Podcast appearances and mentions of bill bonner

Play Episode Listen Later Dec 4, 2022 27:08

Welcome to Episode #78 of the Fatal Conceits Podcast…They're sometimes called “California refugees.” But they hail from New York and Illinois, too… You'll find them in sleepy little towns in Florida… Texas… Arizona… Nevada… and across the sunbelt… basically anywhere that doesn't suffer oppressive taxation, creeping government, woke school curriculums, high crime, homelessness, drug epidemics…The pandemic didn't birth this trend, but it sure did accelerate it. Presently, California is losing about 370,000 people per year, a record rate. In today's program we're joined by MN Gordon, editor and publisher of the Economic Prism newsletter and former California native. Earlier this year, Mr Gordon packed up his family and headed east to find his own American Bolt Hole. We begin today's discussion with his fascinating story… then talk about Opendoor - as both an idea and a company - and what's next for real estate in the US. Please enjoy our discussion and leave your own comments and ideas regarding the best places in the US to live below…Cheers,Joel BowmanP.S. For those inclined to read rather than listen, please find a lightly edited (for clarity) transcript below…Thank you for reading Bonner Private Research. This post is public so feel free to share it.TRANSCRIPT:Joel Bowman:All right. Well, welcome back, dear listeners, to the Fatal Conceits Podcast. As you know, by now, it's a show about money, markets, mobs, and manias, not necessarily in that order. If you've not already done so, please head over to the Bonner Private Research substack page. You can find us at bonnerprivateresearch.substack.com, where there are now hundreds of articles on everything from high finance to lowly politics and everything in between. There's plenty of research reports there, of course, by our macro analyst, Dan Denning and investment director, Tom Dyson, as well as plenty of Bill Bonner's daily musings. You won't find them anywhere else.And in addition, of course, there are many more conversations just like this on the Fatal Conceits Podcast. Grab that at the tab on the top of the page. And speaking of which, I'm delighted today to welcome a newcomer to the show. Mr. MN Gordon is the Editorial Director and Publisher of the Economic Prism Newsletter. I'll provide a link in the transcript to this, so you can head on over there. In particular, check out the library. You'll find plenty of usual suspects from Messrs. Hayek to Hazlitt to Mises, and all the rest of those free market oriented kind of gentleman. So, without further ado, Mr. MN Gordon, welcome to the program.MN Gordon:Hey, Joel. Morning. Thanks for having me on.Joel Bowman:Yeah, not a problem. Not a problem. Now, we've got so much to talk about, as is the case whenever we sit down these days. We had the remarks from Mr. Powell yesterday. There's real estate to discuss, credit markets, the dollar, on and on. But one thing I wanted to start with here is a story I read over on your Economic Prism website, and I think it's really instructive. I think a lot of people in America are thinking along these lines at the moment, and that is your exodus story from California. Why don't you just kick us off by telling us a little bit about how you got out of the Sunshine Tax State?MN Gordon:Yeah, you bet. Yeah, I'm a native of Southern California, born and raised there and worked for many years there in my career. And over the years, it just became more and more intolerable of a place to be. Certainly, the high taxes and wacky politics have always been a part of California, but it really turned ugly or just more and more intolerable during the COVID lockdown that had taken place.And my wife and my kids, we were just eager to get out and try something else and look for a place that maybe has a lighter touch from the government, more favorable tax policies, lower cost of living. So, we certainly found that in Knoxville, Tennessee. We moved out here in July, so we've been here for several months and we're really enjoying it so far. Really, really liking the green and wet conditions, not being in perpetual drought...Joel Bowman:Must be a nice change.MN Gordon:It is a nice change, for sure. And yeah, certainly more of a freedom feel here, no state tax, and lower cost of living, so it's turning out to be a really great move for us.Joel Bowman:Fantastic. Yeah, my wife and I were just in Austin, Texas a couple of months back and ran randomly into a group of people who referred to themselves as "California refugees." There are these pockets of similar people, it seems like, all around the country, in Austin, in other states. You guys looked at a few other places, Arizona, Nevada, Texas, Florida, but none of them floated your boat for various reasons. What was your criteria?MN Gordon:Yeah. That's right. I think for us, it was really finding that lower cost of living, finding somewhere that had very good access to nature. I grew up at the beach and really connected with the beach in my youth and into my early adulthood. And the older I got, the more appealing the mountains became for me. California certainly has mountains that you can go to, but they're kind of tinder boxes. You don't really want to spend much time in them, and certainly wouldn't want to live there.And all the mountains in East Tennessee, we've