Germany, Japan, and Korea are all

historically big creditors from a

sovereign perspective. And in

particular, Japan, if they're borrowing

money to do defense sty, they have

turned sellers of bonds as well. So now

they're selling, they're competing with

Bessant to place bonds. Like everywhere

you look, yield should be going up. And

so to me, it's just all about when does

something break at any of them because

once it breaks at one, they're all going

to have to do something. and that

something's going to look a lot like

yield curve control, although my

suspicion is they'll never call it yield

curve control until they have to.

Today's episode is brought to you by the

Fundrise Income Fund. You'll hear more

about the income fund later in the show.

But for now, let's get into today's

interview. Welcome to Other People's

Money. I'm Maxi. I am joined today by

Luke Roman, president and founder of

Forest for the Trees. Luke, thank you so

much for coming on the show.

>> Thanks for having me on, Max. Great to

be here.

>> So, there is so much happening in

markets and macro right now. we have

yields at 20-year highs. I want to

understand what is the driving force for

this sell-off in the bond market.

>> Guess ultimately a supply and demand

issue. Um and then the secularly

inflationary

um dynamics or or results of how the

supply demand issue has been managed. Uh

what do I mean by that is that

uh

we've seen the US in particular um shift

issuance to the front end since uh Yelen

late in 23. Bessent criticized it as

soon as he got in Yelen's seat. He did

the same thing except more um or at

least as much uh but then it added

accelerated the treasury buybacks uh

that Yellen was doing which was also

shifting to the front end on the margin.

Uh and he accelerated that quite a bit

versus what Yellen was doing. And if you

take a step back,

why is this happening? It's very

straightforward. No one wants to talk

about it, but it's it's very

straightforward. It's right in front of

everybody's face.

We kept a hundred trillion dollars plus

in the United States. Uh Europe had and

and UK also have their offbalance sheet

liabilities.

They were all off balance sheet and they

were always going to stay off balance

sheet until

uh people started getting old and any

sixth grader with an actuarial table and

a calculator could have seen that if 65

million boomers were going to be born,

they were eventually going to hit

retirement age and start collecting. And

once they did,

these offbalance sheet liabilities would

start coming on balance sheet and being

cash flow negative. People said, "Oh,

you don't have to worry about it. It's

not part of our debt to GDP

until they turn 65 and start demanding a

check." And now they are. And so that's

happening all over the West.

Adding to the problem, they would have

been bad enough on its own, but adding

to the problem has been that the United

States in particular has been engaged in

forever wars for going on 30 years now.

25 years certainly.

And so when you look at veterans

benefits, which you know, right after

the Vietnam War, right, expensive, messy

war, veterans benefits as a percent of

the defense budget got as high as 12%

of of total defense spending because

it's accounted for separately.

Um, and then during the 80s, the '9s,

fell back to 3, four, five, six. It's

turned up sharply in 2010, and it hasn't

stopped. It's now 27%

of defense spending.

And

>> it's not like defense spending has gone

down. It's not like

>> defense spending hasn't gone down. This

chart looks like this.

And

this again is an offbalance sheet

liability that comes on. You want to go

to war? Great. You got an awesome

military, great.

And you better reserve for what happens

on the other side of a war if it lasts

too long, which is you're going to be

paying out a lot of benefits.

We didn't. So now those are coming on

balance sheet. Uh and to put some

numbers around it, $400 billion of

veterans benefits annually. Now, it's

about 8% of tax receipts, which are near

all-time highs,

and it's growing at like two to 3x the

rate of

of of tax receipts because we we refuse

to stop doing stupid wars and because

our guys are getting older and because

of the money we've printed to pay for

the veterans or the the entitlements

that are coming on balance sheet, etc.,

uh inflation's rising and so the cost of

care is rising. So, you're getting like

triple whammy there uh on the veterans

benefits cost. And so, when you look at

just the interest expense on the debt

plus the entitlements,

you're nearly 100% of receipts. You

throw in veterans benefits, you're over

100% of receipts. And that drives a very

simple dynamic, which is once you're

over 100% of receipts with debt where it

is, you can't raise taxes because it

triggers a recession. You either print

or you cut benefits.

And when more you print,

the more inflation goes up, the more

inflation goes up. The more yields go

up, the more yields go up, the less

attractive or or or the more inflation

goes up, the less attractive long-term

bonds are, the more you have to shift to

the front end. The more you shift to the

front end, the more inflationary it is,

the faster the faster the debt reprices

when interest rates go up. This is the

spiral the US, the UK, Japan, and and

Europe are in. and

being in this it's a very recognizable

spiral. We saw it after World War I in

the UK, in Germany, in in France. Um,

you know, the UK, the US paradoxically

took care of it the way the Chinese are

taking care of it now, which is stand

aside and let stuff fall in price like

housing. Uh, we had a huge, you know,

huge depression for like 18 months in

the early 1920s. Uh, Jim Grant did a

great book on that. Anyway, this is why

yields are going up around the world and

there's no easy answer for it. Uh again,

smart people are looking at the boomers

and the boomer generation around the

world going and in the west going,

"All right, well, they're not going

away."

And you know, it's very obvious they

have to keep inflating.

>> Well, it's interesting. We just had

another ceasefire pause in the war as

people consider the the cost of the war.

And if you were being generous, you

would say, you know, maybe we have some

sense here in in keeping in trying to

keep this the cost of this thing in

check. But the alternative way to look

at it is I can't remember a time what

the idea of America not being able to

afford waging a war that it is maybe a

signpost um of that negative side of

things that you're talking about that

that we can't actually afford to wage

this war

>> in in short yes there's you know we can

we can wage war on weekends and um as

long as the 10-year Treasury yield is

below 4.7%.

Um, which tells you either it's not that

serious a threat on one hand, right?

Let's let's number one, it could mean

it's not that serious a threat and Trump

is going through the motions. So, you

know, he he keeps his friends in Tel

Aviv happy

or

it means we can't go to war anymore. And

it has huge macro geopolitical

implications in terms of

what we hear so often, right?

Ultimately, the US military backs the

dollar. Hey, if you try to make things

multipolar or sell oil outside the

dollar, we're going to come and send the

most powerful military in the history of

the world and we're going to beat you

over the head with it. And

if the latter is even partially true,

those those things aren't true anymore.

And I I I think that's what's happening

here. And it's still it's such early

days in terms of the implications that I

think markets are just waking up to the

sort of the reality of and oh by the way

that then feeds back into inflation

because look what's going on around the

world. What are we hearing?

Somehow they all got the same idea at

the same time. I say that you know

facitiously because I think they all sat

down and said they're going to do it.

