In this Weekly Market Recap, Andrew Brill reflects on the interviews that took place on Wealthion over the past week in another Wealthion Weekly Market Recap!
Andrew Brill 0:00 Hello and welcome to wealthions weekly market recap, I'm your host Andrew brill. I hope you enjoy this week's roller coaster ride of ups and downs. Let's hear what our experts had to say about it this past week. We begin with Caitlyn Long, who joined speak up with Anthony Scaramucci. Caitlin is an expert and advocate for cryptocurrency. She talked about the imbalance of supply and demand and how interest rates are misleading the economy. She also talked about strategies for lending with bitcoin and how leveraging Bitcoin is a dangerous game. Also, she touched on the troubles she's had with government policies toward crypto and the battles she's come up against. Caitlin Long 0:47 Inflation is also running hot. And so that's the dreaded stagflation. And we're seeing of a tug of war between Janet Yellen and Jay Powell. She is executing stealth QE, through the issuance of tea bills and the drawdown of a treasury general account, which pushes fiscal stimulus into the economy. And Jay Powell, his job is to try to offset that offset the inflationary effects of that. And so you actually have the the Treasury and the Fed, not in agreement. And that is an unusual situation. Andrew Brill 1:26 So talk to me a little bit about this, and, and we'll get into custodial custodia bank and crypto. But there seems to be a glut of money supply because of COVID. We pumped all kinds of money into the economy. And Janet Yellen is trying to do that again. But Jay Powell saying, Whoa, wait a minute, slow this down? How do we combat this? You know, where do we go from here? The obviously FOMC is meeting there's a consensus maybe rate cut in September, not right now. But once that happens, things are going to start to tick up again. And inflation could rear its ugly head. Caitlin Long 2:04 Well, the old saying goes, Milton Friedman saying it's inflation is always in everywhere, a monetary phenomenon. And a lot of folks will debate whether that's true, you certainly have things like like real shortages, that can cause inflation. But if markets are allowed to clear that those shortages will very quickly take care of themselves and clear. And and so the honest truth is that if all that spending that you pointed out, we didn't produce anything to backup that demand. And it's really simple. We did not have a supply of goods. I'm of course being I'm overstating it, but a lot of folks were literally locked in during the COVID lock downs not producing. And everyone who works is part of producing GDP. And if we have a lot of folks literally not working, are we obviously we're not producing GDP, and yet all that stimulus came in to replace folks income. So the supply demand got way out of balance, and that created inflation. Had we not done that. And had folks actually ventured out to work, we would not have had as much inflation as we're dealing with. Now. This is absolutely the after effect of that huge both fiscal and stimulus, monetary stimulus that took place during COVID. Andrew Brill 3:36 Are you a fan of a rate cut right now? Or do you think you know, what, just pump the brakes? And I think we'll be okay. Caitlin Long 3:42 Well, I actually, I don't make forecasts for a living but but at a high level, I'll say this, the most important the single most important price in the economy is the interest rate. That is the traffic signal that allows entrepreneurs to allocate capital across time and across industries. And that is the one price that should not be manipulated, it should be set by the free market. That is, when I say the one price, it is the most important price. And yet it is the price that is not allowed to be set by the market in the United States and in the Western world. And as a result, we get a lot of bad signals. I really, this hit home for me during the 2008 financial crisis when I was working on a trading floor at Morgan Stanley, and understanding why is it that the entire home builder industry made the same investment mistake in the same direction at the same time? The answer is they all took the wrong signal from interest rates. I like the way Jesse Powell the founder of Kraken says though, sometimes you build bridges knowing that you won't need them forever and you might blow up one end of it. And that's kind of how I think about starting a bank, this is something this is the really actually very, very heavy lifting. We knew it was going to be brutal from a regulatory perspective, it's been a lot worse than anticipated because we got targeted by by by folks, we got caught up in something illegal and far bigger than ourselves and overreaction to FTX by federal bank regulators, and a lot of illegal activity and unethical activity aimed at us. But we're here for the fight. And we've been at it for a while, and there's light at the end of the tunnel. Andrew Brill 5:32 So explain to me, you know, lending with