Economist, financial expert, and bestselling author Dr. Nomi Prins sits down with James Connor and dives deep into the economic storm clouds she sees gathering over Wall Street and Main Street alike. With Wall Street sitting on a “hidden” $620 billion ticking time bomb of loan losses (levels not seen since 2008), the risks of another banking crisis are mounting. Nomi explains why persistent inflation, record consumer debt, and tariff uncertainties are increasing the threat of a consumer recession, putting the economy at significant risk of stagflation. She reveals how the Fed’s next moves, with potentially deeper interest rate cuts, could reshape markets dramatically.
You’ll also hear from her about major geopolitical shifts, including Europe’s surging defense spending amid ongoing global tensions, and why central banks (particularly China) are rapidly diversifying from U.S. Treasuries into gold, likely pushing gold prices significantly higher.
We want to hear from you! What would you like to see more of on Wealthion? Please take our poll here.
Investment Concerns? Get a free portfolio review with Wealthion’s endorsed financial advisors at https://bit.ly/3Xz3ihq
Hard Assets Alliance – The Best Way to Invest in Gold and Silver: https://www.hardassetsalliance.com/?aff=WTH
Nomi Prins 0:00
Wall Street is sitting on a set of unrealized losses, meaning they’re just book losses right now of seven, $620 billion and rising very rapidly, of unrealized loan losses. And what that means is they have loans on their books. These are in commercial mortgages. These are in corporate loans. These are in some consumer loans, but for for most part, commercial, corporate loans that are hemorrhaging, where the delinquency values are up to pre financial crisis at 2008 levels, and where they haven’t had yet to book the losses, but the losses are growing, so that’s like a ticking time bomb for Wall Street.
James Connor 0:48
Hi, Nomi. Thank you very much for joining us today. How are things in Los Angeles?
Nomi Prins 0:52
Um, they’re great. Jimmy, so glad to be here with you today. Well,
James Connor 0:56
it’s a pleasure to have you now. You have written many books on the Fed, and this is where I want to start our conversation. We recently had a Fed meeting, and the Fed took their growth rate assumption down from 2.1% down to 1.7% and at the same time, they also increased their inflation expectations from 2.5 to 2.8% and these moves had to do with the uncertainty associated with policy changes around tariffs. What were your takeaways from this Fed meeting?
Nomi Prins 1:25
So I have seen growth figures come in lower the Atlanta Fed has a tool called fed now, which is a more accurate tool for predicting and noting the forecast for economic growth more factors and some of the other data sets out there, and they’d already concluded it was going to be slower growth. So that in itself, that the Fed then turned around and said, Yes, we are actually going to experience slower growth in 2025 was not shocking. And in fact, I think growth could still slow from that 1.7% prediction, if we continue to have this tariff uncertainty, and if what’s already been sort of baked into the cake of the uncertainty that we’ve experienced continues to fester. So that’s one thing, the fact that the Fed also raised its inflation prediction again for the same reasons we’ve been looking at inflation figures that are going to hover in that high 2.5 2.8 maybe even touch 2.9 or three, oh, level. The issue here is that the Fed seems to think it can actually stick a landing of inflation down to some magical 2% number, when the fact is there are so many supply chain, geopolitical and other reasons why inflation is what inflation is at any given moment. And the Fed really can’t do that. But what was interesting about the meeting was that the Fed was sort of pivoting from that language about the bravado of fighting inflation to, you know, it’s kind of still there, and yes, it’s increasing, but also we’re focusing on lower growth, which is what makes sense. They should have been doing this. So I think what they’re doing in their language is massaging that ability to be able to reduce rates by more than they had forecast in December of last year. They forecast 50 basis points of cuts for this year, the expectations on fed watch, or that could be between 50 and 75 basis points. I think it could be as high as one full point. And that’s also because we are seeing growth slowing. Inflation is going to be there, and the Fed is going to have to come to terms at some point with the fact that it can’t get that 2% just because it wants to.
