation is that, you know, the BRICS groups would issue some kind of sovereign bonds that would, you know, cause this payment system to work. Who knows? It’s, there’s a lot of question marks here still, but it’s a big risk. And I think Alistair rightly pointed out, and I’m glad he did, because it caused me to look at it a little bit more closely. So essentially, just to wrap up my thoughts here, you know, his takeaways are his key points, what to do? Well get out of the credit markets, it’s not easy. But he’s saying get out of the credit markets, or at least reduce your risk to credit markets, by gold. By real honest money is his recommendation. I think he said up to 20% or so. That’s roughly what we recommend five to 10% of your investable assets. Many people that we know are up to 20%. And we think that’s okay. Gold is still outperforming the s&p since the year 2000. So I think that’s very good advice. And, you know, put your faith in something other than fiat currency because fiat currency is likely to be disappointing stock markets are likely likely to be disappointing. If we are actually going into a credit crunch. Then some of these charts that we’ve been sharing every week about valuations are really going to start to matter. You were trading at probably three times a level where the s&p should be trading at at fair value. When I say fair value, I mean levels that you would have to see, to expect eight to 10% returns on your money over the next decade, we’d have to be somewhere around 1800 or so on the s&p and it’s currently at around 4450 And lastly, maybe a little later, we’ll share some charts. The s&p And we’re talking here on Thursday, July 6, may very well be putting in an Ireland formation today that the markets down, we’ll see where it closes. But if we close below 4390, it’s a 4403 As I speak, then we will have a completed Island formation, which is a bearish sign, nothing is guaranteed, but there’s starting to be cracks. And along with all the FOMO that we’ve been witnessing, it’s something to really be cautious about.

Adam Taggart 45:32
All right, well, good summary. And, you know, Aleister Yan raises the concern of a breakdown in the credit system. That is, and I’ve had a number of guests on this program recently, where I’ve said, hey, you know, optimism seems to be growing again, we’re getting talks about a soft landing, or perhaps a no landing at all that we avoid recession entirely. And, you know, I’ve asked, okay, so what, what is the likeliest of triggers that would disprove that and, you know, cause a correction that that now the bulls are not thinking it’s possible. And the pretty much universal answer I get is, it’s going to be something in the credit markets, that folks aren’t imagining right now. And what’s interesting is, is in a relatively short period of time, you know, all of a sudden, we’ve started to hear people really getting worried about the credit markets, I would say, Allister is still an outlier. I don’t think folks, the average Wall Street analyst is looking at it with a concern that he is. But you mentioned the guilt rate, Mike, at the moment, here we’re talking, the US Treasury tenure has jumped back above 4%. Yield, it’s actually gone from like, 3.6. To above, for in the span of a couple of days here. It’s been very quick. So all of a sudden interest rates are really seriously on the rise. And that is, you know, when I talked about the lag effect, rising yields just places more and more downward pull of gravitational effect on asset prices, on economic growth, it contracts, the opportunities that are available to companies to borrow and create value. So, you know, maybe this is just a little rough patch we gotta get through. But like I said earlier, you know, we know from the math of the basic facts, that inflation is likely to not come down and probably rise at least as measured by CPI, as we get into July, August, etc. And if so, that’s just going to place more, you know, optical pressure on the Fed, especially if the jobs market continues to be as hot as it is, I’m gonna, like I said, I think that the ADP report came in today, I think over 400,000 jobs created last month. So it’s that it’s still a super hot jobs market, which is exactly what the Feds been trying to cool here. So my point here is that, like the Fed is who’s already told us Look, guys, we aren’t done, we’re probably gonna hike a few more times, they may have to even get more aggressive than that, given the way things are looking here. And of course, that again, just adds to the downward gravitational pull of all these lag effects. So John, coming back to you here, how concerned you are about this. I mean, the fact that yields are marching back up again. Is that something that brings us closer to sort of some, some breaking point where, you know, I just talked to David Traynor earlier this week, we were talking about the zombie companies, you know, the higher those yields go, the the harder it is for overleveraged companies to survive here.