Japan, Germany, Korea, UK, US all saying

we're going to run basically defense

stmmies, right? So in co we did we did

consumer stmmies um where you you run

deficits and you you send money to

consumers to buy stuff. And these five

are doing defense stemmies. They are

borrowing money to rebuild their defense

bases. And three of those guys, right,

Germany, Japan, and Korea are all

historically big creditors from a

sovereign perspective. And in

particular, Japan, to a lesser extent,

Germany, big creditors of the United

States. Well, if they're borrowing money

to do defense sty, they have turned

sellers of bonds as well. And so not

only is it inflationary which reduces

demand for incre you know attractiveness

of long-term bonds at current yields

sends yields higher but it also turns

Japan from bond buyer to bond seller. So

now they're selling they're competing

with Bessant to place bonds yields up.

Like everywhere you look yield should be

going up. And so to me it's just all

about when does something break at any

of them because once one it breaks at

one they're all going to have to do

something. and that something's going to

look a lot like yield curve control,

although my suspicion is they'll never

call it yield curve control until they

have to. What about the the high real

yields we have right now? Um, a lot of

people have been saying, you know, just

looking back over the last 10 years,

real yields have never been higher. But

if you look back even further, the idea

of real yields at two, 3%, isn't that

crazy? Do you think we're heading into a

world where to to make these bonds

attractive if the only way that that

that we know is to keep printing to keep

issuing debt? I mean, are we going to

have to see sustainably higher real

yields to make any all of this paper

attractive?

>> It won't work. If that's the plan, like

it's it's a disaster because high real

yields when you have debt to GDP of 125%

and it growing faster than your economy,

right?

United States is a highly financialized

economy. High real yields are going to

drive much slower US growth. Um,

and the key driver to US growth for the

last 12 to 18 months has been tech, has

been AI, which is borrowing a ton of

money now, and which is very sensitive

to positive real yields. It needs

negative real yields. So basically

what that translate to anyone saying

that hey we need high real yields to

place that paper is we need to put a

bullet in tech and we need to put a

bullet in the American economy to place

those bonds and once you say it like

that you realize how nonsensical it

becomes because

if you do that the US will go into

recession US goes into recessions

deficits are going to rise nonlinearly

um last four three recessions we've seen

deficits rise

600 to,200 basis points of GDP. So GDP

is what 31 trillion. So you're going to

add two to3.6

trillion on top of a two trillion

deficit in a world where you have

positive real yields. And now what? Now

you still have your entitlements coming

on. They're going to come faster because

in a recession, those numbers grow even

faster. So, you're going to be looking

at that that number I quoted before of

of interest, gross interest plus

entitlements plus veterans benefits.

You know, it's maybe 104% 102% today.

It's going to go to 130% 150%. And

what's going to happen is the dollar is

going to skyrocket as the US government

crowds out all global dollar markets

trying to place paper. and

the treasury market dysfunctions the

stock market crashes in the US around

the world the economy it's basically

early days of co from the portion where

treasury yields started going up instead

of down until they step in and start

buying

treasuries under the opaces of of

treasury market functioning in numbers

that would make what they were buying

under co look quaint by comparison. So

it the two the the positive real yields

people said hey sell gold on positive

real yields

you know all my friends in emerging

markets they're like

>> when your debt to GDP is 125% and your

deficit's six and it's growing faster

than your receipts and your positive

real yields are going to slow your

receipts the last thing you should be

selling on positive real yields on real

yields rising is gold. you should be

buying gold hand over fist because you

know how it's going to end. It's just a

question of when. So that's just a mad

repositioning and leverage.

>> So when you hear the new Fed chair

talking about reducing the balance

sheet, that's just got to sound farcical

to you.

Yeah, I think I I think it's absolutely

farcical and he is I think he's saying

what he has to say

and I think markets have a way of

testing new Fed chair people and I think

it would be a delicious irony if War who

is so desperate he's he's been so vocal

that he could have done Powell's job

better than Powell did and look I'm not

some you know I was a critic of Powell

you know you sort of had a moment in

time where you can inflate away the debt

and he chickenened out. That was the

brave thing to do. He should have done

it, but he he couldn't do it. So, I've

been no no like big supporter of Pal. I

think he did fine. But to hear Worsh

talk about how he could have done so

much better is absolutely farical. And

so, I think it's going to be a wonderful

delicious irony to watch. He's if he

tries to do this, he is going to he will

end up having to grow the Fed's balance

sheet bigger faster than Bernani and

Powell ever did in all likelihood. And

so it's just everybody wants to pretend

like the debt isn't 125% of GDP and

everyone wants to pretend like there

aren't 65 million boomers that are you

know somewhere between age 80 and age

whatever they are 64 and they want to

pretend that we haven't been at war for

25 years. Like if we you know it's it's

like the old joke on you know the three

scientists on a no scientist is being

generous. Three people on a deserted

island, right? A chemist, a physi a

physicist, and a and an economist. And

they're like, "Oh, we, you know, can

washes up. We've got food. Great." You

know, chemist is like, "Hey, we could

use chemical reaction to open it."

Great. The physicist like, "Hey, we can,

you know, create a lever and open it."

And the economist is like, "No, let's

just assume a can opener." And so, like,

Wars is like, "Let's just assume

the federal debt isn't what it is. The

entitlements aren't what they are. the

veterans benefits aren't what they are

and that we have a non-financialized

economy that isn't highly sensitive to

real rates. Like, what are you doing,

dude? Just take your freaking medicine.

Mark it down, move it on, and let's go.

But otherwise, it's just going to be,

you know, more of the same. I hope

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This is a paid advertisement. It'll be

interesting this this week to see what

we get from the Fed. But I I mean just

looking at the the price reaction to um

to the the ceasefire announcement, you

know, in the past with oil down like

this, you would have expected bonds to

really rally the the equity markets are

now negative on the day that we're

recording this. So we got a ceasefire

and with the outside of the oil markets,

we couldn't get the reaction. Uh I mean,

what do you make of that? Um, and as

well the AI trade unwind, as you said,

it's highly tied to rates. How much of

this do you think is where we are in the

bond market affecting the equity market

versus people starting to doubt uh that

we're going to achieve, you know,

artificial general intelligence?

I don't know that they're doubting we

we'll achieve AGI. What I think has come

into play is China, right? This this

reminds me so much of

um so much else I've seen as it relates

to China. Uh which is, you know, oh

don't worry, they're never going to

catch us. H they're closer, but they're

still never going to catch us. Oh yeah,

they have a competitive offering, but

it's just cheaper. It's not as good. Oh

god, it's cheaper and it's better. And

by the time you get to that last one,

it's over. You've lost. And I think

that's what we're in the early days of

seeing with this AI, which is again

2000.com bubble it burst. Who cares? It

was mostly equity issuance, right? The

equities go to zero. You know, sorry,

thanks for playing. If you believed in,

you know, the sock puppet, you lost.