Bitcoin, now, a bank and someone goes out wants to buy a house, I don't have the $600,000 worth of bitcoin to buy that house. Can you still lend? Because it's a peer to peer thing? Is there still lending that's going on? Or is the lender the peer to peer and I'm actually paying them interest back in Bitcoin. Caitlin Long 5:54 So two points. One is lending in a disinflationary asset like Bitcoin, it should only happen for reasons that are related to liquidity or tax planning. It shouldn't be for speculation. And the reason I say that is the moment you go above one to one leverage, if you take out more than one to one exposure, there will never be more than 21 million Bitcoins. And so you're insolvent, the lender is insolvent, the moment that they do that, and we experienced that with block phi and Celsius, among others, that got themselves massively leveraged. And then the then the proverbial bank run hit, and they didn't have enough Bitcoin to pay off the customers who were withdrawing. And they went into bankruptcy. And I do fear that the big Wall Street firms are going to have to learn that lesson the hard way, we can come back and talk about that a little bit later, because so many of the Wall Street firms are in the old paradigm, the old trap five paradigm, which is, which is debt based money in fiat money is all debt based. If you want to have a mind bender, if all if the US were ever to pay off all of its debt, there would be no money. Why? Because the dollar is an IOU. And so it's a debt instrument. In and of itself, there's nothing backing it other than the full faith and credit of the US government. But It's turtles all the way down, so to speak that in that regard. So it's purely a confidence game, there isn't anything backing it there used to be gold, which was a valuable asset that tethered the amount of credit created in the US dollar. And that's no longer the case, obviously, to the first question you asked with Ben on into gigantic money printing spree that will not be able to go on forever. But But back to the Bitcoin point. Bitcoin is an asset that does not it's a different paradigm. It does not pay interest because it doesn't need to it's a disinflationary asset. And what I mean by that is, you can either have an inflationary asset like the dollar that deflates with inflation, you can have a disinflationary asset with a very low inflation rate that holds its value over time or you can have a deflation deflationary asset that Ashley shrinks in quantity, bitcoin does not shrink in quantity, it it does grow in in quantity, I think just a little bit under 80 basis points point 8% per year right now, gold grows at about 1.6% per year. So bitcoins inflation rate is half that of gold right now. And the inflation rate gets cut in half every four years. But it never goes to negative. So I don't call it a deflationary asset. But back to your question, if that's the asset that you own, an asset that that that is growing in supply at a rate far slower than the rate at which fiat currency is growing and supply every year, then that asset is going to hold its value, it doesn't need to have to have a yield in order for it to hold its value. So if if you're investing in any bitcoin product that has yield, because Bitcoin itself does not have yield, ask yourself, where's that yield coming from? And if it's coming from someone going more than one to one leverage, you should expect that Counterparty to be insolvent. It's just a question of time before the market reveals that and if you happen to get out before the run happens, and the market reveals the insolvency of your counterparty, then you are lucky. But what is happening right now, just as a fair warning is folks that got out of Celsius in the last couple of months of Celsius operations are now being sued personally by the bankruptcy trustee. So you again do your counterparty credit risk homework, really understand if you're investing in Bitcoin that gives you a yield. Watch out. Andrew Brill 9:59 So how do we lend? how do we borrow? I guess if I wanted to buy a house, and I'm doing it with Bitcoin, let's say Bitcoin becomes the currency. How do I do that? Caitlin Long 10:10 Well, again, it's a new paradigm that's not a debt based paradigm. Bitcoin is money. That's no one's IOU. The dollar is money. That is the US government's IOU. Bitcoin is money that is not debt, the dollar is money that is entirely debt. So it's a completely different paradigm. So now the question becomes in a Bitcoin world, would we actually have much in the way of Debt Capital Markets? So let's let's pack unpack that in a couple of different ways. Some folks won't want to sell their Bitcoin for liquidity reasons and might just want to borrow against the collateral kind of the same way as you would take a home equity loan out against the collateral of your home. And some, for tax planning reasons don't want to sell it, a lot of people there are there it's very easy in the Bitcoin network to determine who's in the money. In other words, who has unrealized