got quick access to the Smoky Mountains here, and while they're certainly more subtle, the peaks are lower and what have you, they really are livable and very beautiful and enjoyable to spend time in. So, that was certainly something that attracted us to this area.Joel Bowman:And you mentioned your wife and kids, obviously it was a more appealing environment for a family in addition to just the great outdoors and having easy access to the lush Smoky Mountains. What about things like schooling? I'm interested in this, in particular as a father of a young daughter, what were the kinds of, I don't want to call them grievances, but complaints that you had pre-COVID, did you find those exacerbated with lockdowns and that kind of thing? Was that prevalent where you were in Southern California?MN Gordon:Yeah. Yeah, so that was also a big part of it. So, my son is 15, he'll be 16 next month or later this month actually. And so, he's in high school and the school he was going to, the local public school in Long Beach, has about 4,000 kids there, and they shut it down, of course during COVID. And when they reopened it, it really seemed like that the kids just went back and were really wild or what have you.Anyhow, it just turned into a rough situation. There was an incident where the school safety officer ended up shooting and killing a woman that was fighting one of the students right in the street, in front of the school.Joel Bowman:Wow. Oh my goodness.MN Gordon:Yeah. So, it was really crazy. And then, just during COVID and this prevalence of this woke ideology that had seemed to come into the school. Several years ago, the state of California created a third alternative when you apply for a driver's license. So, you can be male, female, or X, right?Joel Bowman:Oh, right, okay. Yep.MN Gordon:Yeah. And so, all of a sudden then my son's got a teacher that is clearly a mister, but he goes by Mx, because that's what's on his driver's license, and just a lot of that kind of nonsense.Joel Bowman:That teacher didn't happen to be the biology teacher, did they?MN Gordon:Right, yeah.Joel Bowman:Creates a little conflict.MN Gordon:Yeah. So, we were eager to get out of there for those reasons, and certainly don't want to be too negative on it here, but that was also certainly part of the factors in our decision to leave.Joel Bowman:So, how have you found it then in Tennessee? Because one of the things that you mentioned in the article, and actually one of the things that this group of "California refugees" impressed upon me when we met them in Texas, was exactly what you would said, which is, "Don't California our Tennessee." Or, "Don't California our Wyoming." Or whatever it is.We think of places like Tennessee and like Texas as brimming with Southern hospitality and very warm and welcoming, but I can see that there would be a little reticence when you see this brigade of California number plates just teeming over the hills. How have you found the welcome there in East Tennessee?MN Gordon:Right. Yeah, I mean, overall the welcome's been great. The people are very friendly and accommodating. We certainly have gotten some odd reactions from people when we say we're from Long Beach, California, and just moved here. And we have gotten some, very few, but some people that seem visibly outraged or what have you, that we moved here. We had one experience where we stopped by the lake marina and were talking to the lady at the boathouse, and she found out we were from Long Beach, and she really started questioning why we would move there and so on. And I think that's what it is, they're protective of the Tennessee that they have. Right?Joel Bowman:Right.MN Gordon:They don't want liberal policies coming in and taking over the schools or the government, whether that's limiting freedoms or increasing taxes, or creating these massive social programs that you have in California. So, I think that's what it comes down to. And they'll warm up to you pretty quickly once you start talking with them.Joel Bowman:Yeah. One of the things I liked that you mentioned in your article, is that a lot of times people think that those who are coming from California or maybe Illinois, or New York, or wherever else, and seeking refuge elsewhere, they think maybe they do want to bring their woke policies or what have you to the school boards there. But actually, it's people like yourself who know full well, have been on the front lines of this, who see it for what it is. It's really gotten to a fever pitch just in the past few years, and you see exactly what has happened upfront, whether it's at the school, or with taxes, or real estate prices, crime, homelessness, drug problems...MN Gordon:True.Joel Bowman:So, I find actually a lot of the people who have moved away from those places, they may have been very progressive to begin with. They moved to the Bay Area and then all of a sudden they see the end game of those policies and they think, "Oh, I've got to get out of here. Even if I'm centrist or if I vote a little left, this has just gotten out of hand here."MN Gordon:Right. Yeah. I think that's certainly accurate. I think people that are looking to leave California or other liberal dominated cities are looking to get to places that have greater freedom and are not wanting to recreate the situation that they're escaping from.Joel Bowman:Right. So, then let's talk about