Okay, great. That's markets.

The second they started borrowing money

and mass to finance this and then

using these vendor financing

arrangements, etc., and then and then it

got looped into a national defense

imperative.

I think that's what we're watching is

the fact that like people say, well,

there's a big debate. Is Japan better or

excuse me, is China better? Is is China

not better? I don't know. I don't have

the c credentials to know and evaluate

which AI model is better. I read smart

people who who I think are do have the

credentials and they kind of go both

ways with different qu here's what I

know 30 years in markets.

The fact that we are discussing is China

competitive or not is all that matters

because it means it's close enough for

government work and in

sectors that are as richly valued as

this. I mean we are valued in faking La

La Land on P, you know, multiples of

revenues, you know, PE to the ones that

even have earnings. Uh and they've

borrowed a bunch of money. It was all

borrowed on the come all of it. It

wasn't like they had the cash flows to

pay this stuff. And so if you have a

forget about a down round, if you just

have a slower round of refinancing

things like OpenAI equity, etc. The

whole thing starts to come unwound

and

that has capital flow implications. That

has growth implications. And to your

point

that that that the long bonds in the

United States 10 and 30-year Treasury

sold off

over the last two weeks or the last

month

as the AI trade was questioned over the

last three weeks. It's a really

troubling signal. Now, you could say,

well, we went back to war and oil went

up and that's why fair point, but I

think you raised a great point, which is

oil's down today. What's a tenure? I I

saw it earlier down two basis points.

>> I mean, it's not the rally you would

expect for oil down five bucks on a

pause of the war.

>> No. No. And so, yeah, I think it's super

important. You know, we had we had

charts in a report for clients last week

which highlighted

I saw that non or excuse me, labor force

participation rate in the United States

is tanking. It's back it's not only is

it tanking, but it's back to COVID lows.

And I'm like, all right, well, let's

just see what this looks like. I took it

back to 2000 and I compared it to 10ear

Treasury yields. And it's like the same

chart. Lower labor force participation,

lower tenure. Makes sense. deflationary

30-year it's even tighter. Well, let's

look at, you know, 10-year term

premiums, right? So, what's the market

the rate the market's demanding to buy

US longer term paper against that and

it's a pretty correlated until 2022 23

and all of a sudden

long-term yields and term premiums have

taken off as as labor force

participation rate is turned down. And

in the last 6 to 12 months, all three of

those have taken off like scalded cats

as labor force participation rate has

tanked.

That is emerging market with a debt and

fiscal crisis price action. There is no

world where a declining labor force

participation rate should be driving

sharply higher yields. There should be

no world there. None. And yet it's

happening. And so why I think it goes

right back to that discussion of hey

we can pretend right you can you can you

can ignore reality but you can't ignore

the consequences of ignoring reality and

wars and all the others are ignoring

that to GDP is 125%. Japan's a seller

Germany's a seller. Korea is a seller.

UK is a seller. UK has been our second

biggest creditor by the way. So they're

going to build up their military.

Chances are they're going to finance

their own bond instead of ours. Um and

then you've got debt as well. Like I

said debt where it is. And you've got

these offbalance sheet liabilities

coming on balance sheet at rates that

are two three x of what receipts are

growing, what GDP is growing. It is a

it's the same it's the same problem

Vimar Germany had after after World War

I. I mean I don't think that's where

we're going for a lot of different

reasons, but directionally it's the

exact same problem. Now, you talked

about the the changing nature of the

stimulus that we're going through right

now compared to CO where it was sort of

direct to consumers. I mean, do you do

you view there there being a potential

that all of this AI spending has become

such a big driver of the GDP growth of

the of the US economy at this point that

um it it it is in many ways the stimulus

and it will be backstopped.

>> Yeah, I do. And to me, the only question

is is how big a draw down do you need to

justify some sort of Treasury uh or Fed

backs stop bailout guarantee of the AI

thing? Um

I heard credible rumblings the subject

was broached six to nine months ago

already.

Oh, really? That that they've already

discussed what happens if this whole

thing unwinds

>> in specific cases. Okay. And would it be

just like the public bonds like the the

big bond issuance that we hear about

from the major companies or they how far

down uh how far down do you think they

would go?

>> What was the Fed buying in CO? Weren't

they buying junk bonds? Weren't they

weren't they buying corporate they were

buying corporate bonds, right?

>> I I don't know if they ever bought the

corporate bonds. I know they said they

would. They they just opened the door

that that's a possibility that they

would do that, but they never actually

stepped in and did it. If they did it at

all. Yeah, if they did it at all, it was

small. But that was enough, right? So

>> I think look at the imp look at the

imperative of how this is being

described, right? We can't afford to

lose this. This is the new cold war.

China can't win blah blah blah blah

blah.

And then look at the reality of the math

and you just to me it is it's elemental.

They're going to have to buy back stop

bond like they'll just take over Nvidia,

right? Nvidia's on the tape today

guaranteeing, you know, $250 billion of

uh I think it's o open AAI. I think it's

open AAI some sort of data center here

in Ohio actually. And interestingly,

Nvidia's down on the day I last I saw.

Right. So, it's Nvidia is starting to

trade down on guaranteeing other

people's

bonds.

That's another signpost, right? Um that

shouldn't be happening. And ultimately I

think Treasury or Fed will take over for

for Nvidia is guaranteeing these things.

They'll take over for Soft Bank, take

over for and just backs stop the whole

thing. And it's, you know, may not even

be that expensive per se, but I think

that's what's going to happen. And it'll

be a really

Look, I think stocks go up on that. I

think bonds go down on that. I think

dollar goes down on that. I think

inflation goes up on that. Um, I think

gold goes up on that. I think Bitcoin

goes up on that. Uh I think industrials

go up a ton on that. So

to me it's just so crystal clear that's

where this is going. But I again it's

Wars is going to lose all credibility

after it happens

and and so will Bessant, right? Because

Bessant will be running the frigin

Chinese economic model he's been

complaining about for the last 15 years

of his career. And that's fine. Like

this that's where this was always going

to go. But just don't pee on my back and

tell me it's raining. Just tell me the

truth.

>> Yeah. I mean, they're taking stakes in

companies like Intel. It seems there's

Chinese characteristics for for sure.

Um, but I want to talk a little bit more

about the the short term. We had quite

the whipssaw in expectations in in rates

this year from everybody saying we're

going to get cuts to now people are

starting to price in in hikes. the the

there was a period in time when people

were pricing in cuts and the long end

was selling off. Now we're getting we're

having inflation concerns and the long

end is selling off and and so I I wonder

like is there a world where without

intervention in the bond market where

you see um where you see the long end

stabilizing?