gains. And, you know, anyone who bought Bitcoin, obviously, at prices below where the price is today have an unrealized gain. And in a lot of cases, it's if they're American, it's an it's a long term unrealized capital gain. And so they don't want to have to sell it and pay the taxes. They'd rather borrow against the appreciated value. Those are two strategies that I know a lot of folks are using and there are places including Bitcoin, but you know, Bitcoin native companies that will lend against Bitcoin they have, they have US dollar and Bitcoin based loans. So that folks who don't want to trigger that capital gain can can temporarily borrow against the value of their Bitcoin and I do know a lot of folks who are engaging in that. I will say though, one of the phrases that I'm somewhat famous for is a fool and his leveraged Bitcoin are soon parted. At the Bitcoin Conference three years ago on stage with Sam Beckman fried I coined that phrase, and it kind of went viral when FTX failed because he was a fool. And his his leverage Bitcoin he and his leverage Bitcoin were soon parted for sure. But he, the the point is well taken that just don't go above one to one. If you're going up to one to one, you're fine. But don't go above one to one because the moment you do, you're in trouble. Andrew Brill 12:27 Caitlin, I know that you're not a big fan of Elizabeth Warren. I know that. She, she's dead set against crypto, and she's in charge right now. But she says that crypto can be used to spy on the United States to undermine Homeland Security and to launder money. You're now in an elevator with her? What are you seeing Elizabeth Warren that changed her mind? Caitlin Long 12:52 Well, I think she has a very different paradigm than I do. She has a paradigm where she wants total control. She wants total visibility into everything everyone does. She wants the ability to block people from speaking freely, and she wants the ability to block people from transacting with their own money freely. And she has said that she wants a central bank digital currency. So to be honest, I'm not sure it's worth even having that elevator conversation with her. Andrew Brill 13:21 Jonathan Wellum of our partner RIA rocklinc investment partners join wealthy on and thinks that the US deficit can lead to a recession. He also explained that remote work has taken a severe toll on commercial real estate and regional banks. James Connor 13:39 And there's an ongoing debate on whether or not the US is going to slip into recession. What are your thoughts? Jonathan Wellum 13:44 We step back and we don't get is preoccupied with recession or non recession? I mean, it we think about it, but what's going on in the US right now, which I think is what stimulating it more than almost anything is these massive deficits. So I mean, they're they've got 2 trillion plus, and it's probably two and a half trillion, if not more of deficits that they're incurring, which is, you know, it's it's high single digits, percentage of their total GDP. And so, you know, if you're spending that kind of money, which is completely and totally unsustainable, yeah, you can sort of make your economy look like it's a little stronger. And so if there's any kind of reasonable balancing of budgets, I don't, I'm not, I'm not talking about a balancing budget, but even just pulling down the deficits, that economy would be in a recession. And it would be much slower. They've also had a massive inflow of immigrants across the border. And so you've got government spending on the municipal level, the state level and the federal level to support these 10 million 15 million people across the border. So there's just a lot of stimulus going into that economy that, I think is there's no way it's sustainable. And so we when we look at buying businesses and buying investments, you know, we're going to discount that and try to be very careful about what we're prepared to pay and look for businesses that are not, you know, we're not in order Notley impacted by some of those trends, which, again, are not sustainable. James Connor 15:03 So in spite of this strong q2 GDP number you think the US economy is slowing down. And one of the things that it's really impacting is the real estate price. And I want to speak about commercial real estate prices and this whole work from home thing, remote working, it's having a big impact rate across the economy, especially with commercial real estate, Moody's recently came out with a report saying vacancy rates in the US hit an all time high of 20.1%, in q2, high, or I should say, the highest since 1979. That's when they started taking those records. And then if you look at some cities, like San Fran, everybody reads a book the problems happening in San Francisco, but their vacancy rate now downtown is 35%. And that's up from 28%, just a year ago, even in the city of New York, it's approaching 20%. And I want to get your thoughts on this what's happening within the commercial real estate. And if you think this can be if this can lead