ATENCIÓN: Bitcoin y las acciones van a subir MUCHO más

[0:00] And so you have this powerful tailwind in for earnings. At the same time, you're getting uh you have this problem that keeps requiring policy intervention um in the form of financial pressure and monetary debasement. That is a reason for stocks to be at or near all-time highs. And it's one of the reasons why we think stocks will go to make significant highs from here uh over the next 12 to 18 months. In our view, we don't think this bull market is over. What would stop it? What would stop it? What's going on guys? Today we got a great conversation with Darius Dale. In this conversation, we talk about the Bessant bluff, the Bessant bazooka,
[0:30] what's going on with interest rates, what's going on at the Fed, what's going on at the Treasury, what's going on in the economy, how all of this is tied together, and why so many people are upset yet so many people are getting so rich. All of this is tied together in a way that you probably don't understand, but if you listen to this conversation, you will. Here's my latest conversation with Darius Dale. All right, Darius, I want to talk about the Bessant bluff. [laughter] You like that, huh? You like that? No one used that one yet. Is he bluffing or is he got the goods? Can he intervene in the market and get everyone
[1:00] back on sides or is it just a bluff? [laughter] I apologize in advance, Scott. Uh [laughter] you didn't think that was coming, huh? >> Oh, no. No. Look, you know, I'm here to speak my mind and and say what the data lead me to tell people. And and ultimately, I think the uh I think your characterization is partially accurate. I don't think it's fully accurate because I I do believe we're in a fiscal dominance regime. And ultimately, if the bluff fails, then he's got backup. >> And we know what backup looks like. It can either take the form of an expansion
[1:30] of reserve management purchases by the Federal Reserve. Uh we could see we're pro we're going to see in our opinion a substantial degree of a relaxation of bank regulation that will create uh the balance sheet capacity for them to uh you know address this kind of supply demand imbalance in the Treasury bond market. And if and if that's not the preferred path or if that a bank deregulation process takes too long, you could actually see the Fed come out, you could see Beston sort of to direct the Fed uh to come out and essentially say, "Hey, look, we need to cap yields at a certain level uh in order to achieve
[2:01] our, you know, they'll make it up. You know, they making all the stuff up the whole time." Uh by the way, uh they'll make up, you know, this is what we need to do to achieve our price stability mandate or our labor mandate or, you know, or our moderate long-term interest rate mandate, which by the way, that's the Fed's third congressionally stated mandate that no one ever talks about. So, there's the Bessin bluff, but I think it's backed up by the Bessant bazooka. >> Who? What's the bazooka? >> That he has unlimited firepower. >> This man brought a a butter knife to a gunfight. What are you talking about? $6 billion of buyback skin.
[2:31] >> Yeah, cuz he cuz he all he's doing he's just testing. He's like uh I think of it kind of um people think of the US government as like uh America's army in a war. And what we learned over the last 25 years, one, we shouldn't be in foreign wars. Another topic. Uh but is the insurgents they understand something that America had a hard time learning for a while. >> Yeah. >> What they used to do is let's say that there's a base somewhere in the Middle East. >> They would test. So maybe they send one guy over. He takes a couple shots, runs
[3:01] away. >> How'd they react? What' they do? Did they all of a sudden get up and go full security? Did they send someone after him? What weapons did they have? What vehicles? How many people? the next day somebody else from a different angle and they just kept kind of proddding and proddding and prodd and then they would learn and then they would start to understand who they were up against. >> Yeah. >> And as Americans we knew what they were doing. It's not, you know, you're not that stupid. You're like, "All right, that guy just shot at me. That guy's got a camera." >> Yeah. [laughter]
[3:34] >> Audible. Audible. >> We need to do something differently. Yeah. So that's kind of to me what Bessant is doing is he's like, "All right, if I go here and I say I'm going to go to six billion, what happens?" But he knows that he could throw the kitchen sink, but he kind of doesn't need to do it yet. And so he could use words. He could do a little proddding. He's kind of like trying to figure out where's his pressure points. But I do think at some point if the market keeps calling the bluff, then he's like, "All right, you guys want to test me?" He's got a lot of
[4:05] firepower. He's got a lot of backup firepower to be clear. Uh and I agree with your your theory here that he's sort of proddding the market. Like look, ideally he would not have this problem set, right? Ideally, that's the ideal set. You think that's what he thinks? Yeah, exactly. Ideally, you wouldn't have to do any of this. [laughter] That would be that's the ideal problem. But since you can't control the fact that there's a geopolitically driven supply demand imbalance in the Treasury bond market, he has to respond to it with policy intervention uh in order to do his job. By the way, he's just doing his job. You know, his 100% his job to get financing costs down and and capitalize the US
[4:35] government. He just just to be clear for folks, I do think that he is uh one of the most clearheaded communicators when it comes to what is happening. >> Yep. >> What are we doing in response? >> Y >> and I think what sometimes is taken as his illreverence for the critics, etc. >> is actually what we should have had more from other Treasury secretaries or Fed chairman. Yeah. Because what it allows [snorts] him to really do is he's kind of just like, "Hey man, here's the game
[5:05] being played on the field." >> Yeah. >> I I think of it as you know what Fisher chess is. >> No. What's that? >> Fisher chess is uh when they mess up the pieces at the start of the game. >> Oh, interesting. >> So, um I know somebody uh who is one of the top people in the world at one minute Fisher Chess. >> Wow. >> He's excellent. He hates when I bring it up, so I'm not going to say his name. Uh Evo. Um, and uh, [laughter] the whole idea is when you start the game, it's just what what is the outlay of the pieces? Like you got to start from that point. >> That's kind of what he's doing, right?