>> Yeah, I think we're past I think we're

past, you know, we've crossed the

Rubicon on that front. Um, and the bond

vigilantes were for a long time

kneecapped by derivatives.

Um, and the private the private

vigilantes, but the but the vigilantes

now are, you know, Kevin Worsh is a

vigilante, right? He's talking about

selling bonds out of the long end. Um,

the the global sovereigns are are, you

know, foreign central banks are

vigilantes. They're not buying this

stuff. They haven't bought this stuff

for 12 years uh on a net basis. Central

bank holdings of of of bonds are are

down slightly over 12 years as the debt

has risen like

I want to say about like $18 trillion

over that time. Um maybe it's just 12

trillion. I know what's six trillion

between friends, right? Um the uh so I

think we're past the Rubicon on that

front. Now what could I do to get

the long end down? I could get it down

for a little bit for you, right? If if

you like, hey, S&P down 40,

S&P down 20 in two days, three days, I

could get the long end bid for you for

three, four, five days, maybe even a

week, and then it's going to turn around

and it's going to start selling off with

the S&P. We saw that in CO. We saw it in

Liberation Day. We saw it on the war. We

keep seeing it. People don't want to

believe it, right? It's like it's like

if you're watching the movie Jaws

and it's like oh girl washes up, she's

cut in half. That's just a motorboat

engine. And then like the little boy

gets chomped up and then the other the

fisherman gets chomped up and like

you're seeing the teeth and you're

seeing the bite mark. Then you see the

shark

and you're and and and yet you go I'm

still going to go swimming. I don't know

what's eating people. there's, you know,

there's something out there.

The issue is there's too much supply.

There's not enough demand at the rates

that we can afford and everybody knows

it. It's a because it's a pretty

straightforward math problem. And so

like I can get you rates down for a week

or maybe even 10 days if we crash S&P

like if we have a black another black

Monday like 87 event. I could get it

down for you. The other way I can get it

down for you is Kevin Worsh

prints money and buys it and caps it.

That'll get it down for you. Uh, and I

guess the last way is, you know, Bessant

going to, you know, Worsh and saying,

"Hey, revalue, you know, revalue gold

and and or or Bessant letting gold

really run and then revaluing it and

then telling Bess or Worsh, excuse me,

to create a TGA uh, deposit and Bessant

buying back his own bonds." then I could

then I could get it down for you. And if

you did that, by the way, you get that

the GDP down. Now, sort of these

traditional metrics that for the last 30

40 years all worked, right? Hey, if we

have equities down 10%. That's going to

create demand for bonds. It will not

create demand for bonds until you

delever the you have to devalue debt to

GDP from 125 to at least 80 and probably

more like 60 to 70%. which means you

either got to whack the heck out of the

dollar

um particularly against gold or you have

to do yield curve control. That's it.

Like those are the ways out. And you

know they want they don't want they

don't want to do that because then

they're going to you know they're going

to be the John Laws who have to buy back

all their bonds at like printing money.

>> That's how this is going.

>> Which one do you think is is more

realistic? I you you do have to give

Worsh a little credit that he has at

least come in saying that he wants to

change the way that that the central

bank thinks. The idea of revaluing gold

in the past, you know, monetary policy

policy regimes of the past few decades

seems kind of outlandish. I mean, do you

think that they would that that Worsh

would revalue gold or do you think he's

going to be more traditional and just

do, you know, financial repression? I

think he's gonna be much more

traditional. I think I agree that it's

outlandish that they would do gold at

least until they absolutely had to do

it. Um I just want I'm trying to find

here on my screen something that Wars

said recently because everyone's talking

right. So uh last week he told Congress

that

uh the Federal Reserve is not in the

bailout business um especially not for

the biggest debtor of all the US

Treasury. Sorry, that was Gregory IP at

the Wall Street Journal. He did though

append an escape clause. This is a

direct quote last week from Kevin Worsh.

Quote, "In periods of crisis like the

2020 pandemic and the 2008 crisis,

central banks by design need to step

into markets to create a fair price."

End quote.

>> Okay. So, we'll get fair prices.

Fair for who? Yes, we'll get fair

prices.

>> Yeah. So, he he's basically like he's

full of crap to be blunt. Like he's he's

he's going when push comes to shove.

Yeah. He's gonna play tough for a little

bit. He's going to play harder to get

right. He ain't going to sleep with the

markets on the first date. He's going to

wait till date three when he has a

crisis and, you know, then he's then

he's going to be sleeping with them, you

know, giving them whatever they want

because he's he doesn't have a choice.

His alternative is the Treasury market

dysfunctions again because it's a supply

demand problem.

If he wants to change that, he's got to

devalue the debt. Well, let's talk about

where some of that demand is going. You

said it's going to just other bond

markets just because there is so much

issuance, but also central bank buying

of gold has has reacelerated. There was

a brief blip in March when I think

people were were selling gold, you know,

to to get dollars to buy to buy oil as

as the price of oil went up. Um, you

know, emerging markets in particular.

Um, but since then buying of gold has

resumed. Uh, we have stabilized a bit in

the gold selloff. I mean, do you think

that now with the crisis maybe

behind us again, do you think we are

going to start to see the the gold

buying pick back up and a resume a

resumption of the rally?

>> I don't know if the crisis is behind us

or not. I think that remains to be seen.

Um, but I do think the gold buying will

just resume because I think there's a

moment in time where people sell gold to

get

uh to get oil, right? basically to

finance reserves and they sold

treasuries right alongside that as well.

You can see that in the data. Um

but the longer a war goes on the less

you want to own bonds and the more you

want to own the more you want to own

gold. And

also what this war has demonstrated

which is the Americans not only can't go

to war on anything other than a weekend

or and and as long as the 10-year

Treasury yield is below 4.7%.

But even under those conditions, they

can only go to war for a couple months

and then they run out of defensive

missiles

and need China to restock them and they

can't make their own rare earths yet.

And in with those set of circumstances,

what do you want to own the bonds of

that country or do you want to own gold?

Especially knowing that, you know,

they're busy sanctioning everybody over

everything. Um still um

you know is there if I was any random

country

having been threatened by Trump,

Greenland, France, Spain, England,

Germany,

Korea, they pulled the missiles from me,

right? So you know they love me so much

and then when the when the crap hit the

fan they pulled all my defensive

missiles and came to Israel. What would

you own? I would own you own gold. And

so I think that's what we're seeing. So

I think and then oh by the way the

Chinese who were supposed to be the

worst herd of all of this right there

were some in some circles this was a a

5D chess move to choke off the Chinese

what have the Chinese done you know they

bought like 80 tons then the next month

and when the price fell then they bought

like 100 tons then then price stopped

falling then they bought 110 tons then

they bought 140 tons this most recent

month in June they bought 173 tons

they're literally buying like 70% 60 no

it's closer to 70% % of of global gold

mine production on a monthly basis when

they're supposed to be collapsing

because they don't have any oil and this

and that and the other. So like that

narrative is being demonstrabably proven

false. But I think they're also going,

"Oh, you're going to knock gold down.