James Connor 3:41
That’s interesting. So you think the economy is definitely slowing down. What signs are you looking at that would indicate that? So
Nomi Prins 3:48
one of the major signs is, it’s the debt overhang that we’re looking at. Obviously, we have a massive amount of debt at the at the government level, 36 trillion and counting, you know, as we speak. And that’s one element. And what that means is the government, regardless of what it cuts, doesn’t cut whatever the efficiencies are or aren’t, is that it has to pay somewhere between 880 billion to a trillion dollars a year in interest rate payments just to get in to keep the lights on. And that’s that’s a massive overhang. But if you drill down with that to the business level, the small business level, the consumer level, we are seeing that at every level along the way, there are record amounts of debt at higher rates, at higher costs, than there have been in many, many years. And that’s a direct result from the increase in interest rates that we’ve seen since 2022 and obviously last year there was a reduction of a point, 100 basis points, in those rates, but the overhang is still there. And so what you have is this, this meeting of inflation on lots of levels that hasn’t gone away. And even if it’s slowed down a bit, prices are still rising. It doesn’t mean that prices don’t still rise, and you have debt overhang. At interest rate levels that aren’t coming down fast enough, and that creates a real wear and tear on the economy. We’ve seen that in confidence levels going down. We’ve seen that production levels going down, manufacturing going down recently, in some of the most recent statistics, what that is, is that wear and tear of that meeting between debt to grow or debt to survive versus the cost of that debt, and that’s going to have an impact on the economy as well. Of course, uncertainty. So right now, of course, we’re in the middle of not knowing what’s actually going to happen with respect to tariffs between the US and other countries, what’s going to stick, what isn’t, what negotiations are going to happen beneath the surface, and all of that uncertainty also hangs on the economy. It makes growth projections and strategies and forecasts for companies a lot harder, and therefore there’s more hesitation, and that hesitation means the economy is not growing while, while that hesitation exists. So all of these, all of these elements, really contribute to a slowing down in the economy. Yes,
James Connor 6:09
I thought it was very telling when we saw Delta American and southwest all come out with profit warnings, and they all cited the fact that one people aren’t traveling for pleasure, because they’re concerned, and people aren’t traveling for business. They took a real hit in business because for there’s just so much uncertainty associated with the tariffs and the trade wars, and people don’t know what what they should do or where the economy is going. And then when you look at the retail sector, you touched on that a little bit, but a a store called Forever 21 I believe they it’s a retail store that caters to young women, but they just declare bankruptcy for the second time. We’ve had numerous other stores in the past year also declare bankruptcy and go to business. And in 2024 there was 73 7300 retail stores that shut down and went out of business, and industry experts are expecting that number to double in 2025 so we went from 770 300 up to 15,000 give or take. And so, once again, it kind of shows so what’s happening there with the consumer? And I recently read a report by David Rosenberg, he said, penned a piece citing the weakening consumer and he looked, was looking at not only retail stats, but also restaurant stats. And he thinks this is the beginning of a consumer recession. But what are your thoughts on the research that you do? How do you think the health of the US consumer is right now? Yeah,
Nomi Prins 7:38