[5:35] Is he's like, "Look, man, the chess pieces are where they are. I didn't put them here, >> but I got to play the game. I got to win." >> Yeah. >> And that kind of feels like he's the right guy for the job. >> I've been saying this. He's one of the, you know, certainly in the in the modern post-war US economy and maybe in the since the turn of the, you know, the 19 turn of the 20th century, he's probably the best fit or or Treasury Secretary. Um, you know, we've seen in in in terms of his understanding of all these dynamics. Like a lesser Treasury Secretary would be either getting dragged by the market and not
[6:05] understanding the full scope of the game. Like it's very clear to me that he understands that there is a supply demand imbalance in the Treasury bond market. Why else would you be intervening alongside Japan's Ministry of Finance to defend the yen? He understands the circular nature of the all this. The US is a net international investment deficit economy. We have a current account deficit of 3 to 4% annually. We need to find 3 to 4% of our growing GDP's worth of capital every year just to have the same level of economic outcome, let alone growing the economy. And so, you know, this is a big problem in the context of foreigners
[6:35] owning 30% of the market, the private non-bank sector owning 60% of the market. now up from 36% in the in end of 2021. And so you have all this you have such a change in the composition of the treasury ownership that now incremental units of supply will be met with incremental requests for higher Xanti yields. That's essentially the condition that that's the fisher chess condition that he's inheriting and he inherited uh at the start of 2025. And so you know we can quibble with his communication style to your point. Um, we can quibble with
[7:06] what at times seems like a a a touch of arrogance at some point. Um, but I think it's coming from a place of saying, "Look, you guys don't get it. This is a big problem." He can't come out and say it's a big problem. By the way, I can say it's a big problem. It is a big problem. [laughter] He could think it. He I know he thinks it otherwise he wouldn't be taking the policy action that he's taken. Uh, but at the end of the day, I think he is responding to the appropriate thing to respond to, which is the supply demand imbalance, the geopolitically driven supply demand imbalance. when uh Duck published the uh OpEd that was AI
[7:36] written um and everyone freaked out >> which by the way this is Stan Drunken Miller. Who cares if he uses AI to write his is is this is Stan Duck and Miller. The man did 30% annualized returns with no down years for 30 years. Go find me another investor in history who's ever done that. >> Bernie Maidoff. >> Yeah. Exactly. [laughter] Exactly. Bingo. All right. Do you think that Bessant and Duck talked and maybe Bessant encouraged him to publish it? That's my standing theory. And the reason is because everything that was
[8:08] said in that piece, I believe best in believes. >> Yeah. Of course he believes. Yeah. >> He just can't say it. >> Of course. >> So it's very helpful if one of your best friends says it publicly for you. >> And then you could take it and it's like going to the teacher say, "Look, somebody else said this." >> Yeah. >> You know, hey, we we should uh he's smart. >> Yeah. >> The messenger is just as important as the message. >> Yep. And if you're drunk, you weren't going to write that unless maybe you got a phone call. >> Yeah. >> From your friend and you on vacation, probably somewhere in the Mediterranean. Hey man, hey Grock, write this for
[8:39] me. >> Yeah, >> right. Let it fly. [laughter] >> Let it fly. I love how you think it was Grock, too, by the way. >> Yeah. He's like like write this thing for me. He he literally has it sent to the, you know, Wall Street Journal or whatever. And I just imagine him closing his laptop. Say, "Yeah, well, >> good luck, guys. See you in a week." [laughter] Yeah. Huh. You know, I I try to I'm not >> I'm a conspiracy theorist in the sense that a lot of times you do enough analysis, you just wind up at the natural conclusion of things. And I feel like that's kind of what we do in our
[9:09] research at 42 macro. We just keep pulling on threads until we can't pull on the thread anymore because the data doesn't exist. Um that's kind of the nature of our research style. Uh and >> does this did drug you know, here's what I think. Whether or not Ducken Miller and and and and Stan or Stan Ducken Miller and and Treasury Secretary Scott Pess colluded on that, I think the outcome would have been the same regardless, which is the more the public knows about this, the more likely it is that the the
[9:40] politicians in DC who are responsible for addressing the problem will take the appropriate action. And so whether or not you colluded or not, I still think you two >> I don't even think I don't think it's collusion. >> He wants this outcome. This is a good outcome. >> I don't even think it's collusion. Yeah, >> I think actually my point is uh we've been talking about Bessant from a financial like operator standpoint as the Treasury Secretary. I think this dude is dialed when it comes to the political process as well. >> Yeah, he's he >> and if there was a conversation before
[10:13] that op-ed was published and maybe Besson encouraged it. Yep. >> This dude understands Washington DC better than most of the politicians understand it. >> Yeah, of course. >> And so what that then tells me is if he understands domestic policy and the political process, >> he might be the best person we should be sending to Japan or some of these places and saying, "Hey, Scott, >> I think in Trump's words one time, he said, I get the markets rallied up." >> Yeah. >> He gets them to calm down.
[10:43] >> Yeah. And so now all of a sudden we have a very unique individual it seems like who is financial operator, investor, political operator and a great communicator. We have not really had somebody in that seat and he's happens to be in the seat at a time where like we kind of need a person like that to navigate all this. It's fascinating. >> It's it's beyond fascinating. I think one of the best things that's happened in the last few years in American policy is the downgrading of all the other voices around President Trump and the
[11:13] upgrading of of Treasury Secretary Scott Besson's voice. I mean, you know, I at the risk of being, you know, sued or yelled at, I mean, we obviously had a NEPO baby run in the commerce department, you know, he his views needed to get go somewhere else and say that and do that. Go go go work on this. We have bigger fish to fry. We have a massive geopolitically driven like this this in my opinion the PC1 of all of global finance is the fact that treasury bonds are no longer considered to be a safe haven asset. Now why is that? In my opinion and I think the opinion of other
[11:43] you know smart people people much smarter than me Ray Alio and Neil How Peter Turchin they would say that you know America's sick a sick patient internally and I would argue and I'm certain Rali would argue uh that America's a sick patient internally because we have too much we have such a high level of public sector debt service and it's squeezing out income and wealth accumulation for households small businesses and interest rate sensitive sectors on the bottom of the K. And part of the reason that's happening, that squeezing dynamic, we talked about this
[12:13] in previous um in previous uh shows and discussions where the amount of money that the US Treasury needs on an annual basis to either roll over refinance its existing debt, it's roughly about 12 to 10 trillion over the next year. Uh to capitalize the new debt in terms of the budget deficit, that's about 2 trillion over the next uh year. And then the amount of money it needs to refinance into a higher interest rate regime, that's about 125 billion over the next year. So you're talking about over 12 trillion that it needs. That's up from about less than 5 trillion prior to CO. And so that's 40% of global savings, the flow of global savings over the next
[12:43] year. That used to be on average 20% of the flow of global savings prior to CO. And so we've doubled the the the the demand for capital. The US Treasury has doubled its demand for capital. And and obviously in a world where there's not an infinite amount of capital, it's draining resources from the bottom of the K-shaped US economy. It's obviously draining resources from around the world and it's causing more inflation. and we just have a a persistent supply shock uh for capital and a persistent demand shock for that capital from the treasury and this is causing all sorts of outcomes.