the nuts and bolts of your exodus with regards to selling your home. You mentioned that you had a story with regards to Opendoor. And for those readers listeners who are perhaps unfamiliar, I actually wrote something similar about Zillow a couple of weeks ago, one of these online real estate market makers. They wear various hats, I guess. But what was your experience with unloading California real estate and getting into the Tennessee market?MN Gordon:So, I used Opendoor. They refer to themselves as an iBuyer, I guess that's the buzz word, but essentially they use their digital pricing models to make offers on houses, cash offers, and then they make light touch-ups to the houses and then flip them back onto the market.And so, it was about June of this year when we were looking to sell our house, and I'd heard a bunch of commercials on the radio about how easy it is to sell your house with Opendoor. So, I reached out to them and got a price quote, and it was a price quote that I was certainly happy with and was ready to take. However, I wanted to just see what sort of price I could get, perhaps I could get a better price if I went with the traditional approach.And so, I got an agent and they staged the house and took a bunch of nice pictures and had open houses over a series of two weekends. And this was early June, so it's right when the mortgage rates had spiked up above 6% for the first time. And while we got a lot of traffic, we didn't get any offers. So, it was, "We really need to get out of California. We want to get into Tennessee before the next school year starts."And so, I went back to Opendoor, and this was maybe three weeks after my initial offer and spoke to the same person there who had given me the initial offer. And so, he came back with a new offer that was actually higher than the first one that they had given me. Clearly they weren't recognizing what was going on with the market. And so, certainly I jumped at that offer and took it.Joel Bowman:Yeah. Congratulations.MN Gordon:Their process was really simple. I got all my stuff moved out, took some pictures, uploaded it to the website, put the keys in a lockbox that they had mailed me on the door, and I left. Right? And then they wired the money to my account and it was really smooth and simple.But then after that, I've been following what's been going on with that house, my former house. And so, about two weeks after I had sold it to Opendoor, they had put it back on the market. They had gone through and really just done some interior painting on the walls, nothing major. We had some more colorful paints, and so perhaps they just wanted something more neutral, who knows? And so, they put it back on the market for 60,000 less than they bought it from us for. So it was-Joel Bowman:Wow. What was the timeframe there? That was just a few weeks?MN Gordon:Yeah. It was literally two weeks after they'd bought it from us. So, I don't know why they didn't recognize that before they bought it from us, but after they bought it, clearly they realized that they'd paid too much. They put it on for 60,000 less, and then it still hasn't sold. They've been dropping the price every several weeks. And so, we're going on 110 days and it's over $110,000 less than what they bought it from us for.Joel Bowman:My goodness.MN Gordon:Yeah. So, it was pretty wild. And so, that got me into really looking at Opendoor as a company and what's going on. And I wrote an article a couple weeks ago about it, and it seems like there's countless examples out there of my experience. In my article, I cited one in Colorado where Opendoor had paid close to $780,000 for a house in April, and then listed it for 870,000 and it didn't sell until October. So, about six months later. And when they sold it, it was for a $154,000 loss.Joel Bowman:Oh, wow.MN Gordon:Yeah. So, I'm not quite sure how the company expects them to make money that way...Joel Bowman:It's difficult to make up losses on volume.MN Gordon:Right. Right. So, from what I can gather, they have these digital pricing models or these algorithms that they use, and somehow they just missed it. That when interest rates rise, that it's ultimately going to cause the prices to drop, right? And interest rates or the price of credit really is fundamental to the markets, and especially those that rely on large quantities of debt.So, the housing market's a prime example of a market that's really sensitive to interest rates. And so, as the rates rise, the house prices eventually must adjust downward to balance out the monthly mortgage payments that people have. And so from what I can gather, Opendoor was projecting this trend outward that they had seen over the last several years. And when the inflection hit, they just missed that, missed what was happening with the rising rates, and continued to load up on houses that they would eventually have to sell for a loss. So, a wild ride going on there at Opendoor.Joel Bowman:Yeah. It's amazing too, that this happened, as you say, in the summer months of this year, because Opendoor had a forward example in Zillow. I may have to double check the years here, but I think it was in 2019, 2020, Zillow did something similar, where it used one of these AI algorithms to extrapolate straight lines into the future, which is never a good undertaking when you're dealing with human behavior and all of the complexities of