John Llodra 48:37
absolutely adamant. And we’re going to keep banging, banging down the concept of this lag effect, these things take time to work through the system. It’s not a problem until that needs to be rolled or refinanced or repaid. That’s when the problem emerges. So all well and good if you hold if you’re a borrower at a lower than market rates, but as soon as you got to tap markets to refinance that debt or roll it and you don’t have the liquidity to pay it down, that’s where the impact really starts to come. I found it really interesting that Alistair gave an example of Thames Water Company and the UK the stodgy old water utility and the cashflow problems that have emerged there. I’m not particularly intimately close with that company, but I’ll take his word for it. in no small part because of the private equity ownership that took over the business loaded up with debt and even a boring stable asset can become a toxic asset, if it’s over levered and, and can’t service the debt under a much higher interest rate regime. I have a couple of charts I’d like to share just to kind of show you what we’re talking about here. So let’s you reference the US Treasuries starting to break out. This is a chart that looks at both 10 year and a 30 year treasury bond yields and as should be loading here. So hopefully you can see that the top top pane is the 10 year yield, this goes back to late 2020, I guess. So what you have here you had a peak in in 10 year yields of about 4.3. Back in October of last year, and they’ve kind of steadily declined a bit. But they have just broken out of this, this triangle, ascending triangle here, as of this morning, I think they’re off this a little bit, but they were about four point 4.05. This morning, I think they gyrate a little bit but they broke above 4%, which is a notable breakout. Now there is a you know, support shelf, right, a resistance ceiling right around here. So you know if we can punch through that, that that would be more concerning this, this may just be a temporary poke up. But also the 30 year has has poked up just under 4%. These are notable moves and the from a purely chart standpoint, and and you look at the the economic backdrop, it would seem that the path of least resistance is for high like higher yields. And this is important because we’ve talked about the higher yields on the short end of the curve. And now we’re starting to see the longer and start to pick up. And it’s probably no coincidence, it is no coincidence that when yields peaked on the 30 and 10 year didn’t drop down back in October, that’s when this recent bear market rally that we would describe the market up move since October has happened. So declining interest rates certainly have been helpful to the equities and and this could be another headwind into the equity markets. We’ve taken some effort steps to hedge that even modest longer term, bond exposure our clients have. But we’d certainly be cautious about adding to longer term bond exposure right here, just given the yield yield pressures. did want to talk about a chart here that that kind of gets to the lag. And this is basically a chart that overlays. Last week, when we talked to the atom, we shared a chart that that spoke to the tightening of credit being extended by banks to commercial industrial borrowers, you know, lenders are becoming much more stingy. Okay, much more concerned about credit quality. And this is another chart that looks at the blue line, and basically shows the expected credit conditions and loan availability by the National Federation of Independent Businesses. Now, this is importantly a six month lead. So this is, you know, basically, the employment impact as measured by the yellow is lag by six months. And basically what this says is, this yellow indicator is the what’s called the labor differential it, it measures the difference in the perception of the plentiful newness of new jobs versus those that view view new jobs as scarce. So there’s been a tight correlation over history of these two numbers. So if that were to continue to hold, you know, we should expect to see a deterioration in the expectations anyways, job availability. And that’s why you can still see a very strong employment report like we saw today, and still be on the verge of something very dramatically slowing down in the employment market, because it is a lagging indicator. And I just didn’t want to give a final nod to the to the private equity situation, this is a chart came across the Burgess Group put it together, it basically looks globally at the net cash flows, if you will, to investors and private equity. Basically, it measures the difference between capital calls where private equity sponsors basically make calls to their their limited partners to fund more capital injections to you know, basically fund the operating portfolios of the of the private equity groups, less than distributions paid off. And you can see there’s been a dramatic net call for capital rather than distributions out. This is a very broad brush, there are certainly nuances and stratifications in the private equity market, some of the smaller end of the private epic market actually does true, you know, truly adds value in terms of implementing, you know, management systems and sophistication at that level. By and large and get to the bigger private equity. It’s more about financial engineering and loading up on on on leverage. So, you know, just another canary in the coal mine, I guess, you might say in terms of tightening credit and concerns about how that might might flow over to the corporate America and help thereof. One final thing I want to make, Alastair, and we’ve often talked about how gold mining companies are a levered way to play the price of metal that sells itself, I want to be very clear that when we talk about leverage in that context, it’s not financial leverage in terms of, you know, loading up on debt, what we’re talking about there is operating leverage, which is a very, you know, accounting 101 concept and when you have a company that has, you know, fixed costs, and if they can increase their revenue, that revenue can you know, do proportionately float to the bottom line profits. That’s what we call high operating leverage, it’s actually a very healthy thing. And, you know, generally speaking, the miners have that where if simply a, an increase in the price of the commodity price can have a magnified effect on the profitability the bottom line. So just want to be very, very clear what we mean there by leverage when we talk about gold mining companies, not financial leverage that can can blow up in the context of rising interest rates, but operating leverage.

