Nobody Is Ready For The Biggest Economic Shock Of Our Lifetime

[00:00:00] Speaker 1: Hello, fellow Rebel Capitals. Hope you're well. I'm here with my good buddy, Porter Stansberry. And we're going to give you a ton of actionable information during this interview right now. Porter, thanks for coming on, buddy. George, always a pleasure to see you. And I look forward to seeing you in New Orleans later this week. Absolutely. Well, I think in a couple weeks, end of October, something like that. And I really look forward to it because we're going to be able to hang out with our other good friend, Doug Casey. I haven't seen Doug since I hung out with him in BA. And I don't know if there's any other person on the planet Earth that makes me laugh more than Doug when he's not trying to make you laugh. [00:00:44] Speaker 2: I've been close friends with Doug now for 30 years. And he's made a tremendous impact on my thinking, my life, my career. And he says this is his last public appearance. He says this is it. After this, he's hanging it up. [00:00:58] Speaker 1: Yeah, I heard him talk about that for sure. Yeah. So, well, on that note, what's on your radar lately? I mean, there's so much going on. So I wanted to kind of just give you the ball and see where you wanted to run with it. [00:01:09] Speaker 2: Well, you and I go back and forth on this issue. But my biggest trade this year was I had a $10 million short on Treasury Zero coupon bonds. And I've said in many places and to many people that I'd never had a more confident trade in my life. I mean, I'm certain I'm going to make a whole lot of money on that trade. And I covered it about 10 days ago. So I got up about 20% on that trade in about six months. And I covered. So why'd you cover? Well, I think. I think that we have priced in the inflation that we're going to see so far. And so what happens next in the Treasury market depends on what happens next. And I think it's probably going to be more inflation for longer. But I think there's going to be a pause. I want to see what happens with the midterm election. I think there's going to be a lot more uncertainty after that. I think that doubt has finally crept into the AI trade. So I think you're going to just see a weaker financial environment for the next six months or so. And that, of course, would relieve some pressure on the Treasury market. You could see you could see a little relief rally in Treasury prices. And you could see a little a little retreat from risk assets, which would help move Treasury prices higher. [00:02:30] Speaker 1: Yeah. Lower. I don't know that we have a difference of opinion on the direction of rates. But more so what drives rates, at least our last discussion, because I just always look at nominal GDP. And so I know a lot of people talk about debt and deficits or what have helped drive, let's say, the 10-year Treasury up over 5%. But in my view, I'm like, look, guys, you know, nominal GDP is at 6.5%. Like, where would you expect the 10-year Treasury to be? [00:03:01] Speaker 2: Oh, there's lots of reasons to see why rates have gone higher. And I do the same analysis that you do. I think you're going to see, you know, nominal GDP of at least 4% for the 12-month period. I'm not saying you're wrong at 6. I'm saying at least 4. And I think you've got inflation of at least 3% or 4%. And that's, you know, the government's first inflation, not real inflation. And in that environment, you should see 10-year rates at around 7%. And we're nowhere near there. So, I mean, there's certainly – I could certainly have covered the short too soon. The other thing I think with the unrest you're seeing in France, you're going to see more and more of this kind of deep, sovereign unrest because the Western democracies are actually going broke. And, of course, they have printing presses. You know, we're not the only one with a printing press. We're the world reserve currency. But, you know, the euro has a central bank too. They can create as much paper as they want. And the impact of that now, of course, is being felt through inflation. So, instead of a deflationary collapse, we're looking at, I believe, over the next decade, an inflationary collapse that's much more akin to what we saw in the 1970s. So, I think we're going to see much higher rates of inflation, much lower bond prices. And I've made some long-term changes to my permanent portfolio allocations. I don't know if you know about this, but Harry Brown had a great strategy for capital preservation and a paper world, the permanent portfolio. It's an asset allocation strategy. It's 25% stocks, 25% bonds, 25% gold, and 25% treasury bills, you know, 60-day paper. So, you've got liquidity. And then you just rebalance. Whether you rebalance quarterly or annually doesn't really make much difference. But it just keeps you in balance as the inflation bounces around between those different buckets. And I replaced the bond portfolio with property and casualty insurance companies because, as I'm sure you know, that's all they own. Property and casualty owns a big bucket of bonds that they use to pay claims. And then they have an underwriting unit on top. So, you get a little bit of profit from the underwriting unit, you get a little bit of profit from the growth in premiums, and you get whatever the return of the bond market is. And that's what really makes up a property and casualty business. And my thought was property and casualty gives us a little active management for the duration risk. So, you've got people like WR Berkeley who are really good at investing in bonds, and they're going to help us weather the duration risk we face as inflation marches higher. And so, that's what I'd done in my permanent portfolio. And in September, when the 10-year got to 5%, I said, that's it. We're out of long-duration fixed income, including through property and casualty insurance stocks. So, my current permanent portfolio is 50% gold in equity and 50% cash. And that's how I think you're going to do best in this environment until there is some real change in the structure of sovereign debt. [00:06:02] Speaker 1: So, that's how you've got that permanent portfolio positioned right now? Yeah. [00:06:07] Speaker 2: 50% stocks and gold and 50% cash because those assets can weather inflation better than any kind of fixed income strategy. [00:06:19] Speaker 1: Yeah. But, you know, what's interesting is I think through, excuse me, you covering that position on the short, that zero coupon, you know, covering that basically is in the 1970s, you know, people think that inflation just went straight up. But that's not true because once you got the big kind of spike in the unemployment rate in 1974, 75, you had disinflation for the next two years or so where interest rates gradually did come down. Now, it is true that they came down from a high level and you had disinflation from a very, very high level. But you still had that disinflation. You still had interest rates go down there. So, even in the 1970s, when you have a big economic contraction and you have that unemployment rate spike, it's very rare to see inflation actually accelerate. And therefore, if you think that interest rates are a function of growth and inflation expectations, you would expect that they come down. [00:07:23] Speaker 2: Yeah, I wonder how much that if you think about it as, you know, an earthquake and then, you know, what do you call those aftershocks? [00:07:34] Speaker 1: Oh, the tremors or whatever. [00:07:36] Speaker 2: Yeah. So, if you think about the big earthquake being the break from gold in 71, and you look carefully at what the 10-year yield did, right after that, the 10-year yield went to 6%, like almost overnight, because people didn't have any idea what that was going to mean for paper money in the bond market. And then those yields came back down until the end of 73, and then in the beginning of 74, they shot over 6% again. And, boy, it was a massacre. And so, I wonder, if you think about what happened during COVID, when we printed $7 trillion, we shut down the economy, we spiked demand, I mean, we're setting ourselves up for a massive inflationary event. And we saw that, and you saw the Fed begin to manage it starting in, I guess, 22, and the culmination of the banks, some banks going bust in the spring of 23 from these events. And then the very soft, I'm not even saying it was a recession, just the soft markets that we had in the fall of 23, there was a roughly 20% drawdown in tech stocks. A lot of the speculative stuff