[13:13] >> If I said to you, close your eyes and imagine a world where there is a $100 oil price >> five uh% 10-year yields, >> the Fed just raised interest rates for the first time in a while. >> And there's still a geopolitical conflict going on. Mhm. >> There seems to be a lot of disagreement or waning support for uh the current administration going into the midterms and the entire economy seems to be propped up by a single sector and AI and
[13:43] everything else seems to be suffering. >> Mhm. >> And I said, "Now decide, are stocks at all-time highs or below?" >> You probably would say not at all-time highs, but we're pretty dang close. Bitcoin is up in that environment. Many of these assets are up. How do you rectify those two things where many of these data points actually should tell us like they should be headwinds? Like assets should be under pressure, but it kind of feels like investors don't care. They're just like, eh, I still want to
[14:14] go buy Nvidia, [laughter] you know? I still want to own some Bitcoin. Look, uh uh I appreciate that thought exercise and and it was really thoughtful. Uh I will push back mildly to suggest that uh I would I would actually argue that stocks would probably be at all times because of some of the dynamics you listed. Okay. Uh in our view, we've been bullish. We've been structurally bullish since January of 2023, say for the 3 months in February through April of 2025. Uh we saw paradigm B the the cut the deficit portion as being negative for the economy. The markets at the time were correct on that. Uh but we were also correct to immediately pivot back
[14:45] to being bullish, which was where we had been since Jan 2023 uh when we noticed the pivot to running the economy hot uh in in April of last year. The reason I think that we stocks should be at or near all-time highs is is for a couple of reasons. One, there's policy intervention associated with the supply demand imbalance. They're not going to sit idly by. And we've we've long forecasted that an increasing amount of policy intervention. Uh whether it be through extension of dovishnet financing policy, this is some of the more dovishnet financing policy we've seen on record uh for the US Treasury. And it's only going to get more dovish uh in the coming years. Uh we've seen uh the
[15:16] Federal Reserve uh cut interest rates about 175 basis points with the inflation, you know, with missing their inflation target for five consecutive years, now going on nine consecutive years. Um in terms of their projections, uh we've seen the Federal Reserve monetize US sovereign debt uh in the middle of a nationwide affordability crisis. You know, we've seen all sorts of reactions to this supply demand imbalance in the Treasury bond market. And then you have this orthogonal demand shock called AI. This is massive AI capex bubble. You're talking $800 billion in hyperscala capex next year growing to 1.2 1.3 $1.4 trillion uh next
[15:48] year. And so obviously that creates a powerful tailwind for earnings. Um and so you have this powerful tailwind for earnings. At the same time you're getting uh you have this problem that keeps requiring policy intervention um in the form of financial pressure or monetary debasement. That is a reason for stocks to be at or near all-time highs. And it's one of the reasons why we think stocks will go to make significant highs from here uh over the next 12 to 18 months. In our view, we don't think this bull market is over. What would stop it? What would stop it? Uh a a lack of realization of the policy
[16:19] intervention required to address the problem. Like if they wanted to pivot back to paradigm B and and be serious about cutting the deficit, >> which stop again? I don't I think it's a very low probability bet. If the world's smartest man and best inventor of all time and best innovator of all time, if he couldn't do it, I just I don't know how like you're not going to get Congress to do it without a crisis. >> I I did uh I did a little uh mental uh gut check. >> Yep. >> Uh recently I went back and I was thinking, okay, at the start of the
[16:49] Trump administration, what was I excited about? >> Balancing the budget was probably the number one thing. Closing the border was another thing. >> He fooled you. >> Well, he he closed the border. >> I'm talking about the balance [clears throat] of the budget. Yeah. So, it bounces the budget and it and I tried to really think through like why was I excited? I went back and I looked at some of the stuff I read and I tweeted and and was trying to almost look at it like, okay, what did I believe? What went wrong? And a big part of it was actually not the Trump administration as much as it was the Trump administration deputizing Elon and like, dude, this
[17:20] guy's the best in the world at doing this, right? >> They're gonna find the fraud, the waste, the abuse. And as I was looking through my Twitter feed, I found absolutely hilarious in hindsight different data points that we kind of forget. And the one that I I've talked about in the past is if you remember, he was inside of I think it was like the education building or USA ID where there was politicians outside banging on the doors. And if you remember, there was a video of the security guard and he was just standing there and they were like, "Why are you protecting him? He's
[17:50] killing people." Blah blah. And the security guy was just like, "I'm just doing my job, man." Like, you know, he's just he was like, he was not about it. >> Yeah. >> And if we had said if they tried to balance the budget, could you imagine if the politicians >> literally went outside the building and tried to physically stop them, >> you'd be like, there's no way they would ever do that. >> Yeah, [laughter] that's true. >> Right. Like you're just like, of course the politicians want to balance the budget. >> And so, in hindsight, I was naive in the sense of it's not actually about can you
[18:20] balance the budget. It's a lack of will >> wanting to do it. >> Amen. >> And why is there a lack of will? Well, if you're a politician, it's pretty good pitch to be, look at all the stuff I came back from Washington for all of you constituents with. And so then as I was going through this extra, I said, "Dude, there's no way it it is impossible. I I am now convinced it is impossible. It doesn't matter who goes in any of that stuff. So, can we ever have a recession?"
[18:50] >> Mm-m. No. Can we ever have any sort of prolonged market downturn >> going forward? >> Oh, I love and thank you for that that trip down memory lane and thank you for your intellectual honesty. >> Yeah, not a lot of people who do what we do say we get things wrong. >> Listen, could could you imagine if uh they had bounced the budget? That would have been amazing. >> That would have been amazing. That's the best way out of this. >> On what planet >> was I or anyone else thinking that the politicians who quite literally accumulate power by giving away free money were ever going to let that happen? No, they're not.