Awesome. Wave it in. Wave it in."

because and so I think really from here

on out,

you know, I think gold buying is going

to continue because

you want to own the bonds of someone who

can't afford to go to war over 4.6 4.7%.

Why? Because they're telling you if we

have actually have a real war, they're

going to print they're going to print

those bonds into in like oblivion to buy

them all. Just buy gold.

So you think gold purchases are going to

continue to accelerate from China. Do

you let's say this this crisis does

continue? I mean obviously they

stabilize the price. They stopped

importing oil. They sold a lot from

their reserves. We don't really know how

big those reserves are. Do you think

that that's a lever that they can

continue to pull? Um and how long do you

think it can go?

>> I do think it's a lever they can

continue to pull. Um,

number one, if I read recre the other

day, they're the biggest refiner in the

world, right? So, and they can buy it in

or they can buy it in yuan and dollars.

And so, now you can sort of play with,

you know, you buy it in yuan, you can

sell it in dollars, you can there's a

lot of things you can do with a refinery

and the ability to buy feed stock in two

currencies.

Um,

so that gives them optionality. Uh what

have we been hearing for the past year

plus? What are they flooding the world

with? Solar panels and electric cars.

Like you can see what's happening.

They're um according to at least one

source uh in the first half of 26 they

reduced oil demand by 1.4 million

barrels a day by shifting to EVs. uh

they have the grid to be able to do that

because they spent the prior 20 years

investing in grid and instead of in in

you know fighting wars in Iraq and

Afghanistan. Um,

and so I think they have an ability, you

know, their their reserves are not their

reserves are not infinite, their SPR.

And

when Trump got elected, I hear they uh

businesses ramped up cash holdings to

like six months of cash because they

figured a trade war was coming. Trade

war came, Bessant got it and said, "Uh,

we've got all the leverage." And two

months later, he folded like a cheap

suit as did Trump.

Then they spent 2025

really ramping up SPR and probably

longer, right? SPR holdings. War comes,

they run it down. My guess is they were

probably ramping up purchases with oil

down in the 60s and 70s uh a few weeks

ago. restore, you know, then we've

certainly seen we've heard that um you

know, in terms of some public on the LG

side, um ramp up of that.

And so they seem to be doing a pretty

good job of managing these. And again,

does it mean they can go forever? No.

Does it mean they're they're they're uh

omnipotent? No. But they don't have to

be they don't have to be faster than the

bear. They just have to be fat, you

know, faster than the than the pudgy

camper that's over there in Washington

and in Europe and in in the UK. You

know, those fat campers over there, the

barrels will run down faster. It's just

a pain contest. And like they won the

pain contest in April, right, of April

of 25, liberation day. We're going to

put it to them. By May, CEOs of several

of the biggest retailers in the US, they

went to the White House and said,

"There's going to be empty shelves in

three to six months if you don't stop

it." Round one of the paying contest

goes to China. Okay, let's go. Round

two. We're going to cut China off.

Venezuela, Iran,

bond market goes to 466. It folds like a

cheap suit. You know, 10ear yield goes

to 466. So,

you know, I've been very surpris I was

very surprised by what China did to be

honest. Um, had they not, I would have

been right because they did what they

did, I was wrong about the disruption

the oil oil interruptions, etc. we're

going to cause. So, um I think they're

going to continue to have flexibility

around that because they've shown a

willingness to be flexible and a

willingness to react, right? They don't

wait for, you know, they just go, "Look,

it's Trump. Oil's a 65. Do we think he's

going to suddenly start being rational?

Nope. Buy oil." You know, oil's at 95,

10 years at 47. Do we think he's

actually going to blow up his own

market? No. He's Trump. He's inherently

self-interested. sell oil, sell, you

know, you know, whatever. I I I

think that's what they're going to keep

doing.

>> And it is interesting because China had

this huge property bubble. Their market

has gone nowhere for a number of years.

They've been willing to suffer through

this period of down prices from from

their biggest asset classes. And I'm

sure it's been hard for those people,

but they haven't they haven't folded on

it. They've they've said, "This is what

we need to do to get things back to

normal, and they're doing it." And here

we can't take it for a week, two weeks

of of market pain before we fold. I

mean, you talked about the CEOs coming

to to say, you know, the shelves are

going to be empty.

To me, it feels so much simpler than

that. It just feels like it's it's

market prices. It's purely market prices

and they just can't we can't take the

pain here. Um

>> I would I would yeah I would take it one

more which is the equity market is the

economy.

They actually have a real economy. We

don't and they're related. So it's a

little bit of a a flip statement. But

she came out in I think 2018 and said

homes are for living in not for

speculating. And when you look at when

he gave that speech and what happened to

home prices after it was a distinct

policy choice. We are going to deflate

housing. And then you can also see loans

picking up into different industrial pro

you know basically making stuff to make

sure that China 2025 which they had laid

out in 2015 would happen. And so they

redirected capital out of housing into

goods increasing goods supply which is

you know we're seeing that in

competition in cars right it's hit

corporate profit margins there etc. It

comes down to a view of where they want

their country to be in 10 or 15 years,

right? So, do we want, you know,

America, we cater to the boomers, right?

Home prices have to stay high, equity

prices have to stay high. Realistically,

if either of those fall, the fiscal

situation, which is already teetering,

completely implodes.

the Chinese because they didn't do the

dumb wars and because they don't have

the social uh programming that we do,

right? You know, people say, "Well,

their debt to GDP is higher." Well,

yeah. Do you include entitlements?

Because if you do, it's not. Um,

and

because they don't have the social

safety net that we have, and they didn't

do the dumb wars that we did for 25

years,

they have more leeway to take some of

that pain

and take the longer run view of where do

we want to be in 2030?

Because what's going to start to happen

if we just let home prices run and run

and run where people can't afford houses

is you're going to start to have

political instability.

If you have I mean there's

uh uh Peter Turchin did a book on it um

tur r c h i n um I can't think of the

name of it right now but he he looks he

he created a scientific field called

cleodnamics which looks at um uh

basically it's it's wealth inequality

and elite overprouction leads to

political instability

and so people say hey it's great the US

market's up and houses are up And so

it's all fine, right? Like like think

about what Trump what what was her name?

The blonde, right? She's getting asked

about Epstein and she's like the Dow's

at 50,000, right? That tells you

internally that's the only thing they're

talking about. This is our talking point

of 50. That's great. But political

instability is already happening.

Trump's here because of political

instability. Charlie Kirk got shot.