got killed, but, you know, the S&P, I don't think declined even 20% in 23. It was just a soft market. And then, with the AI trade, the economy has recovered, demand for financial assets has recovered. And so, I think we're just in another, we're still dealing with the impact of that enormous amount of credit and money that was created from COVID. And I just think we're seeing another aftershock from all of that. And it's an open question, still to this day, whether or not, you know, can our economy actually handle rates at 6%? Can you, what's going to happen to housing if mortgages are 8%? And I know that over the long term, the economy will adjust to these rates. But will the shock of that big interest rate move we've seen this year, will that cool the economy? And will the uncertainty around the midterms cool the economy? And I think that's what we're going to see. Not a return to 10-year yields below 4%, but I think we're going to see 10-year yields stay at 5%, not move much higher until maybe another 6 or 8 months as the economy is able to digest the uncertainty from the election and the impact of these higher rates on the housing market. [00:10:08] Speaker 1: Yeah, you know, when I try to think about the impact of higher interest rates or mortgage rates, I just did a video on that. And I think we're at like 7.4 right now in the 30-year fixed. And I went back to the 90s, and there were like in 99, 2000, I mean, mortgage rates were almost 9%. I think they were 8.5 or something like that. And I think 94, they got above 9%. And so I kind of asked myself. [00:10:41] Speaker 2: I'm sorry? 94 was a catastrophe in the bond market. People forget how bad it was. [00:10:46] Speaker 1: Yeah, so I asked myself, why are interest rates today, let's just mortgage rates, at 7.5 so detrimental to the housing market where no one can afford a house or no one can buy a house? But yet back then, they might not have been great, but it wasn't as much of a headwind. And so I'm like, well, it's the economy. It's not really the interest rates. It's more so the economy. So if you have an economy that's actually doing well, and you have a 7.5% mortgage rate, that's not that big of a deal. But if you have an economy that's very weak, then it is a big deal. So then I look at that nominal GDP, and I kind of ask myself, what percentage of that nominal GDP is inflation, and what percent of it is actually real growth? Because you can have nominal, let's say 6, but if it's 5 and 1, or 5 and 1 the other way, then those are two completely different economies. And unfortunately, I think right now, we've got the 5% inflation, just using that as an example, and then the 1% growth. And that's why those rates are just so detrimental. [00:11:57] Speaker 2: I agree with you completely. Let me give you another way of looking at this. We went for about a decade in our economy with rates that were artificially low, where the bank, the central bank was deliberately buying mortgages, buying other long dated fixed income to push down the prices of long term interest rates. The impact of that was pulling forward an enormous amount of consumer demand that was enabled without productivity and without savings. Now that interest rates are normalizing, we are seeing a normalization of that demand and credit and productivity process. So I think that demand overall in our economy is going to be relatively weak compared to the last decade, because the last decade was very manipulated. The other thing is that, and people really forget about this, that the important part of interest rates is not the nominal rate. It's not even the real rate, although the real rate is certainly more important. What's really important is the rate of change. As you know, when rates move quickly, things break. And in the housing market, people got used to pricing these assets with a low interest rate. And you understand very well what the impact of capitalizing low rates is. You get a much higher nominal price of a house if you're paying for it at 2% versus if you're paying at 7%. And so the impact of those higher rates are being seen in a capitalized price, a.k.a. the nominal price of the house. And that, of course, makes it very difficult for people to move. And so the whole market shuts down because what's become more valuable, what's more valuable, the house or a 20-year mortgage that you only are paying 2.5% on? The answer is the mortgage. And so if we want to try to free up activity in the housing market, we want to create demand for housing, which, by the way, I don't think we really need to do. We've got plenty of demand for housing. What we need is more supply of housing. Totally agree, yeah. But the point of all that is you'd have to do things to make it easier for people to sell the mortgage along with the house. And right now, that's not the way the market works. But that's just one very small point about a much larger problem, which is we need way more housing built. [00:14:12] Speaker 1: You know, I just did a video today on this, so it's right fresh in my mind. And I found a chart of the top 20 markets in the United States where the new home prices are substantially less than the existing home prices. And, I mean, some of these numbers were staggering, Porter, like Austin as an example. I don't have it right in front of me, but it was roughly, for the existing homes, like $230, maybe $240 a square foot, where new homes are selling for like $188 a square foot. So I'm like, how long does that last when you can buy that brand new house right across the street? [00:14:56] Speaker 2: Some of that's a little misleading, but let me make sure I'm right about this, because I know it's mostly true. And then someone will say, what about that? I'm pretty sure every single home I've ever bought, and I've bought five or six homes in my life, every single one was brand new. Now, I didn't necessarily buy a new lot, but I tore the house down, or I did an 80% renovation where it's essentially new. All the systems are new, blah, blah, blah. And I've always done that, because I always thought that older houses were badly mispriced. That is, people bought them without accounting for the actual depreciation that takes place. If you buy a structure that's 20 years old, you don't have anything like the value of a new structure, but the market was pricing it that way. So maybe just one of the things that's happening is maybe there's been a little bit more appreciation in the market for the impact of depreciation on a structure. That could be part of it. But the other thing I think that really goes on there is location. Newer homes are typically in much less attractive areas than older homes. So in my mind, it really does make sense in that way that a new home would be less than an old home. But it doesn't make sense in terms of the value of the structure. [00:16:14] Speaker 1: Yeah. Yeah. And then I guess it all depends on those locations. That is key, because that is something I didn't think about, that usually those new homes, they buy the cheap land out in the sticks or whatever it is. Yeah. And that's where they're building. You know what? Phoenix comes to mind. I don't know if you're familiar with Phoenix. But when they built out in Gilbert and Mesa, and that's where all the land was. But that's an hour drive with traffic to Scottsdale or whatever it is. So maybe that's a little bit of what's going on. But did you see the new home builder sentiment survey come out today? I said this morning, it was shocking. Yeah. Terrible. I mean, if the viewers haven't seen that, I think the low point that we got to during the GFC for home builder sentiment was 29. And that was in 2012. And we just hit that number. Yeah. And I think for the people who actually lived through that timeframe and remember what it was like, I think the young kids don't understand that in 2011, 2012, everybody thought that home prices would continue to go down forever. I remember, I always tell this story that that's when I retired. I actually retired in 2012. And I took pretty much all my money and I bought all these rental properties in Kansas City. And they're in eight neighborhoods. I fixed them up. I had a renter in every single one. I had zero debt order. Zero. And this is when interest rates were zero, you know, with the Fed. And I went to the local banks and I'm like, hey, could I at least get like a line of credit, maybe 40% LTV? They wouldn't touch it with a 10-foot pole. That's insane. Yeah. And so that was the environment back then. So if you