Adam Taggart 55:28
That’s a great point. And just to maybe help folks understand that a little bit better. So price of gold is around 1900 bucks an ounce right now, right? It’s a little bit higher than that, but it’s around there. Let’s say a miner is making $100 in profit when gold is making $100 an ounce, right? So if the price of gold goes up by another $100, so it goes from $1,900 to $2,000. an ounce, right? What that’s like a 6% increase in the price of gold. Well, all of a sudden, that miner, if its costs, indeed remain the same, is now making $200 of profit, off the gold per ounce of gold, it pulls out of the ground, so its profit has actually increased by 100%. It’s doubled. Right? So a 6% increase in the price of gold leads to a 100% increase in the profits of the company. That’s the type of operating leverage. We’re talking about. John? Yes, yeah,

John Llodra 56:21
certainly, there are some variable costs in these operations. But you know, when you talk about the fixed cost, the insurance, you know, the the plant and equipment maintenance, there’s a there’s a very large fixed cost component that doesn’t change as a result of production and higher prices.

Adam Taggart 56:39
Yep. Okay, great. So there’s two set of risks that we’re talking about here, too, right? There’s, there’s the risks of that, that increased gravitational pull that contraction, that higher yields create through the economy, right. And that that leads to lower demand that leads forces companies to lay off, zombie companies might die, right. So that’s, that’s the issue that’s created by just high rising yields, which we’re now seeing they’re back on the rise. But then there’s the issue of counterparty risk, right, which came up briefly, right, which is, when you get to a credit crisis, you get to the point where all of a sudden, banks just don’t want to lend to anybody at the moment because they don’t know where the risk lies, right? That’s one of the reasons why Alistair is so big on hard assets, particularly sound money, like like gold, is it doesn’t have any counter party risk. Right. So that’s one of the reasons why he’s sort of encouraging people to get out of the credit markets and whatnot right now is I sort of took that as just, Hey, do whatever you can to reduce your counterparty risk right now, because we don’t know where this could potentially go. So just wanted to separate that for folks that they sort of understand the different types of risks that are swirling out here. All right, well, look, gents we are we’re beginning to get to the end of our time here. Mike, as you look, kind of what’s happening this week, going into, you know, the summer from here, you combine that with what folks are, you know, interested in talking to most when they pick up the phone and call you guys, what’s kind of your general advice to people right now, given the current market environment, which is kind of a weird environment, right. But the, the top line narrative is still the twinning out still is, hey, everything’s great. And you know, indices are shooting the moon again. And we might not even have a recession, and inflation is going away. You know, we just peered under the hood today and kind of poke holes in a lot of that stuff. But it’s a really weird time. Because if you listen to the headlines, things sound great. But if you look at the data, things look increasingly scary. So what’s your advice to people when they call you up and say, Hey, what should I do with my capital?