something like a real estate market, which can be hit by things like pandemics, or economic downturns, or rapid interest rate hikes, all of which we've seen in the past couple of years.And Zillow really got caught out as well, where they had just onboarded, almost automatically, this huge inventory of houses and properties that the algorithms had weighed and decided were worth X amount and hadn't factored in or adjusted for reality, let's say. And all of a sudden, they were left with this enormous inventory, which of course, has a carrying cost. And then, if they can't rent out, they have to sell into a falling market, which can exacerbate the problem that in some ways they kind of caused in the first place. But it's interesting that Opendoor wouldn't have seen that as an example and maybe tweaked their own machine learning a little bit in anticipation of exactly this.MN Gordon:Yeah. Right. Who knows? That seems like a good example that they could have learned from. Perhaps they thought they were smarter. I don't know.Joel Bowman:So, what's happened with the price of Opendoor, the share price of Opendoor you mentioned had cratered. What's going on there?MN Gordon:Yeah. So, the share price is really circling the toilet bowl here. I think it peaked at around $35 per share in early 2021, and now it's down to somewhere around $1.80 or so.Joel Bowman:Wow.MN Gordon:That's a loss of over 95%. And meanwhile, the company recently laid off 20% of their staff. So, a ugly situation for the company. Perhaps that's an opportunity for, I wouldn't call it investing, maybe speculating, but when I was doing research for that article on Opendoor, I came across some writing from an analyst named Luke Lango, who writes for InvestorPlace. And so, he made the statement that, "Opendoor today could be like buying Amazon in 1997." And that seemed like a bold claim to me, but who wouldn't want to have bought Amazon in 1997?Joel Bowman:Right. Another company that, of course, was cut in half any number of times on its way to what it would eventually become and has, along with the rest of the tech sector, come off considerably since its highs, at whatever it was a year ago or something like that. But yeah, you do see these ... I mean, 95%, it would be maybe generous to call it a dip. That's pretty much a hatchet job.MN Gordon:Right.Joel Bowman:But at some point, somewhere, assuming there's not bankruptcy and insolvency, there's going to be an attractive discount, 95%. What was your experience like with Opendoor? It seemed like it was pretty open and shut, right?MN Gordon:Yeah. Yeah, I mean, as far as the company, their user interface was really simple and entering my info into the website and then contacting the actual staff person there, who we did a walkthrough on Zoom and what have you. As far as going through the close and getting the money credited to my account. I mean, they certainly operated like a professional business, so they weren't winging it, I guess, as they were going. So, in that sense, they seem to operate like a good business. Who knows if they can survive these losses that they're taking? And their share prices is reflecting that.Joel Bowman:Yeah. I wonder what these big, mass buyers, whether they be the BlackRocks or the big funds of the world, but also outfits like Redfin, like Opendoor, like Zillow, that are just automatically vacuuming up these thousands or tens of thousands of residences. I wonder what that does for that old adage that real estate's about "location, location, location."If the buying and selling is going to be done by artificial "intelligence" that just algorithmically determines what entire regions are worth and then comes in with enough capital, enough muscle to move markets, if we're not going to have severe aberrations like this more in the future. It's interesting to think about.MN Gordon:Yeah, that is an interesting idea. And I don't know if they ultimately end up owning a lot of these houses that they can't sell, without taking a major loss, if they end up just becoming these large scale renters or what have you, until the market bounces back. I don't know. That's certainly a interesting idea to think about.Joel Bowman:All right. So, mate, what's on the future for you guys now that you've made the exodus, now that you're out in Tennessee, what have you and the family got programmed for the next couple of years? You've got a bit more schooling for the kiddos and then?MN Gordon:Yeah. My son's wrapping up high school here over the next few years. I've got a daughter who's 10, she's in fourth grade, and we homeschool her through a co-op, where she goes to school two days a week. And that was something that we started back in California. She was in first grade when the pandemic hit and we just couldn't have her on Zoom calls seven hours a day, trying to learn that way. So, that's when we switched to homeschooling. And it's turned out to be a really good thing for her.But yeah, as far as long-term plans, I mean, we're trying to settle in and make this our home and become connected to the community here, and getting out and exploring the city and the surrounding areas. And so yeah, I guess that's our short-term and long-term plans are to get connected here.Joel Bowman:That's fantastic. We've got our macro analyst, Mr. Dan Denning up there freezing on the high plains of Laramie at the moment. A couple of