think about that sentiment being at the same levels today, that tells you pretty much everything you need to know about the housing market. [00:18:09] Speaker 2: Yeah. And that's one reason why I think there's going to be a little breather on rates as far as the March going forward. Because there's just not going to be much demand for credit at these prices. So, you know, again, I've been short interest rates, as you know, for a long time. So this is, I think, pretty remarkable that I'm like, okay, I think we're going to see a pause in this movement for now. If you don't mind, I'd like to switch gears about something that I think everybody is missing with the AI trade. And I would love to know from you whether you think I'm off my rocker or not. And this is one of the things that's great about talking with people who are experienced and knowledgeable in finance. Because you have a thesis and you run it by a couple of people and they poke holes in it. And, you know, either you change your mind or your argument gets sharper. Here's my thought. I use AI every day in my job. I was able to publish two books this year by myself, completely by myself. I did all the layout and design. I did all the research. I did all the fact checking. I did all the proofreading. And one book, it's called Warren's Mistakes. It's about Berkshire Hathaway's asset allocation over the last 25 years, which has been pretty abysmal. And I've been working on that book for 10 years. So I had 500 pages of notes and research that I'd done. And I put it all into AI. And it was like having 10 research assistants help me. It was incredible. And I got that book. I've been working on it a long time. There's a lot that went into it. But I got that book written in like six weeks, which is, there's no way. If I had done that with a regular publisher and, you know, two research assistants, it would have taken me 18 months. I got it done in six weeks. And when I, we had a fantastic biotech analyst who left our firm in July, a Rez Kaleer, Broad Scholar, guy with 30 years experience in the industry. I mean, a huge loss for our company. I didn't replace him. I just took all of his work and all of the stuff, you know, that we, that he had helped us build. And I put it into AI. So now I've got seven AI agents and I'm not saying that necessarily that we can replicate exactly what it's like having the Rez Kaleer, but we're still doing great work. We're still finding great opportunities and we can read every single clinical trial, all of them. Like it's AI is changing the way white collar work gets done. And I see it every day in my firm and I know it's disrupting law firms. It's going to completely destroy accounting firms, right? We, I know this is happening in real time. I'm never going to hire another person at my company ever again. I'm just going to keep replacing people as they retire, as they move on with AI agents. And so my first research company got to a hundred thousand subscribers and we probably had a hundred employees. My second firm Porter and company is at a hundred thousand subscribers. We've got 30 employees and I'm not hiring anyone else. So what's going to happen to white collar employment in the United States? And that's roughly 50% of all the jobs. And it's, I'm guessing, but it's probably more like 80% of all the wages. [00:21:18] Speaker 1: And it's the passive flows into the S and P 500 too, Porter. [00:21:22] Speaker 2: Yeah. But the bigger thing is it's the payroll taxes. It's the payroll taxes, George. What happens when payroll taxes fall 50% in the next three years? And social security is already, the trust funds are already out of money. [00:21:40] Speaker 1: Yeah. So, I mean, I worry about that more from an economic standpoint than I do with, with the treasury. So we don't, we don't need to go into that because that's going to get us way off topic, but that's very interesting as far as your personal experience, because you've got boots on the ground, right? Like you're in the trenches with the white collar AI stuff on a daily basis. So you're not just, it's not like a hypothetical or it's not like a thought experiment. This is, you're living it every single day. [00:22:16] Speaker 2: It's impacting my company's operating margin. It's improving it. It's impacting the people I hire. We're not hiring. So we will pay, my company will pay substantially less this year in payroll taxes than we have ever paid before because of AI. And I suspect that that decline will accelerate. Every time someone leaves my company, I'm not going to replace them. But are you hiring a human to run the AI? I don't want to hire anyone because of AI because that's just not the way I do business. I'm not like that. We have a good, we have a good enough margin. We have a great business. We're still growing. There's no reason for me to do that. But I could, if I wanted to, if I was Ebenezer Scrooge, I could absolutely get rid of 90% of my staff tomorrow and nothing would change about the quality of my business except for it would probably improve. [00:23:02] Speaker 1: But would you have to, would you have to, let's say you got rid of five people. Would you have to hire two additional people to run the AI that's replacing the five people? [00:23:14] Speaker 2: So I'll give you just a concrete example. Out of 30 employees, 10 of them, 12 of them work in customer service. All of that is easy to turn off with a switch and turn on with AI automatically. We'll never know the difference. All right. Then there's another 10 or 12 people who do genuine creative work. They're copywriters, they're editors. And those people I can't replace yet because AI is not creative. It synthesizes, but it does not create. And then there's another 10 or 12 people who work in accounting and who work in operations and, you know, do things. Probably half those people I could replace easily. So, and I know that I'm not the only business like this. There's a lot of white collar jobs in America and they are, they're not going to be, they're not going to be hiring anymore. And this is going to make a huge impact on our government's finances, but most particularly the way we finance social security. Because right now, as I'm sure you know, the earnings from social security trust fund are about, are, are, it's, it's been operating at a deficit since 2010. So all the money that's going out to pay the people, almost all of it is coming directly from current payroll taxes. And those are going to decline. They're going to decline rapidly because white collar unemployment is going to go up. And I do think that over time, AI will create as many jobs as it eliminates, but it's going to be eliminating a lot of very high paying, very stable jobs. [00:24:44] Speaker 1: And it's rate of change to Porter. [00:24:46] Speaker 2: It's a rate of change that matters change. So I think, I think you're, I think we're setting up for a really big societal question of how do we fund social security and being, how do we tax AI? Because if AI is replacing all of our jobs, if we want to have the government that we have, then we're going to have to come up with some funding mechanism for it. That's a kind of payroll taxes. And I don't think anybody's even thinking about this yet. [00:25:18] Speaker 1: It's a great point, but I worry about that more from a standpoint of aggregate demand than I do from, you know, how are we going to fund social security or something like that, which I guess is something similar, right? It's more so if you're talking, if you wanted to be Ebeneezer Scrooge, let's go back to that example. And you've got 30 people, you could reduce that to five. Okay, well, that was 25 people that now probably need work and they're not going to be able to find a job that was paying them as well as you were paying them. And so that's a decline in aggregate demand. And that brings up the question of UBI. And, you know, a lot of people say, well, the productivity increases and that does. But assuming the productivity increases, who's buying your newsletter? You know, if you see what I'm saying? [00:26:06] Speaker 2: The retirees are buying my newsletter. They always have. Well, you get what I'm saying. I'm just using an example. They get $2,500 a month of social security. But how are we going to fund that if there's no? And listen, I'm not trying to be apocalyptic. What I'm saying is even if payroll taxes were declined 25% over three years, you still have a much bigger funding problem for social security than you think you do. And right now, the