to a much bigger problem in the US? Jonathan Wellum 16:03 Well, I mean, it is a big problem. There's no question about it this numerically alone, it's a large issue. And it's and it's not going to go away, because the trends I think are well established, I think if you talk to businesses, yeah, they want some people back in the office. But they're, they're very much prepared to have people work two to three days in the office, and then the rest of the days at home. And sometimes even less than that. And you could take a company take an area like San Francisco, and it's highly tech oriented. So if there's any place you can work from home and be sort of in a tech company. And so, and just the the power of the employees over the employer, in some cases, if they're highly trained, they have a lot of leverage over the employees over the employer in terms of where they want to work. So I think this is a longer term trend that is here to stay. And so therefore, we're going to have to burn through the excess. And if we burn through the excess, you want to be careful about who's holding the bag in terms of these buildings, who's going to have to take the write downs and write these off. And in the United States is largely a lot of the regional banks. It's not as much the the massive, you know, the money center banks, the large ones, the JP Morgan's of the world, and so forth, I think are much better positioned in terms of weathering this, but some of the regional banks, I'd be careful what we don't own any. And I think that, yeah, there will be some write downs. I mean, it's been largely telegraph to the market, we know it. So it is getting, I think, priced in to some of the businesses and, you know, the businesses, you know, the banks do have a fair bit of capital that they can sort of weather this I mean, our view has always been in the last couple of years is that the banks will just have a tough, tough time. We're not predicting they're gonna blow up or anything like that. But it's just one of those areas, we say, Hey, do we really need to be here? Can we figure this all out? Or is it just easier to go somewhere else, it's like Warren Buffett often says, he's got this pile on his desk, and he says, you know, too hard, too hard pile, in some cases, some of these businesses or industries and what's going to happen to try to spend all the time to figure out all the little nuances, our view is, hey, if we can find a better area to invest in a better business is more predictable. We don't have to spend all this time and and then end up wrong at the end of it, then we go somewhere else. But no, there's going to be a lot of write downs, you've seen the It's horrifying to look at some of these real estate. You know, they're worth $500 million a year ago, now they're worth 200 million. I mean, it's a $300 million reduction on something that's probably been leveraged, you know, 75, 60, 75%. I mean, that's basically wipes out all your capital. So, so yeah, this is going to have to run through the system. And we just warn people, be careful, just try to minimize your exposure to the businesses that are in that space. And of course, this could lead to opportunities, also some bottom feeding and people being able to step in. But I think that's going to take a while because there's been a systemic change in the demand for that particular square foot of real estate. And that's not going to change anytime soon. So be very, very careful and watch your exposures, and particularly leveraged financials, just watch what your exposure is to that space so you don't get stuck and, and get disappointed me just having an investment that goes nowhere. For the next couple of years with the horrible thing to write. Andrew Brill 19:10 This show is sponsored by better help in these crazy times we live in, it's probably the last thing on your mind you and your self care. 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James Bianco of Bianco research spoke to us this week and reiterated what Jonathan Wellum had to say about the commercial real estate sector, affecting the regional banks. He also touched on the move of cash from large companies to small cap stocks, and inflation versus unemployment. He also talked about politicians weaponizing Bitcoin. James Connor 20:47 Many of the banks already reported here in the last couple of weeks, and we saw very good numbers at JP Morgan City, Goldman Sachs, many of these banks are trading significantly above the s&p. So pretty big outperformance Are you surprised by how these us financials are performing in this environment. Jim Bianco 21:05 Not surprised by how they're performing. I mean, let's also put into perspective that the banks, especially JP Morgan, had been horrible underperformers for the last two years or so they've been awful to own them. And so they're finally starting to get a rebound. And a lot of that rebound is coming with this big rotation that we've seen out of the max seven stocks and into the smaller cap stocks as well. The other hope that