I mean, those are all real and visceral elements to how the consumer mindset is pivoting when we see, for example, that restaurant frequency has gone down overall, but the restaurant frequency that people are still doing is turning towards casual restaurant experiences and cheaper restaurant fast food type experiences, to still socialize, but not the middle to higher end. So all of these little tweaks are what consumers are doing naturally, and then when you aggregate that up through the entire country, that’s where we see it impacting the full economy. So, for example, even grocery store purchases, right? We know that the price of eggs is very high. We know that tariffs, the price of avocados is going to high. There’s various things that happen, but all of them contribute to an overall grocery checkout experience. So I think this is what we’re seeing in the numbers. In terms of the the cost of groceries, just an average basket of groceries is still increasing by more than the average rate of inflation. So people are seeing it in their food purchasing, and if it’s happening in your food purchasing with things that are basic needs, again, you extrapolate that, and you start to tighten your belt along everything else. And that’s where you get up to delta and America and all the airlines saying, Look, people aren’t spending what they are on travel that they used to because what can go, you know, if you need to feed your family, first, what goes out of the grocery basket? And then, if you don’t need to travel, you know, what do you economize on? What do you minimize? And all of these choices have a contracting result on the overall economy. And that is what we are seeing, you know, people just buying less, deciding not to buy items that aren’t even necessarily luxury, but are just simple choices along a food chain as to what is purchased and how the experience is more eat at home versus restaurants and so forth. So all of that, all of that has has an impact, and then it has an impact on the industries that supply any of that, whether you know it is the restaurant industry, whether it’s a midstream seafood experience. I actually just spoke at a global seafood conference out in Boston a week or so ago, and the major fear of domestic, North American and global. So companies throughout the seafood chain, that’s that’s the sort of getting of the food, to transporting, to putting in restaurants. There are concerns about the uncertainty of tariffs and the consumer preferences, so then they start cutting back what they supply, but they also increase their prices at the same time, because they’re trying to make ends meet, and that has a bigger squeeze on the consumer. So all of these factors have an impact down the economy line. Yeah, it’s
James Connor 10:27
funny. You mentioned that because I was in the grocery store recently and I saw the price of lobster increased by $3 a pound, and
Nomi Prins 10:36
that’s exactly it. I mean, everybody will see in their own thing when I went to just our local Ralph’s in LA, and I bought what I thought was five things, and it was $83 right? And I checked out. And as I was doing that, I asked the woman, you know, at the checkout counter, like, has anybody, literally anybody, come in here and bought stuff for less than $50 or how many? And she’s like, No, they’re not. Like, every everyone is coming in, everyone’s economizing on their decisions and still walking out to the best of their economic abilities, with a high tab, and then, and then regular feet of family. People are walking out with, you know, cards that are just way beyond what they would have thought they would they would have to pay. And so, yeah, what you’re seeing on any product level, you know, you agree it that up, people have to make decisions. That’s what we’re seeing right now. You couple that with debt. You couple that with the fact that, you know, the consumer is experiencing record household credit card, auto loan payments on debt, not even just the level, but the payments, like we’re saying before, and that that has an impact as well. That squeezes the consumer.
James Connor 11:42
Yes, great points. I mean, I shop at Costco on a regular basis, and I go there to save money. I used to spend three or 400 bucks, but now it’s five or 600 bucks, easy, and it’s even at Costco, the prices are going up significantly, exactly. So that’s a good overview of what’s happening with the consumer. Now I want to move on and talk about what’s happening with a lot of the corporations and also the banks. And in one of your recent sub stacks, which was titled The Fed’s balancing act, you discuss the mandate of the Fed, which is to control inflation and also keep unemployment low. But you also brought in a third element, and that was Wall Street. Maybe you can just speak to that, and what’s happening here with the interest rates, because these, when you look at the yield on the 10 years, been very volatile here in the last six months, right?