That's a symptom of political

instability. The CEO of United

Healthcare getting assassinated on the

streets of Manhattan. These things

didn't happen in America when I was

growing up. You know, I have I have I

have a a friend of mine who has the

contract for the medical examiner's

office in two uh major uh or two two

major second tier cities of the United

States. Okay. So, anybody who dies of

murder, suicide, drug overdose,

suspicious circumstances, accident, they

get them. And it's a monopoly.

They said, "We are seeing we are busier

now than they were at the depths of

COVID when people were drinking,

shooting, and and overdosing them

themselves to death."

So, you've got this sort of political

stability dynamic that I think the

Chinese are considering because they

don't have the financing role that they

have to address that we do quarter to

quarter to quarter to quarter in the in

the election cycle, you know, every

every 6 to 12 months.

And so it's smarter. Like how do you

stop political instability? Well, the

first way you do it is you don't make

houses go up and up and up so no one can

afford a place to live. Like that's a

pretty good smart way. Like if I wanted

to create a revolution, I would jack up

food prices. I would jack up housing

prices. I would jack up healthcare

prices. I would jack up education.

And what are the Chinese are giving away

education. Their home prices have

crashed. Equity prices are down, right?

So, you know, it could be a sign of

weakness of the Chinese. Maybe they're

afraid of of a revolution. I don't know.

But I can tell you the US, right? What

do we have in New York? We have an

avowed Marxist running this city of New

York and people are like, "This is fine.

The Dow's at 50,000."

>> There are mixed feelings here. Uh

depending upon uh who you're talking to,

>> it's going to get worse. It's going to

get worse because you've got a lead over

production and you've got record wealth

inequality. Wealth inequality in America

is higher now than it was in the guilded

age. It's going to keep getting worse.

>> Yeah. It's interesting. the Chinese as

well. You know, I was invested in some

of their uh consumer lending names.

They're just seeing incredible loan

growth and and the Chinese by and large

um it's not a debtor society and it it's

people paid back their loans at

incredible rates. Um and but the Chinese

cracked down on it. They said, "We don't

we don't want to have so much of a a

credit consumer credit driven economy

because it creates these these negative

feedback loops when when the tide goes

out." And they just they stepped in and

and they they shut down on uh a lot of

the loan growth and a lot of the the

stuff that made that made the whole

thing work. Um

>> Yeah. And the CCP doesn't like

competition, right? Because at the end

of the day, if you're making loans to

the people,

>> you're in control of the people, not the

CCP. They don't like that.

>> Yeah. Well, here the market seems to be

seems to be in control. So, we've talked

about gold, we've talked about bonds.

What about the dollar? I mean, you said

you think they're going to have to to

whack the dollar, get it down um to to

help fix some of these problems. I mean,

how is that going to happen with uh with

yields just continuing to rise and rise

and rise? What are they going to have to

do to get the dollar down?

>> Yeah. And with oil where it is, right?

Like you had a moment you could do it

and then you did this dumb war and now

you can't. You can't you can't you can't

devalue the dollar with oil at 85. Come

on. You're right. You know, very very

clearly over the last three, four years,

as long as oil's between 60 and 80, the

Treasury market's fine. Once it hits 85,

it starts a dysfunction. Yields go up.

You got to get it down. So if you're,

you know, for Bessent who came out in

early 25 said, "Judge us by the tenure."

Well, how you doing, buddy? You're not

doing good. The three arrows are all in

the toilet and the 10 years at 47. Nice

job. Heck of a job, Brownie. Right. Um,

so

how are they going to do that? They're

in a bit of a pickle, right? I think the

way you do it is ultimately you let a

momentary risk off.

Um

the challenge is is that's like you know

that's like trying to you know just have

a small explosion by lighting a gasoline

soaked rag in a nitroglycerin plant.

Like we just want a small explosion so

we're just going to it's tricky. Uh I

think you need political cover. So

you're going to need risk off

for a moment and then you can you know

but paradoxically it's going to send the

dollar higher that creates a debt

feedback loop that's going to send

yields higher. You're going to get a

moment where yields go down and then

they're going to go up at the long end

on that just like they have repeatedly

because again your biggest marginal 40%

of the notes and bonds net issuance

since 2022 has been bought by Cayman

Islands hedge funds since 2022. That's

Fed white paper last October. What do

what do Cayman Islands hedge funds do?

You know number one they manage to a

monthly mandate. So anytime volatility

goes up anywhere

they they go they degross their entire

book. What do they sell? They sell

treasuries because they're the ones that

you know a lot of them are doing the

bigger ones. Certainly you're doing this

hedge fund relative basis trade. That's

who's buying all these treasuries. And

that's why in the short run why treasury

yields long long yields go up on risk

off now. You know you got very fickle

creditors. So

how do they get it down? I think you're

going to need a risk off and then you're

going to need something that looks a lot

like what we saw postco

which is, you know, de facto

yield curve control, you know, and and

with with fiscal stimulus and and

that'll do it. Is that a dip you would

be a buyer of? I mean, we we talked

about how reactive both the elected

government and uh and our central

bankers have been to any sort of

instability in prices. I mean, you look

at comparing to 2008 how much faster

during co they got the dollar swap lines

out. They talked about backstopping the

credit markets. Now, you know, we've got

the president if we get oil above a

certain point, the war is off. uh you

know we're we're incredibly reactive and

and any dip whether it was liberation

day or the Iran war or COVID I mean the

the greatest dip buying opportunity that

many of us have ever seen

is the next dip going to be one that you

want to buy?

I think all the dips are ones you want

to buy in dollar terms. Um, look,

equities are still down 30% from 2022 in

gold terms and they're down 40% from

2000 in gold terms.

And I think that is, you know, as long

as China is China,

I think that's the new regime, right?

Where even if we want to beat down gold

and sort of make a statement about the

dollar, what are the Chinese doing?

They're just showing up and waving it in

every month more and more. And we can't

we can't afford to have a force majour

issue in London or in New York in in

physical gold. And so ultimately the

Chinese are driving the boat on gold.

Chinese are watching all this and going

there's a disaster. Like we did this

like in the in in the in the King

dynasty like 400 years ago. We know how

this goes. You know it's it's like the

back to the future. I've seen this one.

Those are the Chinese right now. I've

seen this one. I know how this goes. So

they're gonna keep buying gold because

there is no mystery how this gonna go.

And probably silver too, by the way. Uh

and so dips should absolutely be bought

in dollar terms. And

but in gold terms, I think I think the

next five years, I think we're going to

look back in five years and

I think the S&P is going to be up big in

gold in dollar terms. I think it's going

to be down in gold terms.

>> What do you have for your price target

for for gold over the next year?