years ago, he did a bolthole project, where he drove thousands of miles around the country looking for the best spots with his particular checklist of what he wanted in various places.But it does seem like there are a lot of people who are peering over their own fence and thinking, "Hey, maybe there's not a better life for me somewhere else." So congratulations, mate. Best of luck with you and the family out there in East Tennessee. It's a place I haven't visited, so I'll maybe put that on the to-visit list in the future.MN Gordon, thank you so much for your time today, mate. And I'll include a link to Economic Prism and please, readers, listeners, viewers, what have you, head over there and check out Mr. Gordon's work. And of course, check out our own substack page. Again, that's bonnerprivateresearch.substack.com. And we'll catch you again next week.MN Gordon:Great. Thanks, Joel.Thank you for reading Bonner Private Research. This post is public so feel free to share it with Californians and refugees alike.... This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit bonnerprivateresearch.substack.com/subscribe

covid-19 america new york amazon california texas ai zoom colorado arizona tennessee illinois exodus southern california cheers nevada southern bay area congratulations wyoming publishers powell long beach californians knoxville zillow open door mx editorial director east tennessee hayek mises smoky mountains redfin laramie ibuyers hazlitt california exodus blackrocks bill bonner investorplace tom dyson

Vitaliy Katsenelson on Real Estate, Real Value and having "Soul in the Game"

Play Episode Listen Later Nov 17, 2022 51:17

Welcome to Episode #77 of the Fatal Conceits Podcast... In today's conversation, I'm joined by author, value investor, student of life and editor of the popular ContrarianEdge newsletter, Mr. Vitaliy Katsenelson. I've been reading Vitaliy's work, on and off, for over a decade now. In fact, we used to publish his columns and market insights occasionally in The Daily Reckoning, a publication I managed for Bill Bonner back in the 2000s, in what seems like another lifetime...Vitaliy describes himself as “Born in Russia, Made in America,” a distinction we talk about during our conversation. He's also a professor of finance, CEO of Investment Management Associates and a keen world traveler. Over the course of an hour or so, I asked Vitaliy about his insights into the beleaguered American housing market, what the Fed hath wrought for the US economy at large, the challenges facing bottom up value investors like himself and where to for stock markets over the short and medium term. We also talk about his newly published book, Soul in the Game - The Art and Meaning of Life.Please enjoy - and share! - my conversation with Vitaliy Katsenelson, below...Cheers,Joel BowmanTRANSCRIPT:Joel Bowman:All right, well, welcome back to another episode of the Fatal Conceits podcast, dear listener. If you've not already done so, please head over to our Substack page. You can find us at BonnerPrivateResearch.Substack.com, where we have hundreds of articles, research reports, and many more conversations just like this on the Fatal Conceits podcast tab at the top of the page, where we talk about everything from high finance to lowly politics and everything in between.It is my pleasure today to welcome a gentleman to the show whose work I've been reading on and off for years, and as we were just talking about before we pressed record here, our email correspondence has gone back over a decade, so it'll be great to connect again. Vitaliy Katsenelson is the author of Contrarian Edge. Head over to his website there. He's got plenty of excellent material, mostly about investing, but a few life lessons in there, some political musings, lots of travel stuff. He's also the author of two investing books, Active Value Investing, and the Little Book of Sideways Markets, and most recently, a book that I hope we get to chat about today, Soul in the Game: The Art of a Meaningful Life.So, first of all, Vitaliy, welcome to the Fatal Conceits podcast. I feel like it's long overdue.Vitaliy Katsenelson:I know, Joel, it's a pleasure. Thank you. We're looking forward to it.Joel Bowman:Outstanding. And as we were also just mentioning, if this background looks familiar, you were recently on a podcast with Anya Leonard, who runs the Classical Wisdom website. We sit about 10 feet away from each other. Being husband and wife, we share a home office, so if this is a little bit of deja vu...Vitaliy Katsenelson:Absolutely. Yeah. No, that's still there.Joel Bowman:All right, so there's lots of stuff I want to get to, Vitaliy. You covered such a wide breadth of subject matter in your musings, and again, people should head over to Contrarian Edge to check out your work there. But for readers who are just coming upon your work for the first time, I think they might be interested just in a bit of a Vitaliy origin story, because it's a very interesting one. You put it as “Born in Russia, Made in America,” which I thought was a very entertaining juxtaposition. How did you make that journey and come to that distinction?Vitaliy Katsenelson:Yeah, so today I live in Denver, and I have a wife and three kids, and I run a value investment firm, IMA, and I also write, and I wrote several books, but I write articles all the time. And by the way, we have a