the banks have is the belief and it's not incorrect that the inverted yield curve, which has been now almost two years, is getting close to an inverted. And if banks borrow short and lend long, that would actually help their net interest margins, as well. So the banks I'm not surprised at the rebound that they've had, they've been down for so long. And with the rotation in the hope for and net interest margins, and I am helping, that they are going to rebound now whether or not that can be sustained, say through the end of the year and into 2025. I have my doubts on that. But for right now, they've been a very good place to be. And I think over the near term, they will continue to be James Connor 22:18 And were there any concerns when you look at JP Morgan or Wells Fargo any concerns in terms of their loan books? Jim Bianco 22:25 not really, at this point, I mean, the only concern that you would have is to get all round, commercial real estate, especially office. But that is such a well known story at this point. And it is so in the in the price of the stocks. In other words, office is a disaster. And the banks have a huge problem because of office. But as I pointed out earlier, they've been suffering terribly for the last two years or so in part because of that. So yes, that is a issue. But I don't think that what they reported, should make us think that it's better or worse than the already glum outlook that we had for Office real estate. James Connor 23:09 In Toronto, still a big issue with people going back to work. If you look at any major office building in downtown Toronto, on a Monday, you might get 10% of the tenants going to work. Tuesday, Wednesday, Thursday, it's 50 to 60%. And then on a Friday, it's down to 5%. How does that compare to what's happening in Chicago. Jim Bianco 23:30 Same thing everywhere, you know, in pretty much the developed world right now. Or maybe I shouldn't be that broad, I should say more like North America. You know, remote work is a thing, it is not going we're not going back, we're not going to go back to where we were in 2019, or anything like that. So that this is part of the issue around Office real estate, that if companies are only utilizing, as you pointed out, maybe 50% of their office space on a weekly basis. In other words, if you have 100 employees, you'd have 500 visits to your office a week employees five times, and you're getting about 250 visits a week, to your office from your employees, you're only half utilizing your space. And so there's been a downsizing you've seen of a lot of employers on their space. And I don't think we're going to go back. We're not going to go back on this. People have asked me all but what about the next recession? Won't everybody come crawling back to the office? Like no, it'd be worse the next recession, your employer will say, I can't give you a raise, but take another day a week at home. And you'll think that he gave you a raise. If you want people to come back to the office, tell them that they get paid x, but if they come to the office every day, you'll give them 15% more money, but nobody thinks that way. So since we're not going to pay them a premium to come to the office. We're not going to see this remote work thing go away. James Connor 24:59 A lot of this money that's been flowing out of Nvidia and the other large caps, it's going into the small caps. And the Russell has put in a nice move here in the last couple of weeks. And I'm really surprised given that a lot of the smaller cap stocks are have a higher risk level, they their cost of capital is much higher. How do you explain this? Why is the Russell putting in such a good move? Jim Bianco 25:20 So, the simple answer is I can't. But I'll offer you a simple, I will offer you some ideas. First of all, let's talk about the rotation out of like the max seven in the big cap stocks into the small cap stocks. It's the largest ever measured by many different metrics, whether you're looking at the performance of the Russell 2000, to the Russell 1000, or maybe the max seven stocks to you know, the NASDAQ composite or something like that to the Russell 2000, or back seven stocks to 2000. So you've seen this gigantic move that we've never seen to this degree. And all of the other moves that were behind it a little bit smaller, were 2020, 1987, 2008. In other words, when do small cap stocks massively outperform large cap stocks, when the stock market is collapsing, and big cap stocks go down a lot faster than small cap stocks. This time, it's been when both have been rising Well, or at least mom, you know, a 4% correction in big cap stocks, and a big vertical rise in small cap stocks as even that's unprecedented to see that kind of rotation. So now that I've said that this is wholly unlike anything we've seen before, what do I think could be behind it? My best guess is the ETF zation of the stock market. And that it all started really on July 11. July 11, was when the shocking CPI report came out at negative 1/10 of percent. And I think