>> I think it probably gets back and

probably through all-time highs. Um,

I mean that's actually a pretty big

rally from here. So, I don't know. I

don't like to be that aggressive. So,

let's let's say this goes back to 5,000

and you know eventually um

because I I I also think part of it too

like the other thing about the Chinese

is a very gradualism, right? They're not

>> they don't do big splashy things like

the Americans do, right? It's very

subtle, right? We drop bombs and wipe

out, you know, the family the ruling

family of Iran. Chinese are much more

subtle than that. Um,

and they're they've done the same thing

as it relates to gold. Um,

you know, they were on the ropes a bit

in the third quarter 23 and what

happened like they changed the rules a

bit and spreads in Shanghai blew out.

Gold premiums blew out. Now, we wrote a

report at the time for clients. They're

using gold to defend the yuan. And we

were right. That's exactly what

happened. It's basically, okay, the

yuan's under pressure. we're just going

to empty London and New York gold vaults

until the pressures removed.

And it was and it was and

they did and it was. So, uh,

by I I bring that up by way of saying I

don't think like they're going to be,

you know, a lot of gold people like, oh,

they're going to make it 10,000

tomorrow.

Probably not. That's not their style.

But their style is it'll be 5,000 in a

year and it'll be 6,500 in two years,

three years. It'll be 8,000 in four

years and it'll be 10,000 in five years,

you know, and the S&P will have gone up

from 7,000 to 11,000 or something. And

yeah, S&P up in dollar terms, down in

gold terms. Um, because that's the one

thing, the other thing that that that a

lot of sort of the the China hawks like,

oh, propertyy's gone nowhere, stocks

gone nowhere. Tell me how gold's done in

China because that's that's one of their

biggest savings. It's also a huge

capital base for the bank banking

system. How's gold done? Oh, well that's

gone that's up 4x in the last six years.

And oh, by the way, the same people

looking for a collapse in the yuan

against the dollar have completely

missed a collapse in the yuan against

gold, which is what's happening. And it

it it's literally the way the system's

designed for the yuan to fall against

gold over time. So, um because that's

how they're internationalizing the yuan.

They've said that repeatedly for 10

years, 11 years, 12 years. So, uh that's

how I that's how I think about

equities. It's it's dollar terms, gold

terms. Uh I think ultimately good for

Bitcoin too, but not yet.

>> Yeah, we haven't talked much about

Bitcoin. What's what's happening there?

Uh I I think there's obviously a huge uh

five-year comp problem. I think that

that's, you know, something with

Bitcoin. Obviously, you have the the

store of wealth, the people who want to

get a hard asset outside of the dollar

system, but at the same time, it's a

highly still a highly speculative asset.

And you've got all of these other

speculative assets right now that people

are making money on. You're seeing uh

streamers who used to cover memecoins

are covering AI stocks. How much of the

of the slowness in Bitcoin do you

attribute to there's another flashy

shiny thing in the room right now for

speculators to go and and tell their

friends about?

>> I think that's a big part of it. I think

you've got,

you know, that that that thing, you

know, flashy flashy competition

syndrome. You've got a civil war going

on in Bitcoin of sorts, right, between

the the BIP versus non-BIP. And like I'm

a Bitcoin guy. I like it. I've owned it.

I don't have time to figure out what's

what. I don't like

just tell me when you stop like beating

the heck out of each other and and what

what we're doing. Um

you've got some increasing still you

know credible

concerns about um when quantum becomes

an issue potentially for a part of the

base of Bitcoin out there. And to me,

the other, you know, you've also got the

four-year cycle issue, which suggests we

have more downside from here given

historical precedent. Um, you know,

through the maybe the fourth quarter,

early fourth quarter this year. And then

you've, for me, the biggest hang-up for

me still is it still trades like a tech

stock. Days when NASDAQ's up, it's up.

When NASDAQ's down, it's down.

Except for this year, it's

underperformed the NASDAQ massively for

the first half of this year. and then it

has actually outperformed the NASDAQ a

bit in the last 2 3 weeks um because

it's already been down knocked down. Now

I don't I'm very nervous about anything

techreated. I don't like the setup there

at all. And so basically for me to kind

of you know I I owned a lot of Bitcoin.

It was a huge part of my net liquid net

worth. I sold most of it almost all of

it um last year. Um 96,000 23 24 ounces

of gold. We're still sitting here 14 15

ounces of gold, 65,000.

Um, I'm I'm not buying it back with

what I see the risks on tech because I

just, you know, yes, Bitcoin's already

sold off, but if we really get a risk

off that we need for Worsh that I think

we need for Wor to have the political

cover to cut rates aggressively, weaken

the dollar, all these things, and this

newly emergent competitive setup from

China. Um,

look, if we have a two, three month

stretch where the NASDAQ really gets

hammered,

I don't want to own Bitcoin on that. And

I'll be I'll be happy to be wrong if

that's the case. Look, if Bitcoin goes

up in that, I'm going to be dead wrong.

But I just have not seen

anything in the last several years to

suggest that if the NASDAQ really gets

way laid for a month or two or three

months that na that that that Bitcoin is

going to somehow, you know, scream to

now when they start backstopping NASDAQ

or when it gets NASDAQ gets bad enough

that they're it's becoming apparent

they're going to have to backs stop it.

That

is where I want to be adding back to

Bitcoin. And I might be being too cute

by half,

but I think that's where this whole

thing's going. That's that's how I see

it playing out. And then I want to own I

want to lo I want to be loaded up

Bitcoin to the gunnels and you know then

I'll take my chances. I just think the

price is going to be lower than where it

is today. You think that Bitcoin is

going to be the play over gold?

>> Yeah, I would I mean history would

suggest that. Yeah,

>> we have a Fed meeting coming up as you

said the first uh the first date with

the market. Worsh came out and and he

said, "You're not getting any." And uh

everybody interpreted it as as quite

hawkish. Um but he's also said that he

doesn't want to be giving a lot of

guidance. I mean, what do you think the

chances are that he kind of um whipsaws

the market around and goes back the

other way just to sort of teach us all a

lesson about taking his words um too

seriously? I mean, do you think that

we're we're set up here with with

everybody expecting hikes into the end

of the year for Wor to kind of wiggle

around a little bit and and and make the

market unwind all of that pricing? I

have no edge here, so take everything I

I'm about to say on it with with a with

a block of salt.

The fiscal situation suggests he can't

hike rates this year. Full stop. The oil

market suggests he should hike rates.

Full stop. The tech market suggests he

should be cutting rates aggressively.

Full stop.

If he cuts rates or rehikes rates, long

end yields are probably going higher

either way. Which is only going to then

So

if I'm him, I never would have taken

this job,

you know, unless they're like depositing

$100 million in a Swiss bank account or

something for him to be the bad guy,

right? Or something like that.