Substack as well, so you can just look for my name on Substack. You can subscribe to the articles.Joel Bowman:I'll put all the links to these links in the transcript.Vitaliy Katsenelson:Perfect. Yeah. But I was born in Russia and I moved, my whole family moved to the United States in December, 1991. What's interesting about this, actually, I was not living in Russia. I was living in the Soviet Union, and then literally a month later it stopped, it ceased to exist. The reason we moved to Denver, because my father's youngest sister left Moscow in 1979, and she moved to Brighton Beach. If you watch Moscow on the Hudson, that movie basically describes her life.Joel Bowman:Wow. Okay.Vitaliy Katsenelson:And then she married the Rabbi, and Rabbi had a synagogue in Cheyenne, Wyoming, out of all places, which is, I don't know if there are any Jewish people there, but yeah, that's a different conversation. But anyway, she invited us over. There was an organization that does a lot of good things, actually, not just for Jewish people, called Jewish Family Services. They were in Denver. So my aunt decided that it was better for us to move to Denver than to Cheyenne, Wyoming, and I keep thanking my aunt every day just for that decision alone.Joel Bowman:And so, I believe you were first studying and then lecturing at, was it the University of Denver?Vitaliy Katsenelson:Yeah. Yes. I studied, I got my undergraduate degree and a graduate degree at University of Colorado at Denver. And then I taught finance as an adjunct, which is a fancy word for part-time. So if you are a professor, and if you say part-time professor or part-time lecturer, it doesn't sound as interesting.Joel Bowman:It sounds a little casual. Yeah.Vitaliy Katsenelson:But adjunct, because most people have no idea what it is.Joel Bowman:Right.Vitaliy Katsenelson:And so suddenly, you sound important. So I taught finance for about seven years, and the reason I actually quit, because two reasons. Number one, I absolutely hated the part where I had to give out grades. I loved giving out As. I hated giving out Ds and Fs. And so, I hated that. But the second part is that after you teach the same class over and over again, it gets old.And I realized when I write, I can teach, because every article would teach something, but I don't have to repeat every article. I don't have to repeat this semester after semester, so I can get to learn new things all the time. And so, I quit in 2007, so I haven't taught in 15 years.Joel Bowman:And also, I guess as you mentioned with your Substack and with your Contrarian Edge page, you get to reach a much wider audience than just how many people can fit in the auditorium, right?Vitaliy Katsenelson:Oh, absolutely. Yeah. I can help a lot more people with my writings than just in a classroom. Yes.Joel Bowman:Excellent. We were back and forthing a little bit email-wise, and I'd been reading some of your work recently on the housing market, the US real estate market, and I wanted to kind of get into that, because I think that's, to use a popular phrase, “top of mind” for most people at the moment, with obviously the Fed having met recently. You and I are talking on November the 7th, for our readers' edification, here.But it's been five days since the widely expected rate hike of 75 basis points that I think most people were paying attention to, most people had kind of expected that, but they were paying more attention to the tenor of Mr. Powell's remarks afterwards. He seems to be speaking fairly directly in his remarks, saying that the job of the Fed is not done at present. We're not looking to pause. "Talk of a pause is premature," I think were his exact words.I wanted to get your take on how you think that shakes out in the housing market, because obviously there's a lot of Americans, in particular the middle class, with wealth tied up in that asset class, and you've written that you think it's quite worse than people think. Why is that?Vitaliy Katsenelson:All right. If you look at the housing prices from 1999 to today, they basically went up about 40%. In less than four years, they went up 40%. Most of that increase happened actually over a three-year period. So, the median house today in the United States is about $440,000, probably a little bit less than that, but that's what it was at the beginning of the year.The problem is, those prices were fine from an affordability perspective when interest rates were around a 30-year mortgage at 3%. But when inflation is at 7-9%, interest rates had to go up. Even if the Federal Reserve did not raise them, they would have still gone up, I would argue, because who would've wanted to buy this paper when inflation is 9% and pay 1% or 2%. So interest rates, I think, would've gone up anyway.So, today when the mortgage rate is over 7%, basically if you are a new buyer and you want to put 20% down and you want to buy a house, it's basically going to cost you almost twice as much. Let me just give you a couple numbers. If you bought a house in 2019, or even in 2021, it would've cost you roughly $420,000. Interest rate was 3%, so it would've cost you roughly about $15,000 a year in mortgage payments.When rates go up from 3% to 7.6%, as they are today, now the mortgage payment goes up to $30,000. This is, what's important to understand is that the median American household makes about $75,000 a year. $75,000 a year, or