Nomi Prins 12:32
So you know, as you know, I spent years on Wall Street. I was a manager after Goldman Sachs and other senior positions in other places. And what I do know looking at how this year, by the way, there are record bonuses that have just been announced as being paid to Wall Street for 2024 amidst all of this and the increasing uncertainty and economic slowdown, because Wall Street is trying to do a couple of different things. They want the Fed to cut rates, because that gives them the opportunity to use cheaper money to speculate more, to encourage more deals with with corporate customers and so forth. Because the cheaper that money is, the more ability Wall Street has, from an investment banking standpoint, to to do more deals at those cheaper levels, or to use the cheaper levels as an incentive to push more deals. Which is, which is what the larger banks on Wall Street do, and why these bonuses are so high, because they started to do that last year as as rates were, were being cut. On the other side, they’re not being cut fast enough. And so what’s happening is Wall Street is sitting on a set of unrealized losses, meaning they’re just book losses right now of seven, $620 billion and rising very rapidly, of unrealized loan losses. And what that means is they have loans on their books. These are in commercial mortgages. These are in corporate loans. These are in some consumer loans, but for for most part, commercial, corporate loans that are hemorrhaging, where the delinquency values are up to pre financial crisis at 2008 levels, and where they haven’t had yet to book the losses. But the losses are growing, so that’s like a ticking time bomb for Wall Street, and the more that they can, you know, use the Fed’s knowledge of this to push for lower rates, the easier it will be for them to restructure some of these loans at those cheaper rates and sort of extend the problem out. It doesn’t mean the problem goes away. It doesn’t mean these loan losses won’t grow, but it means that they can restructure some of these loans at lower interest rates, make money on the restructuring so so bank some money themselves and also for themselves, borrow money more cheaply from the Fed in order to grow and speculate, whatever else they do. So they’re in a position where they’re losing money. They’re not booking out. It, and they want cheaper money, to be able to go about their business more, more sort of freely, so that. So that’s that’s a concern. I mean, we did see a number of banks fail in in early 2023 including Silicon Valley. And the problem with what’s happening now is there’s no obvious one bank that’s going to go under. It’s a sort of a pan across mid level banks that does connect into the larger banks. That’s one reason why Bank of America CEO Moynihan was was very specific about suggesting that there’s a connection between economic slowdown and rates, without saying, Oh, you need to cut rates specifically publicly to the Fed. But a lot of these conversations happen behind the scenes, and going back to what we were saying before, that’s one of the reasons Powell is pivoting to let’s look at this economic growth slowdown as a potential reason to save face with the fact that they’re probably going to cut rates by more than they said because of these bank problems. Add that one final thing, the Fed itself has a book of $6.7 trillion worth of assets, which are US Treasuries and mortgage securities which are linked to the 10 year, as you said, in US Treasuries and sort of the middle part of the US Treasury curve, which banks pledge to them in reserve, or which they’ve bought through their quantitative easing programs in the past, that they buy bonds, they give money to the banks. Well, they remit the interest on that money to the Treasury Department, or a portion of it, they are at a record loss and shortfall of the amount that they’re remitting to the Treasury Department of a quarter of a trillion dollars, right? And that’s growing. So no bank, including the Fed, which is basically, you know, sort of mother to the banks and father to the banks and parent to the banks, is, is really doing well with with where, with where things are.
James Connor 16:58
So I know you said you’re looking for interest rate cuts of a full percentage point, but let’s just say circumstances don’t allow that to happen. And maybe they can’t even cut by 50, and I don’t know, for whatever reason, let’s just let’s say oil rips to 100 bucks a barrel from its current levels. Okay? And that would really add to inflation. And once again, when you talk about a psychological point of view, even though it’s a small component of the CPI numbers, it has a very large psychological component. But do you think under that scenario in where the Fed can’t cut, can we get another SVB problem? Maybe a much larger situation than we saw Yes, Silicon Valley Bank
Nomi Prins 17:44
Yes, or a succession of banks, of regional banks in the Midwest, which, which are close to where allows bankruptcies are happening, but, but really throughout the country, because if, if one bank goes under, or two, or even if they have to book a large loss, because they are at a point where they have to for regulatory purposes, and they can’t carry it further, and they can’t restructure it, because rates are continuing to stay high, that can exacerbate this problem. So
James Connor 18:16
I want to ask you about Scott ascent. He has said that he and his team are resetting the US economy, and during this process, the US economy might go through some pain. And he also went on to say that he cannot guarantee that there will not be a recession. What are your thoughts on that? And do you see the possibility of a recession happening in 2025
Nomi Prins 18:38