Mike Preston 58:50
It’s a hard time, Adam, to be sure, you know, this is all psychological, so much of it, we look at data, as much as we can try to, you know, try to understand it in a black and white terms. But it’s really been very difficult in recent years, because what the Federal Reserve has done, and it was followed by other central banks, by creating this mountain of printed money, it’s created a lot of psychological stress for people, because you don’t know what’s real and what isn’t. And you can create a simulation for many years, actually, you can create a permanently high plateau, or at least the you know, the the the appearance of it. But ultimately, everything reverts and this will revert to, and we’re starting to see cracks in the system. And it’s always at the very worst times that people feel the psychological pressure to do something. We’re feeling it and we’re seeing it now we’re seeing that people are feeling it. It’s been a it’s been a long time and this this last kind of gasp blow off top after the COVID crisis is has been really terrible on people. You know, they’ve, I think psychologically people have been whipped in every every direction. Even they don’t know what to think. And they don’t really think it’s ever gonna matter. And that the only thing that matters is the Fed. We know that’s not true valuations matter long term, there’s been other instances where fed, the Federal Reserve has been easing and the market collapses anyway, they probably the scariest thing is exactly that the market corrects, ultimately the Fed reacts and the market corrects more anyway. And there’s this whole realization that maybe this wasn’t very real, this this whole thing that we’ve been living through the last 15 years. So one thing I liked that Alistair said at the end of the interview is, you know, what’s the upshot of what is the upside and all of this, you know, we often come off as being Doomers, because of what we think are really, very real facts that are going to make it very difficult as we go forward in the next five years, I happen to think we are in a fourth turning and happen to be in the final five years of a fourth turning. And as Neil Howe portrays it in his book and his new book, that’s coming out very soon, it’s going to be a climactic time, a time of great effort. And a lot of things are going to happen. The upshot to all of this is, as Alistair said, the system is rotten. I hate to say it, but I think I think that’s what I think those were his exact words is the system is rotten, something needs to happen to revamp the system. And because people will have a difficult time progressing themselves, which is exactly what they want to do. They want to get educated, they want to buy houses they want to save for the future, they want a sound money system that they know is going to be there for them in the future. So you know, that’s the positive all of this is that we don’t have markets that are free, that require a permanently high plateau just to continue functioning properly. You know, I think that a big part of our job and has been for at least lately and has been for a long time is to connect with people help them with their psychology, help them remain steadfast and reducing risk. And holding precious metal. We’re only currently at maybe 15%. Net equity, if you include mining stocks, and only about 5% If you don’t, and we still hold a fair amount of cash that we’re that we’re wanting to layer into the market, better levels, we have a plan for that, and ways to hedge, we don’t think we’ll be perfect, but we’re going to try really hard to do our best and not take on water on the downside. On the other side, you know, there’s all this talk about another melt up and all kinds of things like that, I don’t think that’s going to happen. It’s possible we have some plans to try to participate some if that happens. But our real concern is on an elevator drop the trapdoor opening here and you know, we’ll see if you look at investors, advisors, bullish sentiment, it’s, it’s back at levels that are higher than the previous high back in December of 20, January 21. So those numbers are higher. I know they’re contrarian indicators, but they’re higher. So it’s

Adam Taggart 1:03:02
just amazing to me how fast we can slingshot back to, you know, extreme confidence and or some would say greed. But you know, from panic, during the last year to now all of a sudden, we’re more optimistic than we’ve ever been.