But even then, I don't know that I would

do it because my reputation is worth

more to me than hundred million dollars.

So anyway, I don't know what he's going

to do. But

I feel pretty strongly that every movie

he makes, there's going to be something

wrong with it. Like he's got options,

but they're just all unpleasant. Raise

rates. You 25 basis points might be

enough to kick the legs out from under

what's going on in AI. I mean, look what

we're watching, like you said earlier

today. Okay. Well, don't do anything

then. Okay. Well, now oil picks back up,

you know, and inflation picks back up.

>> Lose even more. Yeah.

>> What are you going to do? Like, and it

it ultimately,

you know, the fix is simple. It's just

not politically easy. It's it's, you

know, those entitlements have to go away

and there's no way you can make them go

away. Okay? So, if the title won't go

away, then the war's got to go away and

the defense department's got to go away,

but it's got to go away without a

recession. We can't do that. And okay,

well then the last options you got to

cut rates when you shouldn't be cutting

rates and buy a bunch of bonds when you

shouldn't be buying those bonds. Devalue

the heck, you know, yield curve control,

devalue the heck out of the currency.

Those are your options. Um,

and you know, so to so to your point,

right? This is the first,

you know, this is the

first day. Last month was the first

date. Here's the second date. I think he

still plays hard to get, but I think he

plays hard to get in an easy to get way,

right? where there's some mystery like

hey just stay with me you know it's

going to be just give me a little time

it's going to be it's I'm going to be

cancelled by me too luckily by the uh

unfortunately by the end of this

conversation apparently but um luckily

it's not a couple years ago at any rate

um

I think he's he's trying to ride two

horses with one ass for another another

couple another you know till the next

meeting I don't even know when that is I

should but I don't but it's probably

what six weeks eight weeks

>> oh yeah six to eight weeks almost

>> September something like that Um,

but it's great, right? It's like the old

Rush song. If you know if you don't even

if you don't make a choice, you still

made a choice.

>> Yes.

>> Perfect line for PO. He's He's going to

have to flop a card one way or another.

He flops a card on Wednesday.

>> Yep.

>> And

he's got three, you know, it's not like

this is like, you know, these aren't

important constituents, right? is oil

and inflation, the Treasury market and

and and AI, which is this like the key

driver to economic growth over the last

two year, right? So, you're like one of

them is going to be unhappy at least and

maybe two

and you know that'll set us up for the

third day which could be a real doozy. I

want to close with a question about

about sequencing and what you're

watching and how you think this is all

going to unfold. What is the area that's

going to start this? Is it the AI trade

unwinding? Is it losing the bond market?

Is it more conflict, the the forever war

um in the Middle East? What What is it

that you think people should be paying

most attention to to sort of see the

path forward that you're talking about

unfold?

>> I don't know. And that's what scares me.

That's why I'm sitting, you know,

personally of my liquid net worth nearly

60% in cash, T bills and and gold

bullion

>> because I don't know. Um, I've got like

a bunch of of, you know, flies flying

around looking for a windshield. So,

what's the windshield? Is it the

Japanese bond market? I don't know. Is

it supply chains now that we're sort of

reclosing Hormuz? I don't know. Is it

the UK bond market? I don't know. Is it

the German bond market? I don't know. Is

it the US bond market? I don't know. Is

it this war? I don't know. Is it, you

know, the fact that Russia's been

helping target US assets and and can

continue to do so and we're out of

Patriot missiles and something untoward

goes boom? I don't know. Is it Ukraine

and Iran getting into it now and all of

a sudden, you know, I don't know. There

are so like and again, I wouldn't care I

wouldn't care. It's too strong. I would

care a lot less about any of these

things

if we were trading at 2002 PE multiples

or or or le and levels of sentiment. If

we were trading at 2008, you know, if we

were trading at 1980, right, we're at

like a 42k Schiller PE like it's it's La

La Land. That's why, you know, even

though I would expect gold to sell off

as if any or all of these things go boom

in the short run, I think gold actually

would go still go down because you're

still a financialized instrument.

I look at all these things and like it's

just so crystal clear. I want to have

the gold position there because

we know in two years dollar you know

stocks higher in dollar terms lower in

gold terms like gold is now the

reference point to

sort of everything in my view uh as a

result of all the the untenability of

all these issues the untenability of

wars like he's got to make a choice and

they all suck there there's no good

choice right like you know do you want

to shoot yourself in the head, in the

heart, or in the nuts. Pick.

Like, uh, nine. No, no, no. You have to

shoot one. Pick.

That's where he is. So, between stocks,

the dollar, and the bond market, which

one do you think is a bigger bubble

right now?

>> The biggest bubble,

I guess, is still the bond market on a

real basis, right? It's

to to to to because to own long-term

bonds, you have to believe that your own

government is going to defund itself,

defund the defense department, defund

the most polit powerful political

constituencies,

and crash the stock market, which would

crash the bond market if they tried it,

by the way, just to preserve the real

value of the bond market. Like, there is

zero chance that's going to happen. And

so to me, the only question on the bond

market is like what is the yield that

they ultimately EYCC at? That's like

that's the most interesting thing to me

about the bond market. The rest of it

like I I

if you want to own bonds, buy gold. And

I think that's eventually that's where

the market's going to go. Like you you

if you want to own duration, own gold.

Because gold is just a 0% yielding bond

of infinite duration, finite issuance,

and infinite face value. Why would you

own a 10-year Treasury which is, you

know, 4.6%

yielding, infinite supply, finite face

value, finite yield.

And and I think as more, you know,

central banks have gotten that. They got

that 12 years ago. US banks are like,

no. Chinese banks are like, yeah, wave

it in. Chinese people, wave it in. Yeah,

I get we get it. We get it. most of the

emerging most of the you know the global

south like we get it waving it you know

the western western and it's not just a

US problem it's it's the Germans it's

the UK there are these sort of they're

all on the same page like oh no these

bonds these are you these are value I'm

reading about the South Sea bubble right

now it's like I'm reading this book I'm

100 pages into a 220 page book and I

must have laughed out loud like

literally 15 times already because it's

just like oh my god this is all just

happening again

>> yes I've seen this one

>> I've seen this one yes

>> yeah exactly Exactly.

>> Yes, indeed. Well, Luke, we will leave

it right there. People can find your

writing for your clients that you talked

about today at forest forthe trees.

That's fft-lc.com

as well. You're on X, you're on YouTube,

whatever your favorite social media

platform, they can follow you there.

Luke, thank you so much for joining us.

>> Thanks for having me on, Max. It was a

great conversation. I appreciate it.

>> Hope you enjoyed today's interview.

Remember to check out the Fundrise

Income Fund. Click the link in the

description to learn more about the

strategy and assets. Until next time.