social security administrators say it's going to run out of money by 2032. And what I'm really saying is I think they're wrong because I think payroll taxes are going to decline a lot faster than people expect. And that means we might have that that crisis point might come in, say, 2029 instead of 2032. Either way, it's coming. [00:26:49] Speaker 1: With the impact on wages, Porter. I mean, I think that's a bigger deal, isn't it? [00:26:53] Speaker 2: There's no way for two workers to fund one social security recipient. [00:27:00] Speaker 1: But there's no more workers. That's my point. That's my point, too. But if there's no more workers, I think that may be a problem with social security. But that's a bigger problem, in my view, a way bigger problem for the economy. And they don't have any money to spend. They don't have a paycheck. I don't know about that, George. [00:27:16] Speaker 2: I think this will be interesting. People are going to be rooting away from taxes. And so the black market is going to expand. And if you've got a robot car delivering all your meals and a robot cooking all your dinner and a robot growing all your food, the prices of things might fall dramatically. And so you might, you know, you might not need as much labor as you used to. People might be able to live a fine job working two days a week. Sorry, they might be able to have a fine life if they're only working two days a week. That's if they're working. Yeah. Like, like those, if, if, if, if, if, again, if... You know this, George. How many, how many people did you know 10 years ago who made a living as an influencer? Yeah. No, I agree. Long term. We have no idea what the job is going to be. But if we don't need anybody, if we don't need anybody to do the accounting anymore, if we don't need anyone to write the contracts anymore, if we don't need anybody to answer the phone anymore, those people are going to go have to do something else. But those, those other jobs are not necessarily paying payroll taxes. [00:28:24] Speaker 1: Yeah. And they're not necessarily there today. That's what I'm saying. They, they will be there. I absolutely agree with you that the amount of desire for stuff is infinite for human beings. So we'll figure out new stuff that we want that doesn't even exist, that we need humans to get out there and manage or actually create, even if we had the robots and the AI doing everything else. But it's, it's the time between now and then. And usually that process takes whatever, you know, 10 or 20 years where this time it could take two to three years. And so how does that impact society? And probably more importantly, what does the government do? Because they're always going to, in my view, they're always going to make it worse. [00:29:11] Speaker 2: Yeah, I, I, of course I agree with all that. You know, the, the, there's a great test case happening right now. Uh, Adobe, as you know, has been one of the best software businesses ever created. And we, we've, I've used their products as a, as a creative person for my whole career. You know, when I started doing word processing in 1985, you know, I remember Adobe would make the fonts that we were using on our Apple computers. And it's been, it's been part of my career, part of my life ever since. And they're now their stock has been under pressure and somebody has used AI to create something that can do everything that Adobe can do. And of course it's free. And the question is, will that put Adobe out of business and looking at their quarterly results? So far, the answer is no, their sales and their profits continue to go up, but whether it's Adobe or whether it's some other white collar business, there's going to come a moment in time. We're virtually overnight, a company goes completely out of business because it's utterly replaced by AI. It's not that AI is, you know, a, a, a slightly better competitor. It's something where you go, if I'm not using AI for this. And then I'm losing in my business. I don't have any choice to be loyal to the, to the, my provider anymore. I have to switch. And so when that happens and all of a sudden in one quarter, you get something like a hundred thousand white collar layoffs, not because people are being Ebony's or Scrooge, but because their business model no longer exists. But then that's the moment where you'll see a big shock, you'll see stock prices go way down. You'll see, I think you're going to see bond yields come down. I think what you're saying, you're going to see a big contraction economic activity in the short term. And, and, and, and there'll be some kind of a reckoning, some kind of like, oh, everyone remember the day that happened. Like that's the day where it really changed, where people were saying this is going to happen. But then that day we walked through that door and there's no walking back through it. And I don't know exactly when it will be or what it will be, but I can tell you from my own business, I know it's coming. And Lord, I hope someone doesn't build an AI that's great at writing financial newsletters. [00:31:27] Speaker 1: Well, I was going to ask you that. Yeah. We're all in a bunch of trouble. All right. Right. Hey guys, if you're watching this video right now, you probably know the stock market, the housing market, pretty much every market is in a massive bubble right now. The Fed is totally out of control and the debts are exploding. You know, this doesn't end well, but the question is, what do you do about it? Well, fortunately I've got the answer. Now, let me be clear. If you're the average retail investor, just watching CNBC and trusting the system, this definitely is not for you. But if you've been sensing there's something wrong and you're looking for clarity through all of the chaos, then rebel capitalist pro is your unfair advantage. What is rebel capital is pro it's the private investment community that I have with my good friends, Chris McIntosh, Brent Johnson, Patrick Srezna, and Jason Hartman. It includes private member only live stream Q and A's that gives you direct access to the pros. I just mentioned also proprietary research from Lynn Alden and Chris McIntosh model portfolios, exclusive whiteboard videos. And best of all, the rebel capitalist pro is basically the cheat code you need to not only protect your wealth, but to build wealth and thrive in this crazy world of asset bubbles out of control, central banks and big governments. So stop worrying about this stuff. Stop losing sleep and start investing with confidence. For more information about rebel capital's pro we'll put a link in the description below this video. How do you reconcile that with the prices of the AI stocks themselves? Because you're sitting here talking about how great AI is. And I totally agree, but that doesn't necessarily mean that NVIDIA is, is fairly priced. Maybe it is. Maybe it isn't. [00:33:25] Speaker 2: I disagree, I've been long NVIDIA since 2016, and I'm still long NVIDIA today. I own shares of NVIDIA. I think it's, it's the most important compute company in the world and we live in the era of compute. So you have to own it, I think. [00:33:40] Speaker 1: Wasn't that the argument for Cisco? [00:33:42] Speaker 2: I think it's, I think it's, I think it's, I just think it's a very, very different, I know people use that analogy. I think it's a false analogy. Why is that? Cisco owned a very small part of the hardware of a compute system that was broken up amongst many providers and, and Cisco didn't even own all of the hardware in their space. There was Juniper networks. There were many other competitors. What's different this time about NVIDIA is the, the internet compute was, was built with three parts. There was the networking, there was the, the microprocessors, there was the, the memory, and there was the software. And those, those, all those four pieces had different leaders. And in, and in AI, the networking, the leader is NVIDIA. The software, the leader is NVIDIA and the, and the compute and the chip set, the leader is NVIDIA. The only thing NVIDIA isn't the leader in is memory. So with Cisco, you had one out of four elements. And, and even in that, they weren't, they weren't as dominant as NVIDIA is in three of the elements of the four today. So I think it's very different. [00:34:59] Speaker 1: Do you worry that they're dependent on the models and the models don't have an economic model? [00:35:04] Speaker 2: I'm very concerned that the demand for their, for their chips has been wildly inflated by all the financing