about $60,000 after tax, roughly. So in other words, when interest rates were 3%, it used to consume 25% of someone's income. Today it would consume, if you were to buy a house at today's prices, at these interest rates, would consume half of someone's income.So, housing today is unaffordable. So, what has to happen is that, for the housing market to return to the prices, to return to the affordability of 2019, of 2020, of 2021, they basically have to decline like 30 or 40%.Joel Bowman:Yeah, I saw those numbers, 30 or 40%. I've read those numbers in your write up, and I think for a lot of people that's difficult to conceptualize, because they've been living high on the hog with cheap and abundant credit for so long that they think, “Hey, it's been so good for so long, how could this possibly come to an end?” But you tap into the emotion of owning a house, how it's different from stocks, it takes a lot longer to come down, but prices can run up pretty quickly. But there's an emotional component to owning a home that counts, too...Vitaliy Katsenelson:Yeah. In the American Constitution, there is a guarantee of pursuit of happiness, but there is no guarantee of rising housing prices every year. But over the last 30 years, we are basically, because interest rates actually declined for most of our adult life, right? So therefore, we've been conditioned that housing prices only go up. But they can decline. Joel Bowman:That'll come as a shock to some people, I imagine. I'm Australian, you can probably hear from my accent, but there's a very similar macro setup in Australia, where they've had access to just an exorbitantly large amount of cheap willing credit for so long that they've been led to believe that this is just sort of par of the course.But one of the things that I read in your full letter, that I thought was very interesting, and I think it's an important point for people to grasp, is that a lot of people will sort of trot out the argument, where they'll say, “Hey, look, we already had interest rates during the Paul Volcker years, or during the '70s and '80s, when they were 14, 16, 18%. And we had a lot of other similar macro setups as well. We had high inflation, we had high unemployment, we had an oil embargo from a major producer of the world, the Nixon price shocks, all of this kind of very pessimistic, sour macro setup. But we were able to muddle through, and then we were kind of off to the races after we got through the hard part. But this time's different. I agree with you, but explain to us why, in your mind, this is not just the '70s and '80s redux.Vitaliy Katsenelson:Because in the '70s and '80s, if you look at the ratio of housing prices to median income, it was half of where it is today. In other words, yes, the interest rates went up a lot, but the housing prices were much, much cheaper in relation to what people made. By the way, we still had a recession, don't get me wrong. We still had a recession. People forget about it. But I think this time, the impact will be greater.Also, this is very important to understand. When we are in an economy that has very low interest rates for a long period of time, our behavior changes. When I say “our,” that includes individuals, corporations, and government. Let's say, let's start with the government. That's the most obvious one. We have our debt to GDP at the highest probably in the country's history. We may have to go back to the World War II era to see what it was then. It's much higher than it was in the '80s. If you look at just how we get used to finance everything. If you bought a new car, you could get 0% financing. That is gone. I mean, well, 0% financing is basically gone, and therefore what you're going to start seeing that now, everything is going to become a lot more expensive.So, what's important to understand is where we're coming from. We're coming from, it's almost like 0% interest rates to meaningfully high interest rates, and therefore the cost of everything will go up. And it's going to slip into every single corner of the economy, and it's impossible for high interest rates not to cause a recession at this point.Let me give you one other important element about the housing market. Most Americans today basically have a mortgage, a fixed rate mortgage. 90% of Americans have fixed rate mortgages, where they probably pay from two and a half to three and a half or 4%, because people refinance and the industry has declined.So, here's what happened. Let's say you bought a house for $300,000 and let's say you have a mortgage. Actually, let me give you actual numbers. The average American has a mortgage of about $260,000 if you put together the first mortgage, second mortgage, okay? So in other words, the average American as of right now has $180,000 home equity.Joel Bowman:Okay, right.Vitaliy Katsenelson:Now, let's say housing prices stay where they are. Let's say they don't decline. If you want to move, if you want to sell your house today and move into another house a few blocks away, you're going to sell your house for $440,000. Hypothetically, you take $180,000 of equity, you put it in your house. So, new house is going to cost you for $440 minus $180, so $260. Your mortgage is not going to change except one thing. Now you'll be paying, instead of 3% interest rate, you're going to pay 7.6. And so, suddenly that move where you still buy the same