So differentiating between like a slowing economy and actually a negative growth economy. I think we can see, and we probably will see some negative growth this quarter, for the first quarter of this year. I mean that that is what the Fed has forecast. Parts of the Fed forecast to have negative growth this particular quarter, and that’s a direct result from all of the uncertainties that are happening right now and the inability of companies to sort of move forward with decisions or putting down payments for both or whatever it might be, that doesn’t mean that the full year is going to be recessionary. That just means that we could see quarters of negative growth mixed with quarters of positive growth, which could, in effect, lead us to not that 1.7% number. It could lead us to a 1% number overall, a 1.2% number overall. So we still have an economy that’s sort of stumbling along, not necessarily full on recessionary for the year, but potentially recessionary for a quarter or two, but on average, just stagnating while inflation is rising. So you get what economists refer to as stagflation. It just basically, it’s stagnant economy, inflation rising, which is all that combination of words is and and that is something that we can definitely see, and in terms of what Vicente said and what the. Treasury Department has said it’s valid to know, and it’s it’s logical to say that if we do have uncertainty, and we do have some slowdowns, and we know that the cost of debt is high for the consumer, on up through the government, if nothing sort of gives in that scenario, and if rates kind of stay where they are on, tariff uncertainty continues, etc, that there will be, and President Trump has said this way there will be, you know, potential pain along the way. We were seeing the beginnings of that, not like the beginnings, like point zero, you know, starting, beginning, but you know, sort of the early stages of what we could see from the standpoint of pain and a slowdown, whether it’s a full on recession, again, it depends on your definition of recession. We could see a quarter to negative growth. I think net, net. It’s more stagflation right now. And it depends on the sector. Some sectors are doing better than others and will do better than others because they’re part of a sort of larger trend picture. That could be the energy sector. It could be the mining sector, because of the last latest executive order that the administration just put out on critical minerals. There could be those sectors that outperform. So it doesn’t mean everything’s uniform, which is why, as an investor, you have to be particular. But it’s not like there’s one black and white sign of recession. There’s not one black and white sign of growth in one area. It’s really combination of all of these factors you
James Connor 21:29
mentioned earlier. You were talking about the debt levels. So it’s at around 36 or $37 trillion interest payments are well over a trillion dollars. Now it’s going to keep climbing, and the deficit, where is it now? Six or 7%
Nomi Prins 21:45
Yeah. I mean, and debt to GDP is like 100 still 124 or so percent, yeah.
James Connor 21:49
So the current administration said they their goal is to get it down to 3% do you think that’s possible? To take it from 7% down to 3%
Nomi Prins 22:00
debt relative to the deficit,
James Connor 22:03
the deficit within the next four years, I
Nomi Prins 22:06
think that’s going to be a really tall order. I wouldn’t say, given what we’re seeing right now, it’s it’s possible, and what would have to happen is there would have to be certainty about tariffs, wherever they’re going to stay or not stay, and a lot of them cancel each other out. So there will have to be negotiations that, if you know the steel and aluminum tariffs at 25% but processing is happening, you know, in Canada, or some aluminum is coming from another country that you know, ultimately things net out that has to happen to create a stable environment under which companies can make decisions. So that has to happen in order for for us to have some better equanimity between debt and the deficit, and we have to have growth. So we actually have to be investing in certain sectors and invest in such a way that the growth outpaces whatever inflationary pressures the spending in those areas. Could do. A lot of people sort of mix up this idea of, well, if you invest or if the government invests a private sector investor, they invest together in any particular sector. Let’s just call it mining processing, just as a very mini sub sector. We focus a lot for insights on real assets, like mined assets and processing, which right now is predominantly done in China, but let’s say that changes that costs money, and so there has to be a firm decision that, well, that’s that might cost money, and that might have a slight inflationary impact on money, but the net result should be more growth, and the growth should outpace the inflation. So it’s not stagflation, and that can help to reduce the deficit by growing the economy around it, as opposed to simply sort of cutting some costs, which won’t necessarily get us there. There’s sort of a drop in the bucket. I’ll give you an example we just wrote this piece on how defense is sort of moving from some of the US expenditures, which are, which are still massive, to to Europe, which is, which is increasing its defense. Well, the Department of Defense Secretary hexa said that he found, or that Doge found $480 million worth of potential cuts to defense contracts. Well, you know, compare that to a $770 billion budget. I mean, any of us can do that math, if we just think of it our own pocketbook terms, it’s not a lot. So that doesn’t really decrease a deficit that’s like sort of a very, very minute potential adjustment, but it doesn’t shrink a deficit. Yes,
