Weekly Market Recap: Rick Rule on Gold’s Surge, Pomp’s Bitcoin Secrets and Battling Inflation

Andrew Brill 0:05
Welcome to Wealthion. I’m your host Andrew Brill, and this is your weekly market recap. This week James Connor spoke with the President and CEO of rule investment media Rick Rule. He remains impressed with the US economy despite some of the indicators, and he remains bullish with respect to physical gold.

James Connor 0:21
What are your views on the US economy? And do you have any concerns either domestically or globally?

Rick Rule 0:27
I’m continue to be impressed by the strength of the US economy. As we said in our last discussion, I would have expected a doubling in the nominal interest rate, which is what we saw to have a much more deleterious impact on the US economy, given how much private credit there is in the system. It would appear to that confidence remains strong. Despite the ballooning interest payments that are taking place at the federal, state and local level. All I can say paradoxically, is so far, so good. The Canadian economy appears less strong, which makes some sense, it’s a smaller economy, a smaller domestic market. But the strength of the US economy impresses me. I suspect that given this year is an election year, that we will see the Fed under increasing pressure to lower interest rates. As a human being and a market participant. I hope they don’t. But I suspect that the political pressure to lower interest rates, even despite a very strong economy will be such that the Fed will feel the need to lower interest rates, which I think will have a very positive impact, if not on the economy and not on the country, on the stocks that you and I follow. I want to take a little issue with something you said to James which is to say a strong CPI number. I would argue that the CPI is not a relevant gauge of inflation. If your definition of inflation involves the deterioration of the purchasing power of your savings, relative to cost increases. The CPI, among other things, doesn’t include the largest household expense that you and I face, which is tax, and a cost of living index that doesn’t include tax is an erroneous index. So I would suggest to you that while the CPI number doesn’t look unattractive, it’s an irrelevant statistic, because it doesn’t measure the cost of living and the confidence that I talked about before. I think we’ll be challenged over time when Americans and Canadians understand just how much less far their paycheck goes than it went five years ago. But let’s enjoy the economy that we have. Well, we can.

James Connor 3:12
So let’s talk about inflation. And you just made mention earlier about the CPI number, I agree with you totally by the way, every time I see that CPI number, I just multiply it by two or three to get the real number. But why don’t we have a discussion on inflation. Now what’s happening,

Rick Rule 3:27
I would urge your listeners to do a thought exercise and look at their budget and determine for themselves what is happening terms of the maintenance of the purchasing power of their own savings and their own salaries relative to the package of goods and services that they consume. I’ve tried to do this for five years running now. And I’m not suggesting that this is by any means an accurate picture. But I would suggest that in terms of the basket of goods and services that I consume, that the purchasing power of my savings is declining by about 7% compounded. The, when I say basket of goods and services that includes tax, I’m not sure that I consider tax to be either a good or a service. But the truth is that tax is consumed more than 40% of my household budget to spend, despite my best efforts to the contrary, in any measure of the cost of living, which didn’t include tax for Americans and Canadians is an erroneous sense of the cost of living. But a bit goes beyond that. The big thinkers would have you look at Core CPI, which doesn’t include food or fuel. The problem with that as I like to eat so that sort of performance mechanism is a very little value to and beyond that. It’s hedonistic ly adjusted which is to say that The people who compile the index assume assign arbitrarily, values associated with the allegedly improving quality of the products that you buy. My suspicion, as I say is that despite the fact that the CPI or the CP lie, as the WAGs describe, it is running at about 2.6% compounded my own arithmetic, the price of gasoline that I put in my vehicle, the price of food, I eat the price of airline tickets, and of course, the price of direct and indirect taxation, suggests to me that the basket of goods and services that I consume is increasing at about 7% compounded, that becomes problematic. Over time, I emphasize over time, many of your listeners who aren’t as old as I won’t have a memory of the late 60s In the early 70s. A period which I would suggest is eerily similar to the period that we face today, the writing was on the wall with regards to US inflation, beginning in 1967. The combination of the war on poverty which we lost, and the war in Vietnam, which we lost, meant that it was very obvious that government debt and government promises were at an unsustainable level. Despite that it took from 1967 to 1972 or 1973, five or six years, for the average American to have experienced enough deterioration in their purchasing power, that inflation came to be a concern. I think that’s what’s going to happen today. I think what’s going to happen is in one of the out years 2025 2026, I don’t know. But in one of the out years, the incredible deterioration in purchasing power that we have seen as citizens between 19 Pardon me 2021, and today is going to become very, very, very squarely in focus.