[19:20] >> I made the mistake of every human. I thought that they had good intentions. [laughter] >> I thought they actually cared about the future of the country. >> Yeah. [laughter] Yeah. >> Right. I thought they cared about the debt that was going to be inherited by our children. >> Our own children. Their own children. Don't even worry about my kids or your kids. What about your own kids? Like [laughter] where do you think we're headed with this? So, uh, thank you for all that and I I appreciate again your intellectual humility and intellectual curiosity are two things I really admire about you. Uh, and hopefully I'm I'm following your footsteps as well there. This episode is brought to you by Lava. The Lava card is
[19:51] the first credit card that allows you to earn up to 5% back in Bitcoin on every single purchase. Most cards have steep annual fees and unclear points programs, but the Lava card offers a much better deal. Earn real Bitcoin every time that you spend. Plus, there's no annual fee. There's zero FX fees and zero spread when you spend internationally. On top of that, Lava gives you access to a Bitcoin line of credit, yield on cash, instant stable coin deposits and withdrawals, on and off ramps to and from your bank account, and much, much more. With Lava, you can borrow against
[20:22] your Bitcoin at the lowest rates, earn yield, move money globally, and stack Bitcoin with each and every purchase you make. Most financial services squeeze you with high fees, confusing rewards programs. Lava keeps it simple, and they help you build your long-term savings via your everyday spend. Visit lava.xyz xyz/pump to get started in just a few minutes today. lava.xyz/pump to get started today. A couple things on this balance budget. Uh I'm sorry that you were fooled by Doge uh hoodwinkedked
[20:53] by Doge. Uh uh I was very on record uh very loud on record uh in the fall of 2024 when we replaced our 30% allocation to bonds with gold in our in our flagship uh asset allocation, our KISS model portfolio. Uh we did it with the the recognition that neither the Republican party or the Democrat party were serious about balancing the budget. When you looked at the the scoring uh for Trump's policy proposals, you couldn't tell the difference. It was like a Coke versus Pepsi test with Camela Harris. >> Well, I uh if I remember correctly, um
[21:24] and this will show you how good my long-term memory is despite my loss of short-term memory. Uh Kabuki Theater, I think was a phrase that you were using at the time. >> It was. It was. I did call it Kabuki Theater. I said, "That chainsaw is really dumb. He's going to regret the chainsaw cuz it's not going to solve the problem." But but it looked cool. It looked cool. It made headlines. It did what it was supposed to do in a in a 25 cycle. Exactly. It did exactly what it was supposed to do. But those of us who are serious about tackling these challenges understand that that was not going to be the credible path. You actually need Congress to get on board.
[21:54] And the probability that Congress would get on board when both parties were projecting to expand the budget deficit to record non-war non-recession wides, you have to give up the ghost. And so, um, you know, just on and and one final thing I'll say on these politicians, uh, yeah, I'm talking to you all you politicians in DC. You know, the reason that [laughter] the reason they don't care about the budget deficit is to your point, you know, one party spends money and gives it to their constituents to to to stay in power to get gain power, stay in power. The other party cuts taxes and gives and support their constituents
[22:24] income that way. And I think um you know this conversation in the country about you know buying votes if you will. I think we have to realize that the wealth pump is on. You and I talked about Dr. Peter Turchin's you know thesis and his and his colleagues at the complexity science hub. Uh they have this term called the wealth pump. I call it the reverse Robin Hood effect because it it makes it easier to for people to figure out what we're talking about. Uh you know the rever just imagine what the Robin Hood effect is in reverse. Like so that's in my opinion what's happening uh with Congress. And you can >> you mean the people who don't have money have to fund the people who have money?
[22:54] >> Yes. That's exactly what's happening. In fact, >> that's a mind bender. >> Here's some statistics for this. Uh, so we see when you break down there's probably like 700 different line items in the monthly Treasury budget statement. So, we had to do uh some data science to figure out um, you know, where the money goes. And most of the money goes to Social Security, Medicare. We know that it's, you know, it's probably like 45, you know, percent of the the outlays. But >> where's it come from? [laughter] >> It's neither here nor there. uh uh but uh the the point I'm making is is when you look at the rest of the spending and you tally up all the money the government spends on poor people via
[23:25] means tested programs federal government uh spends on poor people mean v mean v mean v mean v mean v mean v mean v mean v mean v mean vans program somewhere about 1.2 to$ 1.3 trillion annualized uh and it's been that it's been you know these ratios have been roughly the same over the last you know dozen years or so uh when you look at the money the government spends that pretty much winds up in the pockets of rich people like us it's about 2.62 6 2.7 trillion uh and you know about 1.1 trillion of that on its way to 1.2 trillion is is net interest on the debt. Obviously, poor people don't own financial assets, much less Treasury bonds. Uh and then the uh another trillion on on defense uh net
[23:56] defense. And obviously that money doesn't go to poor people. It's going to folks who work at SpaceX, Palunteer, Andrew, you know, all these, you know, defense suppliers. And so you're talking about 36% of the money the federal government spends about almost $8 trillion the federal government spends is going directly to rich people where only 17% is going directly to poor people. Now, that's a that's an issue. And this has been compounding for for a long period of time. And so, you know, I don't know how we get out of this without more political dysfunction and and and more just, you know, political upheaval. Um, but ultimately, I still
[24:27] think we wind up in a better place maybe, you know, 5, 10, 15, 20 years from now. >> If you go and you look at >> because it'll get that bad. >> Of course, it's going to get that bad. Look at uh social security. Where's the money come from? >> Yeah. >> Young people are funding the old people. The old people, there's a lot of them. The young people are not growing as fast as the older cohort. And therefore you have quite literally a Ponzi scheme y that is being run >> which whether people like it or not whatever the idea that the young people are funding the old people
[24:57] >> is the opposite of what I think people generally philosophically believe should be happening is the older generations should be looking out for the younger generations. You should be giving a better future and all this stuff. We have the opposite happening in this country. If you look at homes, there is a very large cohort of people who do not want home prices to go down. >> Yeah. >> And it's all the people who own the homes. [laughter] >> Exactly. >> Because every time you hear affordability, they hear, "I'm going to
[25:27] lose money on my home." >> 100%. And right now, I've actually seen in the last two weeks or so a number of articles that are talking about mortgage rates are ticking up, interest rates have gone up, home prices are getting slashed. If you don't own a home, you don't really understand there is a full-on panic in this country of anyone trying to sell their home because they're like, "Wait a minute, there's a gridlock. There's not a lot of home uh transaction volume happening. >> And in order for me to sell this home, I've got to drop the price to such a low