Mike Preston 1:03:17
It’s crazy. So greed is back, you know, all within a span of less than two years, the speculative names are leaving the market, there is an alternative interest rates above 5%. Just be safe. You know, we’re here to talk, if anyone wants to talk. And a big part of what we do is psychology. And frankly, that’s really what the Fed was achieving all of these years is psychological pressure. And it’s not right. It’s not a great system. And frankly, I think there would be better times ahead. Once this is all sorted out, maybe a little bit of pain in the meantime, but ultimately, I think that would be good and a freer place.

Adam Taggart 1:03:53
All right, well, great answer. John, I’m gonna let you wrap things up here. I do just want to note on Mike’s part, you know, there’s this prevailing sentiment now, that’s really kind of come from at a left field, given how nervous everybody was at the beginning of the year, that, hey, you know, the storm the storm has passed, we’re gonna get right back to where we were before. And, you know, the words it’s different this time are always dangerous to utter. But I think if you want to jump back on the bandwagon of the bull market is back here. And the future is going to look an awful lot like, you know, 2010 through 2021. You have to have a good answer to the following. What is different this time is inflation, right? The feds policies, combined with the fiscal policy, the massive fiscal policy that came after the COVID pandemic, you know, resulted finally in the inflation Genie getting out of the bottle, right. And the Fed has to get that under control. Right. And it’s been super clear in saying that that’s when it’s going to do. Now, the impact of the Feds efforts is resulting in this higher cost of capital that we’ve been talking about here. Right. And we’ve been warning folks about the lag effects and talking about the gravitational pull of these these higher yields. So you have to take into account, okay, how is the economy going to do well enough to really power asset prices higher in an environment where economic growth is going to get harder and harder, as long as cost of capital remains this high, or goes higher? At the same time, you have to combine it with what Mike mentioned earlier, which is, look, if you are uncomfortable with where things were at the end of 2021, and wanted to play it safe, you didn’t really have a lot of good options, right? Because bonds, you know, quote, unquote, safe bonds weren’t yielding anything back then, you know, especially short term US Treasuries and whatnot. Well, that’s totally different. Now, that game is totally different. As Mike said, we went from Tina, you know, there is no alternative now to Tara, there are reasonable alternatives out there. If you’re nervous at all, you can go get well above 5%, now parked in the safest of safe vehicles. Right. So that’s going to be pulling money out of you know, the hot stocks and stuff like that is if more and more people, you know, just begin to look at that and say, you know, what, on a risk return basis, that’s a great game, right? So, again, I’ll let you have the last word here. But I did just really under one score for folks that like Mike said, nobody knows what’s going to happen, we could have a massive melt up, there’s a few people out there that are betting on that, we have to be somewhat cognizant that that could happen. But if you’re really thinking, we’re just going to be back to just powering again year over year, like we did for the decade leading up to 2021, you really have to address those issues that I talked about, because I talked to a lot of people on this program. I gotta say, just for me, personally, I haven’t found a good explanation that that lets me dismiss those risks enough to say, oh, yeah, there’s a there’s a brand new day ahead of us that, you know, should be all about being all in the markets and being comfortable with, with high speculation. Yeah, Adam,

John Llodra 1:07:03
the Tina is, is the key, there is an alternative. And let me give you just a really simple example of this. Back when short term interest rates were zero, and everybody and their brother and mother and sister and father, were chasing any bit of yield to have to run away from the pain of getting 0% on money at the bank. The yields on junk bonds, corporate bonds issued by non investment grade companies cut below 5%. So you had these zombie companies that your other guest talked about being able to borrow money at less than what what treasury bills are paying right now. And this allowed these companies to stay in business pay salaries, you know, invest in, in new stuff, whether or not it’s going to turn a profit or not. So that is a key difference. You know, we can talk about liquidity this or that. But the real important point is what the liquidity is doing. in its in its in its in its pure form, that liquidity today in the form of base reserves and cash is earning something really quite compelling compared to the alternatives. That was not the case over the last decade. And that has dramatic ramifications, not only investor behavior, but in the basic financial operating system of of corporate America, again, junk bonds were yield that were being elite be issued for less than 5%. Without the normal investor protections for the so called covenant light loans. That is totally different. Now we’re seeing banks start to to get much more stingy on extending credit. And obviously, the rates for that credit are much higher. It’s painful to be patient and watch this play out through the system. But that’s the way it works. And, you know, we’re intent on keeping our eyes on the on the plumbing of the system, even if the short term market behavior seems to want to ignore