James Connor 7:02
And so I guess I want to ask you how we can protect ourselves against inflation and against the erosion of our purchasing power. One of the ways to do that is through gold, physical gold, what are your views on gold inherited a nice move, I think it’s up over 10% on the year,

Rick Rule 7:18
you know, goes down shop, people have asked me for years once gold gonna move, and I say 2000 price of gold in 2000 was 253 $254 an ounce. And it moved up to sort of $1,900 an ounce. So that’s what 8.6 8.7% compounded for 22 years. If you’re asking for a commodity, that as a savings instrument could shield you against inflation. If you look at when gold was going to move at the beginning of the century, it did move, the move has accelerated. And it has excited people. To me, the move that we’ve seen so far is a non event. Really, I think it’s a flow of funds issue. I don’t own gold, because I think it might go to 2400 or 2200, or whatever the number is. I own it because I’m afraid of the possibility, not the probability but the possibility that it goes to $7,000 or $8,000, or $9,000. That’s not very far fetched. In the decade 2000 to 2010, admittedly took 10 years, the gold price went up seven fold. It doesn’t seem like too much to ask, given the deterioration in the purchasing power around fit instruments for the gold price to triple. I frankly, hope that doesn’t. But I sort of think it will. Let’s examine James, the recent strengthen the gold price. This didn’t happen because retail investors were concerned expressing concerns about the deterioration of their purchasing power. It didn’t happen for traditional reasons. It happened because the US government weaponized the US dollar. They confiscated $300 billion worth of Russian holdings of US Treasury securities that made other countries who don’t necessarily favor policies that are attractive to the US government concerned about their own holdings of US Treasury securities. The second thing that the US did is they weaponized the Swift banking system. The Swift banking system is supposed to be an International Settlements mechanism using the US Dollar as the reserve currency and it’s not the property of the United States. But when the Swift banking system began to be weaponized to further the political interests of the United States Government overseas, other central banks felt themselves left with no choice other than than to look for a store of value and a medium of exchange that was outside of the control of the US government, the easiest place to go was gold. Many people say well, why don’t they just trade with each other in their own currencies? There’s an easy answer to that as little as they trust us, they trust each other less. The US Dollar laughingly is the worst currency in the world with the sole exception of every other currency. The Chinese don’t want a trillion rubles. And what that means is that in order for Iran to trade with China, China to trade with Russia, Russia to trade with Brazil, they need a medium of exchange outside the US dollar. And the strength that you have seen in gold has been almost entirely foreign central banks buying gold, because they don’t have any other alternatives. If you lay on top of that. The realization on the part of investors that their own purchasing power is degraded by hold by holding fiat currencies, I think you could see sharply higher gold prices. Here’s another statistic to support that James. According to JP Morgan Chase, the market share of precious metals and precious metals related assets in the United States is about one half of 1% of the total value of savings and investment assets in the United States. For reference, the United States has a 23% market share of world savings and investment assets. JP Morgan Chase suggests that the four decade mean market share of precious metals related securities is 2%. So if precious metals merely reverted to mean, demand for precious metals and precious metals related assets, would quadruple in the largest savings and investment market in the world. And that’s precisely what I think is going to happen.

Andrew Brill 12:08
Anthony Pompliano joined SpeakUp with Anthony Scaramucci, he explains how he thinks the Fed and their goal of tightening things in the economy has taken a backseat to politicians who just keep spending. He also talks about the Bitcoin halving event coming up and give some advice and how to make some money.

Anthony Scaramucci 12:27
I’m going to say the following word I want you to react to the word Okay, you ready?

Anthony Pompliano 12:31
Okay.

Anthony Scaramucci 12:32
Inflation.

Anthony Pompliano 12:34
Horrible.