[25:58] level >> that I might as well just keep it. >> Just keep it. >> And so then they turn and they say, "Okay, well, could I rent it?" But one of the things that goes undisussed is a lot of the boomer generation, I say as a loving term, they live in homes that they've lived in for 20 years. >> Yeah. >> Young people don't want those homes. >> Not at all. They don't want the McMansion in the suburbs. That's a 20, 25, 30 year old home. And so I was explaining to somebody recently that has
[26:29] one of these homes and is trying to sell it. And I've watched them for a year and a half, two years now. You have a product that the person who's supposed to buy does not want and can't afford. >> And you have it at a price point where they quite literally do not have the money. >> Yeah. So, even if you were to say, "I'm going to put new paint or you know what, like like put lipstick on it, >> they still can't afford it." So, you have a choice to make. Either you're the bag holder and you got to figure out
[27:00] something to do or >> rip the band-aid off. >> Yeah. >> And that's what's happening across the economy is people are realizing like, wait a second. So we have actually young people are funding older people which puts immense amount of stress on government spending >> 100%. Man this is a it's an intractable problem. I love your your analogy that that makes a lot of sense especially in the context we were talking about earlier. The spread between the uh marginal mortgage rate and the effective mortgage rate. So the marginal mortgage rate is what you would you pay if you
[27:31] bought a got a mortgage today and the effective mortgage rate is what's the mortgage on all the existing mortgage stock of debt in the economy. you know, it's about 250 basis points, but it's roughly an all-time widespread. And so that's obviously contributing to this lock in effect u that you're you're essentially alluding to uh as well. And part of the reason that spread is so high and part of the reason the spread between mortgages and treasury bonds is is is not historically wide. It was wider a few years ago, but it's still, you know, structurally wide, you know, relative to what had been for decades. Part of the reason that spread is wide as it is is going back to what we talked about that 40/20. The government now
[28:02] needs 40% of the world's savings as opposed to 20% of the world savings. So, there's a missing 20% of the world's savings that used to go to capitalize our mortgage market, used to go to lend to small businesses, it used to go to lend to low to medium income consumers, it used to go to lots of things that is no longer going to um and it's really just I mean it's it's it's a perverse set of incentives because ironically the only ways to deal with this this this we calling the debt disease are three ways or three acceptable ways. There's there's there's a fourth there fifth there's five ways. Two of them are bad.
[28:33] Uh, one of the acceptable ways is you can reduce the deficit, you know, try to cut your way out of the problem. That's what we call paradigm B. Uh, you can, right now we're in paradigm C. You can try to boom the economy, grow your way out of it, or try to, you know, try to grow the denominator faster than you're growing the numerator. Uh, that's what we're attempting to do. And, and we're having quite a bit of success with that. We're growing nominal GDP on the X government and net exports basis. It's 8% in the most recent quarter. That compares to low a pre-COVID mean of 4%. So, we're doubling our nominal growth rate. So, we're succeeding at at paradigm C. Uh but ultimately the factors of production will eventually
[29:04] limit how fast you grow unless you create more factors production which obviously what is part of the reason why they're so gung-ho and u gung-ho and advancing AI but that's a different topic. >> Uh supreme intelligence we call it now. >> Yeah what obviously whatever y'all want to call it man >> we don't like artificial or anything [laughter] we like supreme >> exactly uh and then there's paradigm D. Typically what happens is you know you run out of growth uh and then ultimately you have to start printing the demand for uh the debt securities. Uh the issue is is the only path that leads to less political dysfunction and there's the other two obviously default and total
[29:35] war. Uh historically countries when they needed money they would drum up war and try to go take money from it. They would go get it. They would literally go get it. They cross borders and try to take money. That's that's that's that's assume those are less desirable outcomes. Let's focus on these three. The only one of these three outcomes, acceptable outcomes, cut, grow, print, that actually leads to less political dysfunction, more societal cohesion is reducing the deficit is is is because the other ones lead to eventually inflation and eventually inflation in an economy that already has a nationwide
[30:06] affordability crisis where by the way 70% JP Morgan senior economist said that 70% of Americans live paycheck to paycheck. That is a heartbreaking statistic pump. As someone who grew up barely hoping to live paycheck to paycheck because we didn't even have paychecks, >> the hopelessness you feel as a human being >> when you can't accumulate savings and get ahead and at least aspire to join the capital class, which is the only class in this country, in this capitalism society that allows your life to get better over time. You need to
[30:36] have your money making money for you. If you're just using your labor to your hand of mouth, you're never going to get ahead. especially in this in in an economy where the laws, the regulations, the monetary policy and the fiscal policy is designed to support capital holders, not labor. Uh uh and so and and that's by design, by the way. It's not on accident. Um talk about that >> the craziest part of this whole thing. >> Today's episode is brought to you by Simple Mining. Bitcoin mining has a reputation for being complicated, risky, and hard to evaluate as a real investment. If you're considering mining in 2026, what actually matters isn't
[31:07] headline profitability. It's uptime, repairs, and whether the operation is run like a real business. That's why I've been using Simple Mining. They're based in Cedar Falls, Iowa, and they run a white glove hosting operation where you own your miners. You choose your own pool, and you have Bitcoin sent directly to your wallet. They were featured on the Inc. 5000 list as the fastest growing company in Iowa with over 40,000 machines under management. What stands [music] out to me is execution. They have the number one rated ASIC repair center, and for the first 12 months, repairs are included. If mining margins
[31:38] get tight, you can pause with no penalties. [music] And if you want to resize or upgrade your fleet, there's a marketplace to resell equipment instead of being stuck. To help people think it through whether mining actually makes sense right now, they put together a short resource called the [music] 2026 Bitcoin mining blueprint. It walks through the five mistakes investors make when allocating to mining. And they also explain how to avoid them before deploying capital. If it [music] sounds interesting to you, you can get it for free at simplemining.io/p. That's simplemining.io. io/pump. [music]
[32:08] Go check it out today and see if you should get into the mining game. >> The craziest part of this whole thing is the one technology that can lift all of these people out of the situation is the exact technology that a bunch of rich unemployed kids for the most part are railing against. >> Yeah. Which is ironic. Yeah. >> Right. >> And you basically have two groups of people. You have a bunch of nerds who are saying, "Oo, we created something
[32:39] that could kill everybody." [snorts] Okay. And then you got a bunch of other people who are saying, "Oh, this AI thing. Don't use it." >> Yeah. >> Don't use it. But if you look at what does Bitcoin do? It creates all these computers that work for you to defend your economic value. You took what used to be the dream of the richest person in the world in terms of how it's an army of compute that is defending against money printing. >> Yeah. 100%.