that they've engaged in. And I'm certain that Corweave is less than, is worth less than zero. I wrote a great, I shouldn't say this about my own work, but I wrote a very entertaining piece pointing out that Jeff Bezos has actually shorted Corweave. People are like, what are you talking about? How did you know Jeff Bezos shorted Corweave? And I said, go back and read his 2005 shareholder letter, which was, I guess technically it's his 2004 shareholder letter that was published in 2005. But if you go read that letter, he talks about a business that creates a teleportation device. And of course, demand for teleportation is endless. And he's, they're selling teleportation at a thousand dollars. So everybody wants it. And so you've got to build a whole bunch of these machines and, and there's companies that's, that's set up to buy them and set them up. That's basically what Corweave is doing. But Bezos points out that if the cost of operating those machines is fairly high, and it is because of energy prices, and if the depreciation schedules on those machines is pretty high, and it is because of obsolescence, then the faster it grows, the more certain it will go bankrupt. And he, he does all that math in a shareholder letter, which is really warning investors about heavy top line growth that is supported by an economic model that's nonsensical. And if you look at rent, if you look at the idea of buying full priced Nvidia chips, and then renting them to Microsoft, that the model is nonsensical. If, if it was, if those chips were worth what Corweave is paying for them, then Microsoft would buy them. [00:36:44] Speaker 1: Yeah. Chinos talks about that all the time. Duh. Yeah. So it sounds like you, you may be very bullish on some AI stocks, but then other AI stocks within the ecosystem, you're extremely bearish. [00:36:57] Speaker 2: I'm extremely bullish on compute. I think that compute like electricity is something where there is never enough of it. Same thing with memory. There's never enough of it and the demand for it is totally just depends on price. If you make the price lower, you'll always sell more of it. Same thing with electricity. So I think it just has a very different demand curve than most commodities. And I think that we just need more and more and more of it. So I'm very bullish on compute. I'm not at all bullish on the idea that there are five or six hyperscalers and they're all going to be successful. That won't work. I think, I think Google will work because they have the very best distribution. Yeah. Right. They've got YouTube, which is an unbelievable business and they've got their entire software operating systems and they've got their phones. They are, they are the very best tech distribution out there besides Apple and Apple is probably number one. And Apple is taking a very different approach, which I think is very wise. As always, Apple is just waiting. They're going to wait until there is a clear consumer demand need. And then they'll go in and build a better version of it. And that probably won't happen for another five or six years. So if you want to, if you want a smart way to play all this, you can just own Google and Apple. And then you've got, you've got AI heavy and you've got AI light and you're going to probably win with both. [00:38:23] Speaker 1: How would you personally determine when to exit the Nvidia position? Like what indicators would you say? Okay, I got to pump the brakes here. I want to take a little bit off the table, even though I think long-term this is the right way to go. [00:38:41] Speaker 2: I, I just, I just can't. I don't have any foresight into that. So all I want to do is I just want to own more Nvidia shares. And I just, that's the way I look at it. There's, there has never been a better compute business that's ever been built. And, and I'm not saying that there won't be, and I'm not saying that Nvidia will last forever, but I think it has a very long runway ahead of it. At least 20 more years of dominance. [00:39:06] Speaker 1: Yeah. Yeah. I agree there. I would just look at the cycles, like, like as an example, I was doing some homework the other day and I looked at the peak in 2000, just in the NASDAQ and in general. And then I said, you know, if you would have just taken a 200 day moving average and that's all you used just a 200 day moving average, that would have saved you a lot of headache because the NASDAQ, I believe the S and P 500. I'm not sure it's probably the NASDAQ, you know, it took it 15 years to recover and that's in nominal terms. So if you would have just, okay, if it's under the 200, I'm going to go into cash. I'm going to lighten up a little bit. And then once it gets back above that 200, then if I'm really bullish long-term, then I'm going to get back into the position. And I kind of, I had this written down as something to talk to you about because you've had so much experience, probably more than anybody, as far as dealing with the retail investor. And, you know, investing is hard. It's, it's, it's complicated, but they always want something super, super simple. And so I always thought maybe that's a simple thing that I could encourage my viewers to pay attention to, uh, that could save them some headaches. [00:40:30] Speaker 2: I've got it. I've got a really, a really simple mental model that I use. And I deal with the volatility you're talking about by simply rebalancing every year. It really works and it's really mechanical. And it, that, that turns a lot of people off, but I think it's, I, there's, there's another way to do it, which also works, but let me just describe what I'm saying. [00:40:54] Speaker 1: Yeah. [00:40:54] Speaker 2: Okay. So I, I, it hasn't been published yet, but I wrote my first formal financial journal article of all time. And, um, and it's going to be, it's going to be published in the journal of portfolio management and it tries to answer my, my paper, um, research paper tries to answer a simple question, which is at what point does diversification become the worstification. You and I both know you can't have a hundred percent of your assets and NVIDIA that might have been the winning formula for the last 20 years, but that's very unlikely to be the winning formula for the next 20 years. And besides who can stand the drawdowns, it's not, it's not a practical way to invest your assets. So you want to be in companies that have a high return on invested capital, but you need to be in different buckets of them so that you don't, you don't have to suffer so much volatility. And I'm sure, you know, uh, Markowitz worked on this in the 1950s. He won a Nobel prize for it in 1990. And what he figured out was you want to minimize your pairwise correlations. Meaning if you have 20 stocks, you measure the correlation between each of the 20 combinations. And I can't do that math in my head, but there's, I'm sure the formula, you know, how many to do. Luckily AI can do it for me and you want to minimize the pairwise correlations so that your portfolio can have much less volatility than it would otherwise normally. So then that brings up into my question. Great. What's the right number? How many stocks should you own? Should you own 500? Should you own 20? Should you own 10? Should you own 12? What's the right number? And I've done a lot of homework on all this, but the answer is the most effective way to do this is to own seven industry groups that are not correlated. Seven is the magic number. If you try to own eight, you begin to have a reduction in your Sharpe ratio, which means you're not getting as much return per unit of risk as if you only use seven. So which seven industry groups should you use? Well, you know, call me stupid, but I just went and looked and said, well, what are the best performing industry groups for the last 50 years? I'll own those. And so it's beverages, it's tobacco, it's compute, it's property and casualty insurance, it's gold streaming. It's industries that you'd be like, oh yeah, those are all high return on invested capital businesses. Those are all good businesses. Okay, great. So how do I know which of those businesses to buy? Well, first of all, I want a quality gate. I want at least a 15% return on invested capital, or I'm not interested in being an investor. And then second of all, I want to own as many stocks as I can in that industry group that qualify as long as they're not correlated. So basically when you do all that math, you can find there's usually between two and four stocks in each of those industry