Anthony Scaramucci 12:36
Okay, and but okay, but let’s go, let’s go here. 20% of the dollar has been destroyed. Okay, in the last four years. So if you’re a laborer, let’s say you’re like my dad, May his soul rest in peace. You’re working a crane, they pay you $1,000 in January 2020. You have $780 of purchasing power today? Yeah, yes. Horrible, destructive to a society destructive to lower middle income people? What are we going to do pomp? And what’s going to happen?

Anthony Pompliano 13:10
Yeah, look, I don’t think that there is anything that the Fed or others can do. Because structurally, they have been put in the back seat. And the way I think about this is, if the central bank alone was making decisions, although they are slow, although they make mistakes. If you kind of have one person in charge, or one group in charge, they can kind of over a long period of time, at least keep the train kind of on the tracks. And so what I mean by that is, they definitely were too slow to increase interest rates in 2021, and 2022. But they eventually did do it. And you know, year over year, inflation started to come down. Now part of the problem has been that the politicians, they didn’t get the message, the politicians there. So spending like drunken sailors. And so at the same time at the Fed is trying to create tighter financial conditions, drain liquidity from the market, you have politicians in the same country who are doing the opposite. They’re basically fighting with each other from a policy standpoint, then when you zoom out from just the United States to the global world, you know, at least the fed the ECB, the BOJ, you know, many of the top central banks, they’ve all been on the same page since 2022, which is let’s drain liquidity, let’s kind of create these tighter financial conditions. China, on the other hand, basically said, you know, we don’t care what you guys are doing our economy, our stock market, we need to be pumping liquidity into the market. And so China has been actually acting against on a global liquidity standpoint, these other major central banks. And so when you look at this, it’s one single central bank actually has been taken out of control position and kind of put in the back seat. So they still have some impact, but I think that’s a huge problem. The second thing is there’s a psychological scarring that occurs with consumers that I think is drastically under discussed And so what I mean by that is, if inflation is high in 2021, into 2022, that doesn’t go away, you’re just wake up whenever I don’t worry about inflation anymore. And so a lot of what we’re seeing in society, I call it, you know, we become a society of gamblers, we have sports betting becoming highly popular, being integrated in all these different areas, the lottery is bigger than it’s ever been before. You see zero day options, being the majority of options traded on Wall Street now, mean coins, and crypto and all these things kind of taking place. And a huge piece of it is psychologically some large portion of the population has just lost hope. How do you get ahead, right? How do you do anything? And so if you look at it from a rational position for buying lottery tickets, 300 million to one odds, if I buy a mean, coin, maybe it’s, I don’t know, 5050 odds, it goes up, right? Like, you know, it’s, it’s much better sports betting is better than the lottery, etcetera. And so, people are almost like trying to become more sophisticated. By doing the gambling, there’s moving to like things with better odds. But, you know, look at the story is all this time, like, I don’t think that you’re gonna be able to

Anthony Scaramucci 16:07
The destruction of the money.

Anthony Pompliano 16:09
Yeah,

Anthony Scaramucci 16:09
It’s causing people to take more risk, because they’re trying to catch up with the money destruction, right?

Anthony Pompliano 16:13
Yeah, of course. But I also think that, you know, because we can identify it’s happening doesn’t mean that it’s, you know, this time is different, and all of a sudden, like, gambling is gonna be some great investment strategy. Like it is still a horrible way to invest capital and try to compound capital over time. But you can understand why people are doing it while not agreeing that that is what they should be doing.

Anthony Scaramucci 16:35
And people write into us and many people don’t understand the having some people are like, are they going to have my bitcoin in my account? What does it mean for supply? You’re a great explainer of things start from a base layer of zero and tell us what the halving actually means, and tell us what’s going to happen? And when do you think it happens approximately April 18 19th 20th.