James Connor 24:45
okay, seeing how you just brought up the this last note that you wrote about the defense spending. You also spent a lot of time in that same note talking about the European defense spending. Maybe you can just take us through that and tell us what. Just was of that report,
Nomi Prins 25:02
yeah, so we are looking at a sort of massive trend towards and a lot of reasons for it, towards Europe upping its level of defense spending, and also manufacturing and production of defense related equipment, materials and so forth. And some of that acceleration is a direct result of what the Trump administration has been, has been doing in terms of reducing its Yes, it’s, it’s funding, or it’s, it’s, it’s helped towards Ukraine, requiring or asking President Trump has for NATO to be more of a potential from 2% of GDP to 5% of GDP. That hasn’t happened. But there is a sort of process by which some of what’s happening in the US has a has an impact on what’s happening in Europe. And on the other hand, Europe has been increasing its defense budget anyway. Who before this point over the last few years since the Ukraine this, this episode of the Ukraine war escalated in 2022 most recently, there is a proposal for an 150 billion euro fund for basically local defense companies and lending into those, those growth areas. And that’s just one of many proposals. They’re just coming up now. So there’s a lot of money that’s going into fortifying defense in Europe, in the UK, and even us, defense companies are like, sort of trying to stake more claim in that part of the world, as are European companies. And so we’ve been following a particular company, and we have which we’re doing a full analysis on in our in our paid issue on this week coming out, that really kind of circles into all of that. You know, where the contracts are coming, where the funding is coming, this big trend of defense movement, in funding and in geopolitical just repositioning. So this is something that’s not going to go away. It’s something that’s had a number of catalysts, Ukraine war and the recent White House decisions, but it’s definitely something in play that’s going to be a trend for a longer term, and it’s just accelerating now.
James Connor 27:26
It’s amazing how these two big events in the last five years, COVID being one in the invasion of Ukraine, being the other one, has just totally realigned how things are done, right? We had so many issues with the supply chains, right? And we couldn’t access advanced semiconductor chips, for example, or lithium ion batteries, yeah. I was also surprised to see in your note, when you were talking about Germany, which is the the largest economy in Europe, only has 20,000 combat ready troops available. I thought that was shocking.
Nomi Prins 28:02
Germany has relative to some other countries in Europe, for example, France, Poland has been reticent in terms of the idea of investing or sort of augmenting its defense footprint, whether that’s on an individual level, or, you know, production level. And that’s why I think there, right now is a pivot moment, even, even for Germany, where they have upped their percentage in NATO, where they’re taking more of a leadership role in in Europe in general, to increase defense there, but, but they had been, you know, sort of lagging what you would have expected them to be doing until these moments. I want to
James Connor 28:50
talk about equity valuations now, and once again, we’re going back to uncertainty. But because of all this uncertainty that we’re experiencing, we’re seeing a lot of volatility in the financial markets. Let’s just look at the S P, for example. But they probably lost 10% of its value. It’s recovered here in the last couple of days, but who knows what’s going to happen in the coming weeks. But where do you see the S P going? And maybe you can also speak to the European markets, because at the same time the S P’s been coming off, the DAX has caught a serious bit. I believe it’s up 15% on the year.
Nomi Prins 29:21
So that that movement between these markets has to do with where there seems to be more certainty, which, which is in Europe. We did a piece on this. Was in Europe and some of the larger market countries. It’s in sort of Pan Asia, outside of China, China a little bit. But also, you know, countries like Vietnam, Indonesia and so forth that are sort of growing economically relative to the US. So if we just look at Europe and Eastern Europe, there is a higher growth of investment funds, not necessarily all of their economies, because their imbalance on economies better and other Spain is better than Germany and so forth. But there’s been an influx of investor funds, not just from the US, but also from, for example, China and pan Asia, because of the uncertainty over us tariffs, how that’s depreciated the dollar most recently, and where some of that movement is and with respect to US, US markets, they’re a bit less balanced in that, you know, we know, the sort of Magnificent Seven is a big component of the main markets. And so if something happens in one of those, you know, it tends to or there tends to be a multiplying effect, and that’s part of the correction is along with the uncertainty. Whereas some of the European indices, the DAX, the FTSE, are a bit more they’re more diversified in terms of the sizes of the companies that comprise them, and so that really plays a big role, as well as their more solid location and the general pivot of the world to Being a bit more construct, reconstructing trade agreements and investment and direct funding agreements relative to uncertainty in what’s happening in the US and our policies relative to other countries.