[33:09] >> Incredibly valuable that you give it to and you democratize access to the average individual. AI all it does is it says okay you're one person. What if we got you higher level of intelligence? So you're hiring someone who's 150 IQ and then let's just multiply. Like you could have a hundred of these people working for you at all times. Now there are still people who are lazy who don't want to do anything. I I love when people are like, "Oh, most consumers don't want to be productive." Like actually they just want to like go into snooze mode and just watch TV.
[33:39] >> That's their right by the way. Yeah, >> 100%. But this technology now is giving them access to, you know, go to an extreme. When Bill Gates was running Microsoft in the '9s, how many people did he have? How much intellectual horsepower was inside of Microsoft? >> Yeah. >> In 30 years, have we now given the same amount of productivity power to the average human that Bill Gates had in the '90s? >> Yeah. >> Maybe people maybe people are like, "Okay, not that extreme.
[34:10] >> But okay, if we go back to the 50s for sure, >> yeah, >> give it 12 more months, 24 more months." It's like you're going to have more resources available to you than Bill Gates did when he was running Microsoft in the9s in terms of intellectual horsepower. Well, like that dude did pretty well for himself 100%. >> And so we're discouraging people from using the one technology that actually can help them escape the problem that they're in. >> Yeah. Uh I completely agree with everything you said. The one thing I would my caveat would be I don't think
[34:43] >> we're never going to have like a a classless society. There have been classes since the beginning of time. I mean, you read the Holy Bible and a lot of what we see today in terms of the cyclical pattern of human behavior, you know, the the the cohesion, the the move towards cohesion, the move away from cohesion, the move towards community, the move away from community, um the move towards selfishness, the move towards selflessness. there's these all these cyclical patterns you can see across, you know, millennia of time, you know, tens of thousands of years of time when you read the Bible. And, you know, so we're we're trapped in that same saga today because we're humans and we're,
[35:13] you know, we're born sinners. And so on this point of of of classism, like we're always going to have different classes. That's why I've been saying, you know, we need to turn the K-shaped economy to an E-shaped economy because not everybody wants to climb the social economic ladder or will is willing to do what it takes to cl to take the tools and and climb the social economic ladder. you know, we should create an economy and in a society where everyone feels like they're moving in the same direction. >> That's that to me is the underlying issue. Like we can't create we're never going to be able to create a society
[35:43] where everyone is rich by definition. Like it's like just by definition you can't do that. Uh and so once we move away from that kind of fallacy, you can start to you know you can start to create >> Don't tell socialists. >> Well, I won't I don't listen to anybody but themselves obviously. [laughter] And I'll say the same thing about the the staunch capitalist. I'm on my way to to our friends at Fox uh business this afternoon and I'll say the same thing to them. Both both extremes only listen to themselves cuz they think they have all the solutions. But the reality is none of us have all the solutions. We all need to work together to solve these intractable problems because otherwise
[36:13] they're not going to get fixed. >> Mhm. The um the thing I do find interesting is when you look at um economic mobility and you were to score countries, America is still probably the leader if not one of the top leaders for sure in economic mobility. If you then go and you look at >> the problem is it's going down. That's the issue. >> Well, if other places are going down as well, but America almost has so much of a lead that has further to like fall like it can accelerate, right? It's kind of like, you know, the higher up you are, the faster the acceleration. Now, >> the second piece though is if you look
[36:43] at social mobility and I actually think that we everyone focus on economic mobility for obvious reasons. The social mobility, we have a very interesting dynamic in this country. If you go on Instagram, you see some people who appear to have socially been very mobile. >> Yeah. >> Hey, I knew that kid in high school. >> Yeah. >> He wasn't the smartest. He wasn't the richest. He wasn't whatever. He got a Ferrari now. >> Yeah. >> The appearance almost becomes more important than the truth. >> Yeah. But that same person, and I know some of these people um there are a
[37:13] couple people I've met in the last two or three years that uh turned to me or people that are close to me and were like, "Hey, I need help with XYZ, thinking through from a personal finance standpoint." Great. And I would know how much money they made, how much money they had in their bank account, and we're and trying to help them think through their life. And then they'd be like, "Yo, I'm hitting the eject button. I'm going to Italy for 2 weeks. And you would just be like, yo, there's
[37:43] no way you got the money to do that. And they would figure out a way. Like to their point, they're almost entrepreneurial about it, right? They they would find a way somehow. >> They would just try harder to >> like credit cards, what it's kind of [laughter] like, you know, in school, I spend more time trying not to do the homework than I should have just done the homework, right? >> But hey, you know, whatever. You feel like you're making progress. You're just running in, you know, quicksand. >> But you see this and you're like, >> "Oh, wait a minute. there's some financial education issues, but also there's something about uh the human nature of like keeping up with the Jones. >> And I think that actually the
[38:14] administration understands in a very weird way this problem better than most and they never talk about it. >> But it does feel like there's something about the respectability of the American citizen >> and they don't just want to quote unquote get rich. They want to feel like they have something to stand on. >> Yeah. Agree. >> And >> dignity. >> Dignity. You know, you're like the farmers in Iowa. They're like, "Look, man. I don't need to be the next
[38:44] Rockefeller. >> I just want to be able to have a place where I can build a living, have my family, do all this kind of stuff." And so it always is hilarious to me that like the dude with gold toilets in Manhattan somehow understood that plight of those people. >> And now you have this very weird faction where you have you look at the Republican party as one example. You have people who don't have a lot and you got people who got a hell of a lot. >> Yeah. >> And somehow they've created this like alliance in the MAGA movement. >> If you look at the Democrat party, you
[39:16] actually have a very similar thing. You have very academic kind of elite wealthy type audience. Yeah. And then you almost have this uh >> the way we technically are. [laughter] >> Yeah. But but then you have this like uh upright like kind of the the Democrat socialist of America, right? And they and they have an alliance and and maybe it's not, you know, uh both of sides of this are not like, hey, we're perfectly aligned, but definitely they lean similar. But when you see this rising up, I think the question is ultimately going to become if you want the US economy to