that pretty much hundreds of 1000s of investors looked at that number and hundreds of 1000 investors in the same minute came to the same idea, oh, this means the Fed has to cut rates. And since they are going to cut rates and lower the cost of capital, this is going to help more traditional companies. So therefore, I am going to buy IWM, the Russell 2000 ETF, or RSP, the s&p equal weighted ETF, or something along those lines. So basically, everybody got the same idea for the same two or three trades all at the same moment. And all rushed into it. And we saw this massive rotation unlike we've ever seen before. Now, of course, I'm surmising this. I'm conjecturing this, because we've never seen this before. And we don't really understand what quite happened. But that's my best guess as to what I think happened. James Connor 27:52 the last time we spoke, you made mention of the fact that if the unemployment rate goes from 4% to 5%, that's going to cost the economy 1.7 million jobs, but inflation at 3%, or three and a half or 4%, that impacts 300 million people. Jim Bianco 28:08 Right. And, you know, keep in mind that if the unemployment rate goes from four to five, that means you have an extra 1.7 million unemployed people. But basically what I said before, some of those 1.7 million could just be new entrants to the country without a job, as opposed to somebody who actually had a job and lost a job. But that's where he's going. But the comment that I made before was that, well, people don't appreciate that, when the inflation rate stays to three, three and a half percent. That impacts 100% of the population. Even Elon Musk, the world's richest man is impacted by inflation because he's going to see prices at Tesla in prices at SpaceX and prices at Twitter, squeeze his margins. People that are on public assistance are going to see prices at the stores that they shop at go up faster than their public assistance, and they're going to get squeezed. And everybody 100% of the population is hurt by three to three and a half percent inflation. Whereas if the unemployment rate goes from four to 5% 1.7 million people are hurt. Maybe it's less than that because of the migrant thing. And to give you the crass calculation I was talking about the last call that we had together is that if you told 300 million people 1.7 million people need to take some pain. So the other 298 You know, point 7% of the people could see some inflation relief. They probably say sorry, you 1.7% But the other 298 million could definitely use some inflation relief. The point I'm trying to make by making it this way is inflation is worse than unemployment. inflation needs to be arrested, even at the cost of unemployment. If it comes to that it hasn't yet. And therefore, the Fed should be on the lookout to try and arrest this high unemployment. inflation rate, excuse me, but they don't seem to be they seem to be thinking that it's the war is over, there is been one, and that they're now start starting to talk about cutting rates. And I again, I'll just emphasize, I don't think we're there yet. And they shouldn't be doing it. But like I said, I don't get a vote at the Fed. They seem to be ready to be cutting rates. James Connor 30:37 You always have an opinion on Bitcoin. So I got to ask you about this. Trump was one of the keynote speakers at the Bitcoin Conference in Nashville recently. And he had a lot of positive comments to say about it, and he was eating a lute alluding to the fact that he would initiate a strategic reserve funds similar to what they have, or oil or even gold. What are your thoughts on that? So what are your thoughts on Bitcoin? Jim Bianco 31:02 Yes, you undersold it, Trump went to Nashville, the big Bitcoin Conference, and told them everything they wanted to hear, he's gonna fire gear against, or he's gonna get the industry involved in writing regulations for crypto, he's gonna have the government never sell any of the crypto that they've acquired over the years because of fraud, which is the basis of this national National Fund. He loves crypto, he said, I love crypto. He said he's gonna end operation choke point 2.0, which is where the government has been cracking down on any bank that services a crypto, you know, services a crypto firm, you know, so he gave them everything he wanted, and the price ain't going anywhere. Now, part of the reason that the price ain't going anywhere might also be that at the same time he was doing this and the Democrats were offered Kamala Harris come to speak to our conference, she refused or turn them down and be more specific. And just today, the day we're recording price getting crushed, because the government has now moved some of the crypto that it owns do another wallet, which is supposedly a prelude of selling it. The reason that government owns crypto is they acquired it through Silk Road and mount Gox. These were, you know, famous frauds in the crypto space where the government investigated the frauds and then wound up acquiring the Bitcoin through those