James Connor 31:12
So you said earlier you’re expecting the US economy to pull back. We’re going to see a definite decrease in growth. But in terms of the S P, we’re, let’s just safe around numbers, we’re down 10% right now. Do you see it getting hit by another 10% like at the end of the year, when we’re talking is the S P down 20%
Nomi Prins 31:33
I don’t think that, and that’s primarily because I think the uncertainty that the S and P is struggling under right now has to do with what’s going on with tariffs, for the most part. Meaning, yes, the slowing economy a little bit. But we’ve certainly seen markets outperform the economy, and our market outperform the economy. That was definitely what happened when rates were lower and the Fed was an easing mode. You know, we can definitely see the economy slowing and a market going up, I think what’s impacted this market, and we compounded by, you know, discussing whether the economy is going to grow or not, is, you know, in the media and so forth, is that, is that we have policy uncertainty at this moment, and that that does have an overhang, and it has like a knee jerk reaction within the US market, which is part of the reason we’ve seen this correction. And he put on top of that, the uncertainty over the Fed, as we’re discussing. Is it going to be 50 basis points, like they said, is it going to be 75 or 100 because of slower growth and other issues like, like we believe? And, you know, is it going to be between? Is it going to be none of that if inflation spikes? Right? So there’s still that uncertainty. I mean, I think in general, there’s an expectation of two to three cuts to an average somewhere between 1575 basis points. But that hasn’t been sort of substantiated by the Fed. The markets like certainty, markets want tariffs to be sorted out. Market. Markets want, you know, 100 basis point cut in the Fed. And if those two things happen for however they do, whenever they do, that’s going to light a fire under the US market. It might keep the dollar still lower, because rates might come down and that in terms of a currency perspective, but that’s one of the reasons I don’t see a massive downfall. The S and P to head the end of the year. We could end down relative to the end of last year, but I don’t see sort of that other leg going if the inflation, sorry, if the tariff uncertainty gets sorted out within the next quarter. I mean, if it doesn’t, we have to readdress this, but to the extent that a lot of what’s on the table gets resolved or at least substantively substantiated. I think that will go a long way. If growth is still slowing and the Fed comes in and cuts more, I think that will go a long way. So I think this quarter is going to be very, very pivotal. We’re going to see in the meantime, earnings come in that could be most likely will will be negative, you know, in terms of overall relative to projections from last year, because we have had this slowing quarter, so we’re going to be bumpy this quarter. But if you’re talking year end, I don’t see it being 20% down versus last year. Yeah,
James Connor 34:15
it’s hard to believe we’re at the end of the quarter and we’re going to see q1 numbers soon. That’s great. It’s going to be quite interesting to see the commentary some of these companies. But you mentioned earlier you’re bullish on the defense sector, which makes total sense. Now. You’re also bullish on gold. Tell us. Tell us about your thesis. And you were also at the Austrian mint. Tell us about that. Yeah.