Anthony Pompliano 16:59
So yeah, last time I looked April 20, is when it will occur. You know, obviously, the most entertaining outcome is the most likely so the Bitcoin halving occurring on 420 is like, you know, made for the Internet and memes. When you think of the having, let’s talk about gold, right? Gold has dug up out of the ground, kind of one 2% increase in the circulating supply of gold each year, you can imagine if all of a sudden, half of the gold miners shut down, and you now only had 50% of the previous kind of supply coming into the market. If demand stayed the same, then obviously, the price of gold would go up, right? With Bitcoin, that’s basically what’s occurring is right now, there are 900 Bitcoin a day that come into the market that are net new to the circulating supply. After the halving, it will programmatically you know, kind of executed in the software, go to 450. And so if you have demand stay just the same doesn’t have to go up just the same demand. But now you have 50%, less incoming daily supply, the price should readjust higher to kind of accommodate everyone. And so, you know, it’s pretty basic idea, I think what people get tripped up on is, they can imagine if 50% of the gold miners shut down their facilities or stopped, you know, kind of digging gold out of the ground. When you talk about the software, it’s just going to do it. All of a sudden people say, Well, how do I know that? Or, you know, what, why does the code execute that way? How can I confirm it? Beauty of Bitcoin is you can confirm it, but but there’s some technical skills or experience that are needed in order to be able to to understand the intricacies.

Anthony Scaramucci 18:40
Okay, so we have 900 coins being produced by the network now. And it’s going to 450 How much demand Do you think we have on a daily basis for Bitcoin?

Anthony Pompliano 18:55
I mean, just the ETFs alone, the inflows at one point were 12x You know, that number. So you can kind of think about in Bitcoin terms, there’s 900 Bitcoin a day that are coming into the market, there was at one point, you know, 10,000 to 12,000, Bitcoin, that people actually were looking for in ETFs. Now, some of that has kind of slowed down a little bit. But one of the beauties of the halving is not only the fact that the halving occurs, but everyone starts talking about it. So if you go and you watched, you know, CNBC, Bloomberg, Fox, business, Yahoo, whatever, they’re all talking about it right now. And so the more that people talk about Bitcoin, more people that become interested in it, and so demand likely will go up through the end of the year. It won’t happen rapidly, but it will continue to increase. And so you have this like demand shock, where more people are coming in wanting Bitcoin, at the same time that you have a supply shock or it’s getting cut in half. And so in the past, you know, these halvings the last one occurred One becomes $1,000 Because it does $69,000. Right? When it occurred in the cycle before that there’s more than 20x increase in price. And so I don’t think that we will see more than 8x. But I do think that we will see, you know, hundreds kind of low hundreds of price appreciation, which, you know, obviously is good for people who are holding the asset.

Anthony Scaramucci 20:23
Here at Wealthion, we’re trying to help people make money, make them look smart, make smart decisions to secure their future. If a friend came to you today and said, What should I do in the market this week? Maybe it’s the same thing every week pomp, I don’t know, but what should I do in the market this week? What would that be?

Anthony Pompliano 20:42
Yeah, the way I always have thought about this is I have an asset allocation kind of framework in my head of percentage wise, and then I just think about, I am saving in that asset allocation percentage. So I’ll make numbers up. But let’s just say that I said, Okay, 25%, public markets, 25% bonds, 25%, kind of Bitcoin and 25% venture capital, then what I would do is, every week, whatever money I was going to have leftover, I would just put in those buckets, and try to automate as much of it as possible. You know, you had a great line at Bitcoin investor day where you said, the best thing to do with your bitcoin is act dead? Well, I think that, you know, if you extend that out, one of the most specific things that you can do when it comes to investing is you can just automate that process so that every single week, you’re not thinking through what’s the best thing you know, I should do this week, it’s just have got a plan, and go focus on making more money so that you can continue to get more money into your kind of investment account.

Anthony Scaramucci 21:43
So so it’s a really good piece of advice. So what are some of the things you’re allocating to that?