frauds. So it's almost like Trump said on Saturday, I'll never sell Bitcoin. And the Democrats on Monday are saying Fine, we'll sell our Bitcoin right now. So it's almost like back in your face. Now, the reason I I express it that way, is it's looking like if you are interested in betting on the election, you know, whether Trump will win or Harris or when bitcoin is come now the measure that you could do it, it's become so politicized, that it's almost like an election futures on whether or not Trump or Harris is going to win over the next few months. And that's a problem for Bitcoin, because it's getting wrapped up in politics. It always wanted to be this nonpartisan, decentralized, freedom of choice kind of asset. And all of a sudden, it's starting to look like a Republican asset that the Democrats are attacking because it's a Republican acts as that this is a problem for Bitcoin as we move forward. Now, let me come back. I own Bitcoin. I own some cryptocurrencies. I am very bullish on the specter. I liked the alternative financial system that they're building, I think that it is needed, the disruption is worth wild. But it constantly gets sidetracked with these kinds of things that I just described. And it just makes the eventual creation of this alternative financial system that much harder and that much further out into the future. Do I still think they can do it? Yes. But all I keep doing is just pushing out my timeframe, saying no man no more time where it's just going to move, meander about or maybe sell off and it isn't quite going to get there. And it's just going to take longer and longer and longer to do it. Now. Eventually, if it just keeps doing this forever, you might start to think maybe it'll never do it. I'm not there yet. I'm not quite that pessimistic. But don't don't test it. Don't keep don't keep getting sidetracked by becoming a Republican asset or something like that to make people start to doubt whether or not you'll ever fulfill that promise of being an alternative financial system. So Bitcoin has been struggling since March it hit 74,000. In March, as we're recording, it's around 66,000 right now. It hasn't been able to make any forward progress. It's had to have it in words have its inflation rate. It's had the success of the new ETS. It is had Trump, who's who is the leading candidate to be president? Give the Bitcoin Conference, everything they've ever wanted. And I would omit and people say it's gonna go to 100,000. And my answer is why isn't it already there? Now? What more does it need to get to 100,000? It is it making this progress, because there's a lot of other messy crosscurrents that are getting in its way. First timer. Andrew Brill 35:24 Kathy Lian, Managing Director of BK Asset Management explained the slowdown of oil prices, US dollar and policies, and also Central Bank's hoarding gold and driving up the gold prices. James Connor 35:39 And I want to ask you about the price of oil now because it's been hanging in between 70 to $80 a barrel. And there's a lot of speculation as to why it's still so low. And some people are saying is because of a slowing economy and global economy and a slowdown in China too. And others are saying, well, it has to do with money manipulation going on with the Biden ministration. Right. They're blending, they're selling more oil into the global markets, and that's keeping the price down or suppressing the price. Do you think well, what are your thoughts on the oil price here? Kathy Lien 36:13 I think that the slowdown in China and their lack of real substantial stimulus is playing a very big role. And the pressure that we're seeing in oil prices, they this month, they had the third plenum. And traditionally what this big meeting, the third plenum these planners are supposed to provide is the platform to announce major stimulus packages. And the Chinese government fell short of that there was a lot of expectations going into this meeting. And even though they you know, see all of the red flags, they see their economy slowing, for one reason or the other, they have not decided to come out with that major fiscal stimulus package that the economy needs. So you know, stock markets have been disappointed. oil markets have been disappointed, and investors have been disappointed. So I think China plays a very large role in this. And, yes, they came out later on, and they, you know, kind of reduced, you know, some of their interest rates on the short term and long term basis. But it's not the on the ground fiscal stimulus that is needed to really jumpstart the economy. So I think that combined with the fear that the US economy is also slowing. So it's a reality that China is slowing along with the fear that the US is slowing, I think are playing the biggest role in the pressure on oil. Of course, you know, all the thoughts around what the Biden administration doing is not helping either. But I think the bigger story is really global growth at the end of the day. James Connor 37:44 I want to talk about foreign