Nomi Prins 34:37
So, so what we’ve seen in gold obviously touching over 3000 and we’ve been targeting that sort of a year or two ago to reach that level over over this period, is that gold is receiving so many sort of hugs from the investor and the central bank and the retail community because of its. Staying power, because it’s solidity, because there’s so many reasons why gold has been sort of that Touchstone over these uncertain periods. It does act as an inflationary hedge. Does act as a diversifier against the US dollar, as countries trade more and more with each other and sort of less in dollar terms, it does act as a wealth preservation, general generational preservation. And you mentioned I was just in Austria. What’s interesting too, is, certainly for Europeans anyway, is that it grows without a tax hit. So, so you can basically, for example, buy solid gold coins from the Austrian mint, keep them at the Austrian mint, and have no tax implications. So So for Europeans, there’s that benefit as well. We have seen more inflows into both ETFs and physical purchasing of gold. For that reason, we have seen more purchasing gold, of course, by the central banks. I don’t think this diversification away from the dollar is going to stop. There’s, there’s no particular reason for that, given, given just where we are at in the world, and more pull towards outside of us trading. And so even though the dollar will still be the dominant reserve country currency, it’s not going to go away. There’s a lot of shifting, and gold is the recipient of all of that. It’s sort of is welcoming all of that volatility and all of that uncertainty and all of that change and desire to preserve wealth and preserve sovereignty and to preserve diversification and currency as one asset. And so that’s what that’s what we’re seeing. And so I think gold could reach 5000 by the end of this administration, not because necessarily what goes on in any one of these factors, but that’s because that’s where all of these factors are indicating we can go. And it’s also we have a lot of numbers on this through pin side. It’s also where, if we look at an analysis of these and other kinds of factors, going back in time, over the last 20 years or so, we’ve seen the biggest bumps in gold happen where there’s a confluence of all these sorts of events. And right now we’re looking at like at that confluence, but on steroids. And so that’s why I think we’re going to see that eventual push and and we are seeing it. It’s not gold’s not volatile, it’s just, it’s just trending upward where it it belongs to the because of all these factors.
James Connor 37:25
Yes, and to your point, it’s it’s going to be interesting to see if these central banks continue to buy it. I believe in the last two years, they bought about 25% of annual production, which is a massive number. I also saw in one of your notes, you were referencing China, since the trade war or terror started with them in 2018 I believe you talked about how they’re they continue to sell down the US. Maybe you can just take us through that. What do they own back in 2018 what do they own now? And where are those additional funds going? Yeah,
Nomi Prins 37:58
so, I mean, they used to own going into 2018 about 1.3 $1.2 trillion worth of US Treasuries, and today they own about 750 billion so so to an extent, some of that selling happened into the 2018 tariffs on expectations of them, and just in general, China pivoting to trading with other countries, and not just because of tariffs, just because they’re growing in their sovereignty. Some of that started in the wake of the financial crisis, but it just accelerated through these periods. And so now we’re seeing that they basically have pre positioned their own book of assets, the People’s Bank of China, to have far less treasuries and far more gold and that trend, both of those two things are continuing to grow. In other words, the decline in treasuries as a overall percentage of their book, and an increase in gold, which is still very small, still under 5% of their book, but an increase in gold to offset, or to be that that hedge to fiat currencies, where they do have a stockpile and physical gold to back up what they have in terms of more liquid reserves, and so that’s going to, I think, continue as well. All
James Connor 39:14
very interesting points. Well, listen, that was a great conversation. Nomine, I want to thank you very much for spending time with us today. If somebody would like to check out your sub stack, where can they go? Thank
Nomi Prins 39:25
you, and it’s been a pleasure speaking with you. We’ve covered so much. Yeah, they anyone can come and check us out on print sites, dot sub stack.com, and we have, we have different levels in terms of, you know, real drill down investment types of products, as well as free essays to get people familiar with with the work we do across basically, you know, everything that we’ve discussed here today.
James Connor 39:50
And you’re also very active on Twitter or x, what’s your Twitter handle? Active
Nomi Prins 39:54
on Twitter, know me, Prince at Nomi Prins. Active on LinkedIn. And active on Instagram, and Instagram, I think it’s at real know me prince, because someone tried to hijack my name at one point. So those are there’s all always to keep in touch.
James Connor 40:14
When somebody tries to hijack your name, that’s always a good sign. It means you’re very popular.
Nomi Prins 40:18
You’re popular. It’s just a pain to sort of fix, but yeah, well,
James Connor 40:22
once again, thank you. Thank
Nomi Prins 40:25
you so much.