groups that you can buy that are not highly correlated. Although it's not that they're going to be non-correlated, but you're looking for correlations that are less than 0.5. And so how does that work? Well, you know, in compute there's memory and there's networking and they're not necessarily correlated to exactly the same drivers in the economy. When it comes to defense stocks, there's companies that make guns and there's companies that make planes. They're not necessarily exactly correlated. So you can find different companies that have a high return on invested capital and that are not highly correlated. And then basically what I do is I just, we look at, we look at the last three years, we want to make sure they have high return on invested capital in two of the last three years. And then we pick at least the two highest performing names. It's very systematic. And you just do that every year and you rebalance and you end up making about 18% a year and you have a volatility that's less than the S&P 500. It's a very formulaic approach, but you can use the same mental model to build those kinds of portfolios. And then instead of doing a mechanical rebalancing every year, what I suggest doing is anytime any one of those industry groups becomes 30% higher value than the others, then you do a full rebalance. So when something like compute has a year like it's having this year, you're going to rebalance. You're going to rebalance and that'll keep you into the names that are cheap and it'll keep you selling stocks when they get too expensive. And that's the best thing I've come up with so far. But these are all unknowable problems. But that I think is very intellectually sound. [00:45:17] Speaker 1: How do you, so that's the rebalancing within the stock portfolio. But how do you determine the rebalancing, if that's the correct word, with the all-weather portfolio? Is that what you called it? The permanent portfolio just has firm. The permanent portfolio. [00:45:34] Speaker 2: Yeah. And you just do that one. You just do that one annually. I haven't come up with a way of doing it on the basis of, on value. I don't know that you could because they're very different asset classes. That's the whole point. [00:45:50] Speaker 1: How, how do you determine for your own portfolio? Like how much you want to be in gold? How much you want to be in cash or dry powder? How much you want to be in stocks? Like how do you determine that percentage based on macroeconomics? If that's what you use as an indicator? [00:46:08] Speaker 2: I really don't. I run, I run a leveraged equity book. So I'm, I'm always at least a hundred percent invested. But the permanent portfolio is something I created for my subscribers who are retired. Right. I'm, I'm a lifetime buyer of equities. I have income outside the stock market. So if I have a bad year, no big deal. I'm going to keep putting capital into my account. So I'm, I'm not trying to time the market with my equity investing personally. [00:46:35] Speaker 1: Okay. I thought you had a gold right now is like a 50% position in the overall portfolio. [00:46:41] Speaker 2: Again, this is something that this is the permanent portfolio. And this is the strategy that Harry Brown created in the 1970s. The permanent portfolio is an asset allocation strategy that has four components. And the four components are stocks, bonds, gold, and cash. And all you do is you rebalance every year to 25%. That's it. That's the strategy. That's strategy. [00:47:04] Speaker 1: Always 25%. [00:47:05] Speaker 2: Always 200%. That's strategy. That strategy has been run in a mutual fund since the early 1980s. It's done seven and a half percent a year with volatility of about half of the stock market. So this is a capital conservation strategy that will protect you from inflation. It's way better than just buying bonds, but it is not an equity book. It's an asset allocation strategy. And right now I have, I have turned that strategy into its most conservative setting by eliminating all duration risks from that portfolio. Yeah. Because I'm not concerned about the price of bonds. That's not what Harry Brown said to do, by the way. That's a, that's a Porter Stansberry wrinkle on, uh, on the permanent portfolio strategy. Yeah. With my, with my equity book, what I was describing to you earlier, taking the best seven sectors of the stock market, looking for companies that are not correlated, and then rebalancing as the buckets move into, from overvalued position. [00:48:00] Speaker ?: Yeah. [00:48:00] Speaker 2: That's an, that's a leveraged equity strategy where I'm trying to generate a sharp ratio that is above 1.0. [00:48:07] Speaker ?: Yeah. [00:48:07] Speaker 2: If I can get my sharp ratio to above 1.0, then using leverage is highly accretive because I am getting more return per unit of risk in that portfolio. And so that's, that's not an easy thing to do, but if you, if you, if you will find the highest quality businesses and if you'll build them in a way that's non-correlated, you can do it. [00:48:29] Speaker 1: When you guys are analyzing companies or investment opportunities, are you strictly looking at fundamentals or are you also looking at technicals? We are a strictly fundamental shop. Why is that? Just out of curiosity. Um, is it that you're, you don't believe in technicals or it's just not your, your bag or you guys have. [00:48:55] Speaker 2: No, I would just say, you know, uh, if you, if you, it's a beautiful blue sky day here at the farm in Maryland, and if you see a plane flying over, you can see it's, it's trail, you know, you can see the line it makes in the sky that that, in my opinion, that doesn't tell me anything about the quality of the engines or the pilot or how much fuel it has in the tank. It just, I don't think, I don't think that the technicals meeting the charts give me enough information to be, to be highly useful. I'm not suggesting by the way, that there are not use, there's not any useful information in technicals. I'm saying it doesn't give me enough information in my opinion to tell me what the value of that business is likely to be in a year or in three years or in five years. [00:49:39] Speaker 1: Yeah. When we're in a credit cycle or when we're in this type of business cycle, I mean, you've been doing this a long time. You've, you've been through a lot of these cycles. What type of economic indicators do you use? Or what type of indicators in general do you use to know that we're in the eighth inning or the ninth inning or maybe in the, in the second inning? And so as an example, one of the things I've been looking at recently was just the corporate credit spreads on the, the triple C's, you know, that in and of itself is an indicator, but when you combine that with, let's say five of the the last 12 months negative non-farm payrolls, then all of a sudden it becomes pretty powerful to know which inning you're in. But, but as, as a guy that knows a lot more about this than I do and has experienced a lot more than I do, what indicators do you use? [00:50:33] Speaker 2: I use my, my, my very, first of all, let me just say this. I don't really know that this is all that valuable except for it has helped me find a lot of bottoms. Okay. It's much, it's much, much harder to pick tops. It just is because there is so much incentive of the government and the monetary authorities to keep the bubble growing. Yeah. That seems like in my career, every bubble has been even more extended than the last one. And so if you think, oh, this is where the bubble usually pops, you're usually going to be way too early because the monetary authorities are going to find a way to keep it going. But in terms of bottoms, yes, there are great indicators that I've used very successfully. I bought the bottom to the day in March of 2020. I bought the bottom to the month in the fall of 2002. I bought the bottom within three months in November of, of 2008. So what I look for is really simple. I look for, um, high yield credit spreads that are more than a thousand basis points over comparable treasuries. Okay. So I'm looking for, I'm looking for blown out corporate credit markets. Yep. I'm looking for the highest quality names and equity to trade at a negative enterprise value. If there's one sign, that's it. So in November of 2008, you could have bought Tiffany, which is one of the highest return on capital businesses in the world, the jewelry company. Yeah. Or less than the value of its gold inventory and its real estate. That's, you're getting the