exchange. Now that is your focus. And I want to get your views on the US dollar and the US dollar in relation to other currencies. And I guess the US dollar has been relatively strong Now Trump, he's of course he's campaigning. And one of the policies he's saying he's going to implement if he becomes president, is that he's going to weaken the US dollar and therefore stimulate manufacturing at home. And I want to get your views on that. Kathy Lien 38:14 Yes, I mean, I think that is one of the greatest potential impact if he wins the election, which is that unlike, you know, Biden, or some other presidents who have have stood steadfast to the US a strong dollar policy of Trump, as well as Vance, have been quite clear that they support a weaker dollar. And so you know, there is a while the President does have a direct impact on, you know, dollar policy, and you know, the direction of the dollar is much more contingent upon where interest rates are headed, then, trade policy, especially near term trade policies, I think, you know, as a result of the election outcome, if Trump wins, that we could certainly see a knee jerk decline in the dollar, the dollar has had a really great run, and 2024. We're nearing the election. And I think that you're starting to see an unwind in the greenback. And if we do see, the polls show, a clear Trump victory that could also facilitate a further unwind, especially if it is tied with a Fed easing cycle. So I think that the landscape that we're seeing on a political as well as economic and monetary perspective does start to favor dollar weakness in the second half of the year. James Connor 39:35 I want to move on now. And I want to get your thoughts on gold because we can't talk about the US dollar without discussing gold. And there's a very strong negative correlation between the US dollar and gold. Gold is still up, I think around 15% on the year and this move is once again predicated on lower interest rates, which will result in a lower dollar and a higher gold price. But I want to get your views on gold right now. What are your thoughts? Kathy Lien 39:59 I think that's where it is. It's exactly what you said, which is that with the prospect of US interest rates falling, the US dollar, you know, seeing seeing its peak, I think that we're going to see, you know, more gains in gold prices. But it's not just that it's also the possibility of a deeper correction. And stock September, as a as one is, historically, one of the worst months in the stock market, August is, is neutral to slightly negative July tends to be a really good month for stocks. And we saw that, so we're moving into a period where equities are vulnerable. And when equities are vulnerable, that tends to be really good for gold. And so I think, you know, going into September, a little less August, we're more into September, we should see, you know, more demands for, you know, diversification, as investors look at interest rate cuts, and look at slowing growth there look at the weakness and the lack of return and equities. And they turned to gold for diversification. James Connor 40:57 And I gotta ask you about the central bank buying because this is another reason why it's been moving higher. But in 2022 and 2023, 25% of all gold production has come from central banks. And I guess my question to you is, do you think the central banks are keeping prices artificially high by acquiring it so aggressively, because when you look at the gold equities, or the gold mining stocks, they're not pricing in $2,400 gold, the price they're factoring in is much lower, like 16, depending on the stock and whose research you're looking at, it can be anywhere from 1600 to 1800. Kathy Lien 41:34 I think absolutely central bank buying has been one of the greatest supporting factors for gold. And I don't think that that's going to change anytime soon. I think the political landscape and who becomes the President, for the next four years is going to affect that as well as US International Relations, you know, start to affect Central Bank buying. But for the most part, I think, you know, a lot of countries around the world, especially the ones that don't have the most favorable relationships with the US have seen a good reason to diversify out of US dollars. And if they see the landscape, and they see that the dollar is potentially weakening, which you know, before, they may feel like it's more FOMO, or they're missing out on the strong dollar rally. Now they're seeing the Federal Reserve is stepping up to the gate and they're lowering interest rates, and there's diminishing returns in the greenback, that may give them an even stronger case to diversify into gold. Andrew Brill 42:23 Thank you for watching this week's recap and don't forget to head over to wealthion.com for a free no obligation portfolio review with one of our registered investment advisors. And please follow us on social media for the latest news and information to help you invest wisely. 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