Anthony Pompliano 21:49
I am not very exposed to the public markets, I only have really one personal holding in the public markets, which is a company called defi technologies in Canada, I think that they are drastically undervalued. You know, I’m a shareholder, personally, we sold a business to them, very bullish on that business. When it comes to symbol,

Anthony Scaramucci 22:11
it’s publicly traded in Canada, what’s the symbol Canada,

Anthony Pompliano 22:14
I think it’s d f, t f, if I remember correctly, and they’re an all coin ETF issuer, the company, most recently, when they didn’t earnings report was trading at kind of $140 million market cap approximately. And their guidance was that they’re going to do I think, $46 million in revenue in 2024. And so it’s just I think, something that’s mispriced, but we’ll see what happens, maybe I’m wrong. When it comes to everything else, I do a lot of early stage investing. Those are usually early stage technology companies, they’re in the private market, they stay liquid for a very long period of time, they’re very asymmetric. They’re, you know, zeros, or we’re gonna get back hundreds of percent on the upside, but usually takes about 10 years to get those back. And then I continue to allocate to crypto, I have a Bitcoin position, the second biggest position that we have is Solana. And then you know, we’re looking at other things, and we’ll probably come up with other ideas of what we should be doing there. And then probably the biggest investing we do is in the companies like we want to continue to reinvest in our own companies that can help us generate cash flow and enterprise value. And so you know, we have a skill set and experience doing that. And that usually drives pretty good return as well.

Andrew Brill 23:30
Nicholas Colas of data trek research, joined Wealthion and gave us his expert opinion on where he thinks interest rates are headed, and how many cuts we may get this year. He also talks about how we really should be measuring inflation.

James Connor 23:43
Here we are now we just entered q2. And I want to get your views on where you think interest rates are going and what the Feds going to do. And if and well, they cut this year?

Nick Colas 23:53
Yeah, you’re right. Well, we came into the year thinking we’re gonna get a lot of cuts two years reflected that Fed Funds Futures reflected that. And thankfully, the equity market didn’t really believe it, because rates have gone up. And the expectation now is we might get three I think Fed Funds Futures are still the modal expectations roughly a 330 5% Odds give or take, but there’s a pretty even distribution that says two might be the answer, and now much less of a guest that for me the answer, I think we’ve taken four safely off the table. The issue we face right now is pretty straightforward. And it’s a mixed thing for equities. Because on the one hand, the economy seems to be doing still pretty well. It’s not great, but we’re getting 2% growth more or less. We’re getting reasonable job numbers, even after revisions come through. We’re getting pretty sticky wage growth, which means that consumers are getting paid a little bit more than inflation. But it’s not coming down very quickly. There’s still a labor shortage in this country, in a lot of different sectors, and that’s driving wages to be much stickier than they otherwise would be. Blue. The reason inflation declines after a recession is because wage growth slows down to basically zero. We haven’t had a recession and anything but really. So we’ve had wage growth continue to be pretty high. And so inflation has stayed high. And this is a central problem for the Fed Powell talks about talking about it last Friday, talked about it yesterday, we’re not seeing that kind of slowdown and wage inflation that will allow overall price inflation to keep coming down. And so inflation is proving very sticky. My perspective is, I think we get two rate cuts this year, not three, the Fed is usually wrong. Like we just saw the Feds latest projections last month, for rate cuts over this year, they still said three. But on average, most of those March projections they gave are wrong by at least one cut or one increase. And so I’m thinking the wrong buy one. And we get to probably in July, and then not until December, the Fed does have to deliver on its promise or risk losing credibility yet again, and you pointed out that they’ve rightly lost credibility before and in the recent past, they really can’t afford to make that mistake. Again, they can afford one or two rate cuts, but they have to go slow. So I see the pace of rate cuts is very slow this year. And I don’t think twos you know, two year yields come down very quickly, and tense might actually build up over the near term. So pretty tough situation for bond traders. But I think still okay for stocks, because we do have the backstop of decent wage growth, a decent economic picture, and enough to create some corporate earnings growth.

James Connor 26:17
What’s your take on inflation? I know, you just said that. There’s an issue with wages. But from my perspective, just being the average guy on this tree, when I go to the grocery stores, or when I go to buy gas or whatever, I see prices just continuing to go up. And I think they’re going up by a lot more than 3% annually.