brand and all the earnings for free. That's a pretty good deal. Yeah. So I, I, I think it's impossible to pick tops, but I think it's very easy, very easy to pick bottoms. When things get so blown out from force selling and they're just stuff that doesn't make any sense. In January of 2008, my business partner, Steve Sugar and I, um, we're looking at a PIMCO triple A rated prime mortgage closed in fund that was yielding 22%. [00:53:06] Speaker 1: When was this Porter again? [00:53:07] Speaker 2: January of 2008. [00:53:09] Speaker 1: Okay. [00:53:10] Speaker 2: So you're buying, you're buying prime mortgages and a closed in fund that's trading at a discount from NAV of 40% and yielding 22%. I mean, you're, you're, you know, you don't know exactly when that NAV spreads going to close, there's no official yield to maturity, but those bonds are going to mature. Right. So you're, you know, let's say your effective yield to maturity is something like 35% and that kind of security. I mean, there are just, there are lots of examples of these things that I've actually traded. So when we get into something like that, I think I'll be able to recognize it. But if you looked at credit spreads as an indicator of the top, think about when you would've been selling this market. You would've been selling it for a long time. [00:53:56] Speaker 1: Yeah. Yeah. I know. I said in and of themselves, you, you can't just use that. You've got to combine it with a lot of other things. You know, it's interesting you say that about the oversold and overbought because I was listening to, uh, one of my favorite podcasts the other day, really, really smart guy. And he was talking about it. He's a big FX trader. And he was talking about how he did some research on the, uh, probabilities that you get a reversal when something is quote unquote overbought or oversold. He might've been doing it on the S and P 500. And he says that overbought is like meaningless. Like it can just go higher and higher. It can be overbought forever. But he said the oversold is actually, uh, a pretty meaningful indicator. [00:54:42] Speaker 2: Yeah. I, that's been my experience. I'm, I'm so much more comfortable buying, uh, buying a falling knife than I am selling Tesla. Right. If something, if something is not trading on any fundamentals than I can understand, I don't want to short it. Yeah. Well, yeah, that's, that's true for sure. [00:55:03] Speaker 1: So let's talk about gold. Uh, it seems like you're pretty bullish on that. I don't know if that's because of the central bank buying or more so due to your views on inflation or maybe a little bit of both. [00:55:15] Speaker 2: So I am very bullish on gold fundamentally. I've been buying gold personally since the early 2000s. I, I buy physical gold. I buy bullion coins. I've never sold any, I've never sold a single coin. So let me just, you know, that's my bona fides. I am a gold bull. I have a gold pricing model that's based on global aggregate credit. And I have found my model to be extremely, uh, predictive. It gives me a pretty broad range. Like, you know, I'm not telling you, I can tell you what the price is to the, to the dollar, but within, within a $1,500, within a thousand dollars, within a $500 spread, depending upon what period you're talking about, I can tell you when gold is cheap and when it's fair and when it's dear. And right now it's still dear. My, um, my gold pricing model suggests that we'll see gold at about $4,500 an ounce by the end of next year. So it's just ahead of my model. Now, when does gold get ahead of my model? It gets ahead of my model when the world can see that the monetary conditions are eroding and that the credit aggregates are growing very rapidly. And so, you know, it's just like anything else. I don't confuse my model for the real world, but, um, but gold has been pretty overbought now for about six months, maybe longer. I don't have it in front of me, but, uh, I would, I would be a heavy buyer of gold below $3,500, 3,500, even though it's 4,100 a day. That's correct. Yep. Yep. And I think if you go back and look, it basically bounced off of that [00:56:50] Speaker 1: price once this year already. Uh, it was really bouncing off 4,000. I don't know about, uh, 3,500, but somewhere around there. So based on your model, the, the fair price, what'd you say in 20, [00:57:03] Speaker 2: 27 or so was roughly 4,500. By the end of next year, the bottom price for my model or the average price for the models, $4,500. And I, I, and, and what, what my model does is it looks at current global credit aggregates. And on that basis, it, it derives a three-year forecast for gold because it takes time for the, for the credit creation to result in an economic activity that leads to gold demand. And so there there's a lag and, and that's great. So you, you have an idea of where gold is going to go. And my, my model is pricing in like 4,000 or sorry, um, like seven, $8,000 gold by the end of 29. [00:57:48] Speaker 1: Okay. So 4,500 by the end of 27, but 8,000 or so by the end of 29. Exactly. Yep. Uh, okay. It's, it's, I like that in the sense that almost every single gold person I talk to, when they tell me how they value gold, I'm like, well, that, that doesn't, that hasn't really worked in the past because they'll say like the inverse of the dollar. I'll be like, well, I can show you times when the DXY is going down or up and it has no correlation whatsoever or inflation. You know, it doesn't necessarily over the long run for sure. It has nothing to do with any of those things at all. Yeah. That's why I find what you're saying. [00:58:28] Speaker 2: Very, very highly correlated to, to grow global credit aggregates. And I, I learned this from Dr. Kurt Riescherbacher in the 1990s and he was the last living, uh, the original Austrian crew from the 1920s. So he, he had tons of data and done a lot of homework on it. And now doing that homework, of course is instant. He had to actually, you know, go around and look at all the IMF data and try to piece it together. I can do all that now in, you know, 10 seconds, but it definitely, it definitely works. And I'm, by the way, I'm ha I'll send you, when we get off the call, I'll send you the model. It's not, it's, it's not, it's not a secret. And I think that the people who know gold well have been doing this for a very long time. Go. Why, why, why would gold be correlated to global credit aggregates? And the answer is because gold is the ultimate collateral. So of course it has, the price of it has to be correlated to the total aggregate credit has to be. [00:59:22] Speaker 1: I want to go back to psychology a little bit because it's rare that I get to speak to someone that has so much experience with the retail investor. And I I've, since I've started this YouTube channel and whatnot, I've spoken at a lot of conferences and a lot of gold conferences, one, one of which we're going to be at a couple of weeks here. And I've found that whether it's with the gold bugs or the Bitcoiners, I love them to death. I love them all. But it seems like sometimes their priority is going to church instead of making money. And what I mean by that is most people are religious. They go to church every single Sunday and it's just to hear the sermon, to feel good about the decision you've made in your life. And it seems like a lot of times the gold guys just, they want to feel good about the decisions they've made in their life as opposed to making money. And so how do you usually juggle that? If, if the retail investor comes to you and says, look, I'm all about making money. I want ROI. You know, I want a return on the portfolio, the sharp ratio, but then they kind of get stuck in church mode. How in the past have you kind of shaken them out of that with success? [01:00:52] Speaker 2: I don't even try. I just use it to my advantage. So let me tell you a couple of stories about this. Sure. Yeah. In 2006, I spoke at the New Orleans Investment Conference, which was, I think that year was the largest attendance they'd ever had. And the guy who was the most famous gold bull in the building was Rick Rule. And I saw Rick Rule, I saw Rick Rule give us a workshop to where there was, you know, 300 people trying to stuff into a room that was designed to accommodate 50. [01:01:27] Speaker 1: Yeah. I've been in those rooms. [01:01:29] Speaker 2: Afterwards, afterwards he, he, you know, he, he walked out in the hall and he was still mobbed. Finally, he went to, he went to the bathroom and I happened to be in the bathroom