[39:47] grow and you actually want to use those factors to improve people's lives, you have to produce things. >> Yes. And in a very weird way, we're entering a world where one side is producing a lot of theories and academic ideas and the other side, like if you go look at the re-industrial movement and you know all this kind like that is coming pretty much from one group of people. >> Yeah. >> They're in conflict with each other cuz one thinks policy can solve problems, the other thinks that action can solve
[40:18] problems. >> Yeah. >> Public sector versus private sector, right? like like this battle is not new, but we're actually watching it play out now and we're saying to ourselves, hold on. If we can't get any sort of alignment or like a strategy ain't going to get fixed. We're actually going to pull further apart and you're going to have the halves and have nots and like the K gets wider. >> Yeah. >> Bad situation. >> That's a great thesis. I That's a Yeah, that's a fantastic thesis. Uh, I don't know that I would characterize the uh
[40:49] the Republicans as having more solutions than the Democrats as the right characterization. I think Donald Trump has more solutions than the Democrats. >> I I don't think that they even it's like solutions. I actually think I'm talking more about go and um look at re-industrialization use as an example. How many of those folks tend to lean according to the current political parties although these you know kind of move all the time, right? the current political parties they probably lean more right and they are less like hey we need to go do a bunch of like political stuff instead it is more let's go and
[41:21] actually just build and let's go build you know whatever the company is >> let's not slow down AI right let's accelerate this stuff versus you know kind of the quintessential example right now is like the EA movement everyone's freaking out about >> that's more like intellectual ideas and all now to their credit like they built anthropic Y >> right. So like there is action happening. It's just that the approaches are very different. And so it's fascinating to think about like the political overlay on what's happening economically. >> Yeah. Well, one side one side
[41:52] understands that it's means to power. I'm talking about the Democrats is by pretending to care about poor people but not really doing the things that make their lives better. Uh cuz they don't really have to deliver the service. You just have to promise to deliver the service to get elected. um andor say this guy is such a bad guy you can't elect them and elect me which has been their strategy for a long time which obviously has been a failing strategy and it's an inc it's an increasingly failing strategy or um the other side um you know I this is why I say Donald
[42:23] Trump is brilliant you know I'm not obviously not a Trump supporter u you know you can take a lot of offense to the who he is as a man and what he's been accused of and whatnot and we don't have to go there but he is a brilliant person for understanding that cut print is really the only solutions. And he's basically, in my opinion, for what I can tell, in terms of his policy platform and re-industrializing, uh, America, uh, um, uh, in terms of putting up the tariff wall and then taking, um, you know, in infrastructure commitments, uh, you know, public private partnerships. I
[42:54] think he understands the value of paradigm C. If there's no political will to do paradigm B, which is cut the deficit, he understands that paradigm C is actually a much better outcome. Grow. Yeah. It's a significantly better outcome than winding up in paradigm D which is default via the basement. You know, starting to use the actual money printer cuz the big, you know, the government needs its money. It's got to capitalize itself. And so ultimately, they will eventually wind up using some form of the money printer, whether it be through relaxing bank regulation and allowing them to print the money or, you know, some form of yield curve control, reserve match purchase expansion. I
[43:24] don't know. Who cares? It's all money printing. Uh but to your point, you know, I I do think he's he's wise to understand that, you know, paradigm C is the best choice. Let's go back to something you said. I think we need to um unpack this a little bit further because I don't think it's talked about enough and you and I have enough, you know, cache with our audiences and and and and confidence and and and and and datadriven analysis to make the kind of con arrive at the kind of conclusions publicly that we arrive at uh without fear of being torn down because people trust us and trust us having done the
[43:54] research. My analysis of on this this dynamic of the politics of it all is that there are now four political parties in America, >> four distinct political parties. You know, you got the the the socialist wing of the Democrat party. You got your old traditional blue dog Democrats. Um the whole part has been obviously been pulled leftward over time. Then you have your traditional core Republican party um which is kind of dying in some in some respects because so much of the winning strategy for Republicans even if they were initially part of that core Republican party was to pander to Trump. And so obviously that's the mega the
[44:24] mega wing of the party. >> My fear uh and also ultimately my hope because I think we do need great crisis to bring on great solutions that will ultimately be lasting and really beneficial for society and mankind. My fear in terms of going towards the great crisis is that paradigm C will eventually run out. Um whether maybe AI is a capital misallocation, you could just see I don't know there's a lot of things that could cause paradigm C to run out. I doubt it's running out anytime soon. Our research suggests it's going to continue at least to 2020, probably 2028, maybe even beyond that. Um,
[44:55] if if they run out of paradigm C, the growth phase, you wind up in the print phase from a starting point of already having a nationwide affordability crisis where 70 out of 10 people households in this country live paycheck to paycheck that currently feel like they're not getting ahead that are watching all kinds of stuff on TV and Instagram and wondering why they're not part of the American dream. That's seven out of 10 households in this country. Um, so folks like us in the three out of the 10, you know, we need to take hold of how dire and desperate uh the situation is, the
[45:25] lack of dignity that so many of our fellow Americans feel. If you trying to default via debasement paradigm D with that as the starting point, you're going to wind up with a major political realignment. I think total war is a high probability outcome in that scenario as well. And here's how you can get major political realignment. Most people think of politics as on a left right spectrum. you know, the so DSA on the far left, Democrats in the mid left, Republicans mid right, you know, the traditional GOP in the mid right, and the NAGO on the on the far right. I think of it more as a a