Nick Colas 26:36
Yes, I mean, there’s always been a lot of debate about how accurately CPI or PCE or any of the other common measures of inflation really measure actual felt inflation. And I’d say most of the academic work on this topic reflects exactly the dynamic that you just described. People look at inflation as primarily the cost of food and energy. And everything else kind of falls to the wayside. And so people’s impressions of inflation are always higher than the actual reported number. This goes back decades, literally. So it’s a very, it’s an important problem. Because it ultimately people anchor their inflation expectations on what they see and what they feel every day and every week when they go to the store go to the gas pump. And that’s the reason inflation does feel a lot higher. And we also have to remember that inflation compounds. So if we go up 10% In one year, and 5%, the next year or 3%, that you’re after that just a rough approximation of what I think we all felt inflation has been like over the last couple of years, you still see higher prices, and it just never gets better. And you all you have to hope is that ultimately your wages catch up to the inflation that you’re feeling. Unfortunately, for a lot of households, it doesn’t. And so there’s that persistent feeling that inflation is going to be higher. Now, that’s a real problem for the Fed. And I’ve written about this. And it’s an important issue, because the Feds credibility is ultimately tied to how successfully it deals with inflation in this part of the cycle, and right now, they don’t get a very good grade, as you very rightly pointed out. And all we can hope for is that ultimately, things catch up. But the current situation is definitely tough. And definitely, we all feel it’s I mean, my analog in New York is I have a favorite diner that I go to for breakfast, some mornings, and I had a cup of coffee and an egg sandwich. And that used to be $7. And now it’s $13.54 Every day, and so unfortunate for people to pay it. But I do look at that bill every day and say, crap, that’s just a lot more money than it used to be.

James Connor 28:29
And so you mentioned gas and the price of gas. And this is another so when we look at CPI, we’re looking at shelter, we’re looking at food, and we’re looking at energy prices, right? Those are the three major components representing about 75% of CPI. And so oil, the price of oil is just rip from $75 a barrel up to 85, give or take. And who knows, maybe it moves to 100 bucks. And of course the Biden administration is trying to keep the oil prices down as we head into an election. And then you get the Saudis who want a higher oil price. Of course, they want to make more money. But are you concerned about this move that we’ve seen in the oil price and the impact that it might have on the economy and also CPI?

Nick Colas 29:09
Absolutely absolutely. Yeah, you’re right. I mean, oil prices have been one of the surprise surprise moves of the year gold’s been the other one, we can discuss gold as well. And it’s a fascinating story on top of that, you know, the geopolitical situation is not getting any better in the Middle East. We didn’t know that. And so gas prices, oil prices are going to keep climbing. I think I wouldn’t rule out $100 A barrel at all. I think it’s a very logical kind of mid summer kind of price because it’s been other some seasonality oil prices. The thing that I focused on in looking at how our prices affect the economy, is that you basically need oil prices to go up 80% In a year to assure a recession. So if you go back to 1990, and the oil shock around the Iraq invasion of Kuwait, or if you go to even 2007 We have a commodity supercycle oil prices went to 140. Every time oil prices go up 80% or more in a year, we got a recession. So the good news is we have some leeway With oil prices before, they actually definitely cause a recession in western economies, we’re pretty far away from that. I think we’re up 20% year on year, 30% year on year. But if we get to 121 30 a barrel, that’s for sure going to create a recession. And I do worry about that. As far as energy’s effect on inflation. You know, I just actually was doing this math a couple of days ago, there’s actually not much of a linkage between oil prices and CPI, PCE core headline no matter how you want to cut it, in terms of when oil prices spike, does that affect inflation. And the reason is, because when oil prices spike, you get a recession. And so you get this kind of countervailing effect, it’s not a very welcomed effect, obviously. But if oil prices spike, you don’t get a spike in inflation, you actually get a down a downdraft because the economy slows so quickly that prices have to come down. So we don’t want that kind of recession. We don’t want that kind of outcome. But oil prices don’t generally create inflation. In most parts of the cycle, what they do is they create a recession, that brings inflation down again, not what we want, but that dynamic is somewhat offset one against the other.

James Connor 31:07
And of course, we have to talk about Bitcoin. That’s the SEC approved Bitcoin ETFs in January of this year, and as a result, we’ve seen hundreds of billions of dollars flowing into these into these products. Once again, you’re not concerned about this level of speculation.