when he walked in and people literally followed him into the bathroom and stood around his at the urinal while he's peeing. And I saw him later that evening and I said, Rick, it's awfully hard to be a contrarian when you're surrounded at the urinal. [01:01:57] Speaker 1: Yeah. Yeah. [01:01:58] Speaker 2: And he's like, you're damn right. And so there are signs, you know, there are signs. We do a lot of marketing at my business and you can pretty much know that when the marketing results are just off the charts, that whatever that idea is that is inside that marketing is probably getting near a top. And then the opposite is also true. I remember in 2015, I went to a gold conference in the summer, I think it was, um, John duties and it was empty, you know, there were supposed to be 300 people and only maybe, maybe 75 people showed up. It was absolutely. And you couldn't give away. There's no way we could sell a stock newsletter. We couldn't, you couldn't, we couldn't give it away. And so I put, I don't know how much money at, I don't remember exactly, but I put a large amount of money into 10 junior mining stocks and I wrote a report that said, you know, I'm very confident that gold will beat stocks from, from here for the next decade. It was, it was the report was called 10 for 10, 10 stocks for 10 years in gold. We couldn't give it away, but the returns in that portfolio were outstanding. You know, we did something like average returns in excess of 300% over 10 years, which is very, very good, even in gold, you know? And so I just look for signs like that. I just like to see, I like to see when, um, when, uh, when it's, when things get crazy in the gold markets, they get crazy and they've been crazy this year. So I don't expect the returns in gold to be all that good for a period of time. And I, I don't need to predict that when that is, I just know that if I can, if I can work on buying gold, when it's at the low range of my model, I'll, I'll, I'll, I will always make money. And then I just have to avoid buying it when everyone is telling me to. [01:03:46] Speaker 1: Yeah. And if you just sprinkle on a little psychology on top of that, then that should be pretty predictive as far as on a move forward basis. [01:03:56] Speaker 2: Yeah. I do think though, I think the gold guys get a bad rap because they are, they're not just religion. They're like old time religion. Like it's, it's a, it's more like a cult. Yeah. Yeah. But you know, but I think, but I think the tech guys are just as delusional when we look at, uh, who's that poor woman who runs the. [01:04:17] Speaker 1: A Cathie wood. [01:04:18] Speaker 2: Yeah. When we look at, I mean, people like that, I think that they're, they're absolutely as delusional just, you know, about a different sauce. [01:04:25] Speaker 1: Yeah. It's it. I think it's human nature at the end of the day, the Bitcoiners are the same. And I, I hate to knock on them, but I try to just give them some tough love. Everybody, even my viewers, my subscribers, the people listening to me on the podcast, just try to give them some tough love there and just remind everyone that if you're in this to make money, just make sure you're not going to church, uh, you got to check your biases at the door. That's lastly, that's really good advice [01:04:53] Speaker 2: for investors and really bad advice for publishers. If you're going to be successful as a publisher in this business, you have to join a church. You've got to be about something. Now your something isn't always a buy, but you've always got to be about it. So when we, when we asked me about gold, the first thing I did was give my bona fides. I buy actual gold coins. I have bought many of them and I've never [01:05:16] Speaker 1: sold one. So now I'm in church. Yeah. Yeah. Yeah. What, what do you think? Just lastly here, your broad overview of what's happening in the Middle East. I mean, obviously it's horrific, but do you think it's going to last? Is this going to be a forever war or do you see any end to the [01:05:37] Speaker 2: insanity? It seems like, it seems like we've had troops in the Middle East my entire life and I'm 53. Yeah. I think it already is a forever war. Did we, when did we first put boots on the ground in Saudi Arabia in the 1970s? I have no idea. After the petrodollar deal. I don't know. Find out when we built our first base there. I think it had to have been in the 1970s. And then of course we had boots in the ground in Lebanon in the eighties. And then we had, we had the first Gulf war in the night in 91, second Gulf war in Oh three. When, when have we not had troops in the Middle East? When were we not engaged in an armed conflict, whether they're actually shooting today or not? I mean, I think it already is a forever war. And what I can't understand, and I'm not, I'm not stupid or naive. I know that there's a lot of, there's a lot of political reasons for having troops over there. There's a lot of companies make a lot of money selling Patriot missiles and everything else that goes into all that. But the question I've got is, what is the actual American strategic interest? We have more oil than Saudi Arabia does. What, why do we, why can we possibly care about who owns whatever it is, you know, 10,000 square miles of arid desert? I don't, I don't get it. I do not understand why that is of any strategic interest to us at all. It doesn't make any sense to me. [01:07:13] Speaker 1: So if you think this is going to last a long time, you think the Straits of Hormuz are going to be impacted a long time, therefore global supply chains. [01:07:22] Speaker 2: I do not think that we can beat the Iranians. I'll tell you that. [01:07:25] Speaker 1: Yeah. [01:07:27] Speaker 2: I think it's absolutely foolish that people think that we can. That is a highly mountainous country and it's inhabited by 80 million people who are surprisingly cohesive and who overall hate our guts. And by the way, hate our guts for good reasons. Yeah. I mean, if we can't conquer Afghanistan, what, what chances do we have of conquering Iran? And why would we want to bother? What is it again, the straight of Hormuz, why do we need that again? What does that matter to us? [01:08:01] Speaker 1: Well, it matters right now in terms of diesel prices, just because of the crack spreads and the capacity that's offline for the refiners. [01:08:08] Speaker 2: If you give American industry seven years and you shut down the straight of Hormuz for seven years, do you have any idea how much diesel we can produce and ship here? Right. Right. Right. We can, we can replace any, anything we need to replace with North American production. And the, the raw material that Canada has more of the raw material than I think anywhere else in the world. If you're talking about the raw material being their, you know, the oil they have in their, and their, and their tar fields. I mean, that's exactly what you need to refine for diesel. So these are, these are problems that can be solved by the free market very readily. We don't need an aircraft carrier to make diesel for us. [01:08:50] Speaker 1: Yeah. Buddy, it's, it's, it's great talking to you. And for, I think you've got a daily newsletter that goes out, don't you? I sure do. Can you tell us about that? [01:09:04] Speaker 2: Sure. If you just go to porterstansbury.com, we finally created a URL that even I can remember. You go to porterstansbury.com. You can sign up for my free daily. I write it every day. I just wrote it this morning, by the way, before we got on. [01:09:21] Speaker 1: Yeah, I read it. It was about the AI and the social security. [01:09:25] Speaker 2: Yeah, exactly. And, uh, so yeah, we'd love to have, we'd love to have some more readers and, um, you know, I, I appreciate the invitation to come and talk to you. It is, it's so nice to talk to somebody on a podcast who actually knows what they're talking about. [01:09:38] Speaker 1: Yeah. Yeah. Well, we'll have to do it again soon. Actually, you know, we'll have to do it just face to face. Maybe we can grab dinner or something like that when we're in New Orleans, I'm going to [01:09:48] Speaker 2: see you in New Orleans. I was, I got mistaken on my calendar as you will know that it's not this weekend. It's next weekend, but I'll see. [01:09:53] Speaker 1: Yeah. For those of you guys who want to get tickets to that, it's, uh, like the 29th through the 31st, something like that. [01:10:00] Speaker 2: Yeah. They have it at Halloween every year. All right, buddy. We'll see you soon. Okay. See you.