Adam Taggart 1:09:00
it. All right, well, look, we’re gonna have to leave it there guys. Another great discussion, folks watching, as we say, every week if your brain is feeling challenged to say, My gosh, how do I navigate my capital safely through this type of environment here, especially with all these unknowns, but these concerns living out there, again, highly recommend that you recruit the guidance of a professional financial advisor to help guide you through this, but particularly in essentially one that understands all the macro issues that that Alistair and I talked about, and that John and Mike have been talking about here. If you’ve got one who’s doing that and is then creating a personalized portfolio plan for you and then executing it for you while keeping you well involved. You should really stick with them. That’s a very rare, very valuable analyst. If you don’t have an advisor like that, though, or you’d like a second opinion from one who does maybe even John and Mike and their team, they’re at new harbor. Then consider scheduling a free consultation with one of the financial advisors that Wealthion endorses. To do that, just go fill out the short form at Wealthion dot com. These free consultations don’t cost you anything. There’s no commitment to work with these guys. It’s just a free public service they offer to help people position prudently in advance of the many different potential outcomes that we’ve talked about here in this video. All right, John and Mike, guys, thanks so much for hanging with me for yet another week and trying to just make things digestible for the average viewer here. Folks, if you enjoy these recaps, if you want to see Alister come back into the program, particularly after that August, meeting there by the bricks companies and deconstruct that for us. Please vote your support for that by hitting the like button and then clicking on the red subscribe button below as well as that little bell icon right next to it. Alright guys, thanks again so much for joining me this week. Everyone else? Thanks so much for watching.

John Llodra 1:10:47
Always a pleasure, Adam. We’ll see you next week. Thank you.

Mike Preston 1:10:50
Thanks again, Adam. See you soon.

Adam Taggart 1:10:53
If you’d like to schedule a consultation with one of the financial advisors at new harbor financial simply go to These consultations are completely free, and there are no strings attached. The good folks at new harbor was simply answer any questions you have about your investment goals or your portfolio and give you their best advice given their latest market outlook. They’re willing to do this because they care about protecting people’s wealth. And because Wealthion has connected them with so many thoughtful investors just like you over the past decade. We started doing this because so many people have approached us in frustration looking for a solution because they’re feeling out of alignment, or downright ridiculed by the standard financial advisors who have been managing their money. You know, the type, the kind that just pushes all of your money into the market. scoffs at the idea of owning gold. And when you bring up concerns about the market sky high valuations, they say don’t worry, the market will always take care of you. For many of the reasons discussed in today’s video, we think this is one of the most challenging and treacherous times in history for investing. We strongly believe that today’s investors are best served working in partnership with a conscientious professional financial advisor who understands the risks in play. Now we’re agnostic, which professional advisor you work with, as long as they’re good. If you’re already working with one, that’s fantastic, stick with them. But if you don’t, or are having trouble finding one you respect or trust, then consider talking to John and Mike and the team at new harbor. Now for those about to ask yes, there’s a business relationship between Wealthion and new harbor, which we’ve put in place to make sure everything is handled according to SEC regulations. All the details on this are clearly provided on the website. Also, it’s important to note that new harbor is able to work with US citizens, green card holders, and those with existing assets in the USA, but for regulatory reasons they aren’t able to take on non US clients. All right, with all that said, if you’d like some insight and guidance on how to protect your wealth during this unprecedented time in the markets, go to to schedule your free consultation with the good folks at you harbor. Thanks for watching.


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