Nick Colas 31:27
I actually have covered Bitcoin for a long time, I was actually the first Wall Street analysts to put pen to paper and write for clients to show clients about it back in 2012, and 2013. So follow the space a long time. And what I think we’re seeing is, you know, what was was started as a science project basically has become is becoming an asset class, people believe in this space. And it’s not like gold in that gold, you know, half of gold demand is jewelry and physical use demand real demand, and half of gold is for investments, central banks are things, Bitcoin only has a speculative investment part of the equation. So it’s always gonna be more volatile than gold. But there are a class of people. And that causes growing the view digital assets, digital currencies as a aspiring asset class. And that’s, I think, whether you think it’s valid or not, it’s just a fact. That’s the way the markets heading. And so do I worry about Bitcoin being a sign of speculation, not not especially speculation to me, I worry when it has big moves, and then begins to fall apart. And Bitcoin has done that several times. But it’s still around. And so I think it’s for some people, they want to consider an asset class, and that’s fine. I personally think it’s interesting. It’s not yet an asset class by any means. But there’s enough people who think that way. And the ETF approvals kind of show that even the SEC says that’s an okay thing to try that I’m not super worried about bitcoins move being indicative of some venture market top or excessive investor enthusiasm across asset classes. It’s kind of particular to those digital currencies.

Andrew Brill 33:01
Chris Casey of WindRock, Wealth Management joined Wealthion and expressed real concern about rough times in 2024, due to some of the economic indicators he’s seen.

So let’s talk about the current market a little bit your your view on the economic situation or how things are playing out and and not we’ll get into your outlook. But what do you think, what do you think of things right now? It seems like we can’t get in, we have inflation somewhat under control that last 1% is being really, really stubborn. The jobs report just came in way above expected. What What’s your take on the economy as we sit right now?

Chris Casey 33:39
Well, see we had an earthquake in New York City.

Andrew Brill 33:41
Yes, we did.

Chris Casey 33:42
We have a Eclipse here in a few hours. It’s what were signs do we need that there could be trouble down the road. And if this is 1000 years ago, you know, people will be writing for the hills. But right now investors seem to take a mentality of I wouldn’t call it necessarily irrational exuberance. But I would call it irrational complacency. No one’s very concerned about the markets, financial markets, no one’s very concerned about the economy. There’s even headlines now let’s say all these people have predicted a recession, let’s say 912 months ago, are now kind of throwing in the towel and saying we won’t have one, they have a different view, I do think we could be in some really rough times and 2024. I do think it’s very likely we could have recession. I think there’s some very ominous signs pointing in that direction. And on top of that, we’re gonna have potentially some strife with the upcoming election. And then even up for the end of the year, I think eventually, we’re really gonna be talking about a solvency crisis for the United States dollar.

Andrew Brill 34:42
So what are the signs you’re seeing that kind of point you into that trouble you see in 2024?

Chris Casey 34:49
Well, I think it’s important to point out first of all that a lot of people, a lot of pundits, a lot of economists, a lot of government officials will talk about whether or not we have recession, and for the most part they’re reading tea leaves right there just looking for particular signs. I mean, Greenspan was famous for this, you may remember articles about him like in the bathtub studying steel production, output. And if you don’t have a theories of what causes the recession, you can’t weave all these indicators together, it’s not really going to be meaningful, either magnitude or timing, or probability. And, you know, I particularly subscribe to the Austrian School of the business cycle, which blames the Federal Reserve or any central bank for recessions explains all phenomena that we see within a recession. And probably the best indicator of whether or not it’s playing out in the Federal Reserve of business himself is the the inverted yield curve, typically when the yield curve inverts. So the short term rates are higher than longer term rates, you will see a recession anywhere from say six to 22 months after that red, we’re at 115. So right, right, kind of in the kill zone of where we would expect something, that doesn’t mean it’s gonna happen right away. But it would argue that people should be more concerned than less conservative.

Andrew Brill 36:05
So let’s talk about the interest rates. It’s obviously the one topic a lot of people are talking about that now seems that everything that I’m reading now is like, oh, maybe two cuts, we began the year at six or seven, then we will whittle that down to three. Now we’re down to two, where do you see interest rates going in? 2024?