[45:56] circle, like it's a it's a it's a it's a it's a circle, like, you know, it's like um uh it's like a proton or something like, you know, it's constantly moving around um you know, a field. If you think about it as a circle, like a 360° circle, MAGA and DSA are really technically back to back to each other. They're on both far ends of this like circular spectrum. And so all it would take is more economic hardship to cause them to say to turn around and greet each other and say, "Actually, we're
[46:26] just all poor. The rich people aren't taking care of us enough." And that's my core thesis. And that's not a captive socialist thing to say, and I'll shut up after this. My core thesis is we've gotten so good at creating profits in this society that we've probably overdone it. us in the K1 capital class, we we've created too many profits because what it ultimately means is it's less income for for the folks in the W2 class. It's less wealth accumulation. It's less savings. It's less social mobility, upper mobility. It's inability
[46:56] for them to buy homes, inability for them to pay for their kids to go to college. It's an inabil it's it's a it's an increase in their demand for public goods, for public services. And so we've created so many profits that we no longer have a stable functioning society. And so the last thing I'll say is to your point earlier about reindustrializing, we obviously need to reindustrialize to sustain paradigm C, the growth phase. >> If we do reindustrialize, who's going to eat the additional cost of goods and services, is it going to be
[47:27] the K1 class via margin compression or is it going to be the K the W2 class via higher inflation? That is a big question we need to answer as a society. if somebody has to eat it. I think the the promise, which I don't know if it's gonna happen, but the promise would be well actually use Tesla maybe as an example. Cars made outside the United States, they have the margin they have. Tesla's able to make a car in America using robotics and drive down the price. And so therefore, they can keep margin, but also nobody has to eat that, you
[47:58] know, kind of uh that that disappearance of margin. He's oneonone, man. [laughter] Right. How many other businesses are going to be able to do that? >> Yeah. >> Now, maybe robotics gets so amazing and it's kind of like, you know, any dummy off the street can just plug the robotics in and all of a sudden you get the same benefit. But it's pretty clear there's not many businesses that have been able to build something as complex as a car using robotics, get the price down. And people forget that Tesla started at like $120,000 or something
[48:28] like that. The the original, you know, kind of sports cares, it was over 100 grand if I remember correctly. You can go buy one of these cars now for like 40 grand. >> Yeah, but how does the person who used to work at the car manufacturing plant buy the car? >> So this goes into that business is able to offer this lower price, they do it through automation. So now the question is where do those people go? What do they do? Right? And and I don't have all the answers for it, but it's almost like what you're doing is you're you're playing whack-a-ole in the economy.
[48:59] >> Okay, cool. We need to get prices down. So you whack that. Well, how do you get prices down? You use automation. Okay. Well, what happens to those people? They like pop up somewhere else. Now there's another problem. And so you got like, well, now we got to retrain these people to do something else. So you go whack that down. And then you're like, oh, but wait, like there's, you know, not enough companies or there's too many people or you and you're just constantly trying to figure this out. And so I think actually that's one of the reasons why people are drawn to the politics stuff is because they're like intellectually stimulated by these problems or they're power hungry. >> Like there's one or two reasons. We need more of the people who are intellectually stimulated and problem
[49:30] solving and less of the power hungry people. My big takeaway from meeting tons of these people, you never know who you're dealing with. They're all chameleons. >> You never know. >> That's sad, >> right? Like uh some of them I think have good intentions. >> Well, most of them don't. >> There's good neuroscience on on power and how it actually corrupts the brain. It's basically people who attain power have very similar brain uh function dynamics as people who have traumatic brain injuries. And no, I'm I'm I'm not even joking. Like this is like written about in in neuroscience. You know,
[50:01] >> it doesn't surprise me. Just absolutely ridiculously true. Like they study it's like this looks like this person had a traumatic brain injury. And so what ultimately happens is like you have like more impulsivity uh more selfishness. You start uh downplaying uh other people's points of views and you highlight uh you aggrandize your own point of view. Um uh and ultimately you start thinking of the world and stereotypes uh as opposed to analyzing um you know case by case data. Uh and so ultimately they turn out to become kind of
[50:31] >> on this like conveyor belt of more and more power seeking and aggrandization of themselves relative to what could have been their original starting goals. And so power does corrupt. And so you have to have someone who you know not only is intellectually stimulated by solving the problem but has an uncorruptible heart. And in my opinion, and this is a, you know, my opinion, the only way to have an unccorruptible heart is to have, you know, firm faith in God and and and and a firm foundation spiritually. Um, and that's to find someone with enough intellectual capability to help solve
[51:01] these problems with a with a firm foundation and an uncorruptible heart. That's not a long list of human beings, unfortunately. >> Unfortunately, not. >> Let's end there. I think that's a great way to end. Yeah. >> Where can we be able to find 42 macro? >> Yeah. So, in my actual day job, [laughter] I'm actually uh a day or crunch numbers all day. Uh uh thank God for technology. Our tech is as good as it's ever been. Um and so, you know, I would say real quick, you know, uh I love talking about this stuff with you. Um you know, this stuff to me is more important than trying to figure out
[51:32] where Bitcoin or S&P is going to be 6 months from now, year from now. I think we do that really well. We do that so well that I can spend a lot of time thinking about these big problems. Um and so check us outro.com. I would say our our primary specialty is risk management, full cycle risk management, making sure that in bull markets, you know, you stay invested long enough to to maximize upside capture and in bare markets, you stay uninvested long enough to not blow up your portfolio. That's our core competency. We're very good at that. We have many of the top institutions across Global Wall Street who are clients and customers of mine,
[52:02] current treasury secretaries, a former uh client of mine um who are relying on our on our product. So, uh check us outro.com if that can be helpful for you guys. And then check me out on Twitter on our YouTube channel, Derry Stale42 on Twitter, Dairy Stale on LinkedIn, 42 Macro on YouTube if you just want to kind of hear my thoughts on on this kind of stuff. >> I think you do a great job. >> I think you do. Thank you. See you guys next time.