Chris Casey 36:28
Well, I’m not sure. But I would argue that the only people that are less sure than me would be the Federal Reserve. I don’t think they know. And I think they’ve proven time and time again, that they’re extremely reactionary, right. They, whether they’re predicting something, for instance, every year, they’re coming out with their range of what they think GDP will be, or rates, they’re always wrong. And that’s just wrong. But typically, the the accurate number is ultimately outside their very range. Right? So in looking at how they reacted with inflation over the last couple of years, right, it was transitory. Now, what wasn’t them, you know, everything they do is reactionary. So I don’t think they know, they’re really trying to have their cake and eat it too. Right. So I think what they’re trying to do is they, they, they want to so called curb inflation, that’s definitely but the same time they want a high stock market. And what it talks about with dual mandate for the Federal Reserve how they was really triple bank, they don’t even know why they called dual mandate, because they have to have reasonable interest rates, lower price level, you know, low unemployment. But the fourth undocumented mandate would be that they want a high stock market and some mistaken belief that it’s good for the economy, but they’re constantly trying to push that and Jawbone the market off. And I think that’s what they’re doing here. They’re always dangling the idea of they’re going to cut rates. But whether or not they do I don’t think you know,

Andrew Brill 37:50
They look at the CPI, and they look at the numbers, you know, people spending money, they can’t get that number down. I think it’s around 2.8 2.9, they wanted it to, if that starts to creep up, do you see a scenario where they can actually raise interest rates, a quarter of a point or an eighth of a point just to try and try and inch that down a little bit more?

Chris Casey 38:15
I do see that. By the way, the 2%. Target is very strange. There’s absolutely no academic literature. Why should we tuba science, in fact, I think was yelling at the time, it said it’s 2%, because they want a margin before you get to zero and there’s nothing wrong with zero. I don’t know why they’re so scared of it. So I could see that scenario happening. But probably a bigger concern is I can see rates increasing, simply because the amount of debt that’s being rolled over by the federal government, right, so almost a third of the federal debt that’s been rolled over this year. And that’s those very serious issues for fiscal situation for the US government. And it should raise rates across the board in general.

Andrew Brill 38:58
Is it for the country? Chris? Is it as simple as cutting back spending and cutting things that, you know, raising taxes a little bit just to try and bring a little bit more money in? Is that how we get this under control?

Chris Casey 39:12
Well, I personally think that the the problem is so big, that it almost doesn’t matter what you do, it’s a major problem. So it would take the most draconian, you know, the it’s just politically not feasible to do what needs to be done. Number one is just to get a handle on entitlement spending right now, that’ll never happen in a political climate, no matter who’s in control of Congress, no matter who’s in the White House. So I’m pretty pessimistic on the long term fiscal chances US government. But yeah, it’s it’s a pretty easily it’s pretty easy formula. It’s just that something you could pass

Andrew Brill 39:49
The Fed says they don’t really do whatever they’re going to do with interest rates they want they don’t want to do a close to the election. How quickly do you think people think June July. Look, July is not far from me. It’s only four months from the election. So if they don’t really want to touch interest rates before the election, we’re getting really close to that danger zone, aren’t we?

Chris Casey 40:12
We are in July is also one or two months before the conventions, which is a big deal, right. Like I said before, I don’t know if they’re gonna do anything I suspect they don’t know. I suspect nothing’s gonna happen this year. They’re just trying to talk the markets up. That’s how I think it may play out.

Andrew Brill 40:30
How is this election affecting our financial markets? You know, there’s some that I know something one president is better for the markets, the other president is worse for the markets. How do you see it playing out at this particular point in time?

Chris Casey 40:44
Well, it’s hard to say because I actually suspect it’s not so much a matter of who wins. But who runs I’m not convinced that President Biden will be the nominee, I, I strongly suspect he will be replaced at convention, I could see that happening is the most natural time to do it. And Trump, I don’t know, it’s I first of all, I have to pay him a compliment. His stamina for his age is amazing. I mean, to run for president to oversee a business empire. And to deal with all these litigious matters at the same time is is absolutely amazing. Anyone that’s ever been involved in litigation, knows extremely stressful and time consuming. So I don’t know how he does it first of all, but they are determined not to have him run. So we have to see how that plays out as well. Thank

Andrew Brill 41:33
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