four walls, same picket fences, now it's going to cost you $10 to $15,000 more a year.Joel Bowman:Right.Vitaliy Katsenelson:And that's a lot of money. So therefore, I think what's going to happen, what's important in the sense is this, when the housing prices go up, when the stock prices go up, people feel wealthier, because they feel like the house is worth more, they have more home equity. People feel wealthier, and therefore, if you feel wealthier, you are more certain about the future, you go out and spend money.The opposite happens when they decline, when assets decline, from stocks to housing prices. And when that happens, when housing prices have declined, people are going to have less home equity, but also they're going to feel less wealthy and therefore they're going to spend with less confidence. And that in itself is also going to help to weaken the economy.So again, I'm not an economist. I'm a guy who analyzes, I'm a kind of bottom up guy who analyzes stocks. But I look at this. It took me about 20 minutes to go through all this data, and just to see that it's basically impossible for us not to go into recession.Joel Bowman:Yeah, and even a technical recession this time. I know in the old fashioned days, it used to be two consecutive quarters of negative GDP growth. I'm sure the government has defined that out of existence. But yeah, I think most people are expecting them to even have to admit that we are in a recessionary environment at this point.Vitaliy Katsenelson:Yeah. Let me tell you, I'm going to define recession this way here: when unemployment will start going up. The reason the government got away with saying we are not really in recession, and they could get away with it because it was supply chain issues, et cetera. A lot of one-time stuff. Fine. And we had 3.3% unemployment, so that's how they could get away with it. But when unemployment goes from 3% to 6%, it's going to be very difficult to say that we are not a recession. And I don't know where unemployment is going to go, but I'll tell you this, if you are in California, if you are in Silicon Valley, I think the recession there is going to be even more significant than in other parts of the country.Joel Bowman:Yeah. Well, let's talk about that then. You mentioned, of course, your work as a value investor, and we were just powwowing about our mutual acquaintance, Chris Mayer before. I wanted to just sort of pivot from the real estate market to the work that you do with investing, because obviously this is one of the other big asset classes, stocks, so-called risk assets, that are impacted by Fed policy.As Chris and I were just saying a couple of weeks ago, it would be lovely to live in a world where we could just do fundamental, bottom up health of a business research and due diligence and invest in the best companies, but the Fed can muddy the waters sometimes. So, explain to me and explain to our listeners how the kind of deep value investing that you're doing, that Chris is doing, which is driven more by, let's say, fundamentals than fad, or price over promise. How is that impacted now, even after we've had, with the exception of October, which I think was maybe the best month ever, we've had a very tumultuous year, to put it mildly.Vitaliy Katsenelson:Yeah. To paraphrase our ex-president, high interest rates made value investing great again.Joel Bowman:Right.Vitaliy Katsenelson:So, what is value investing in general? Basically what Chris and I are doing, we are analyzing companies as if they were, even though they're publicly traded, they don't have to be. Our analysis would not be much different if they were not publicly traded. Say I'm analyzing Apple, I'm analyzing Apple as if I was buying the whole company. I say, would I want to be in this business? Do I understand it? Do I like the management? What do I think the cash flow is going to be over the next 10 years? Okay, what do I think the company is worth? And then, once I figure this out, I say, well, how much discount do I need to its fair value for that to be an attractive investment? And you just keep doing it over and over again over different companies.And what's important to understand, is the instant liquidity that the stock market provides you, it's both a feature and a bug. It's a feature because it allows you to buy and to sell something. Like if you want to sell a house, first of all, it takes you a long time to find a buyer, and transaction costs are very high. If I want to sell a stock, like an average stock, I can sell it in seconds, and the difference between the bid and ask spread is going to be a tiny, tiny, tiny number. Okay, so that's a feature.The bug is that, because you can sell it so instantaneously, your analysis changes, and a lot of times what happens, people get tricked. Let me give you this analogy. When you go to Las Vegas to gamble...Joel Bowman:When somebody else goes to Vegas. I would never.Vitaliy Katsenelson:Yeah, let's... Yeah.Joel Bowman:You and I would never do that, Vitaliy. We're responsible adults, here.Vitaliy Katsenelson:Especially, your wife is 10 feet apart, so totally.Joel Bowman:Exactly.Vitaliy Katsenelson:Okay, when somebody else in Vegas goes, yeah, that person is not going to be thinking that he's investing or she's investing, because when you're in the main casino, you know they're gambling. And if you don't, then you have a much bigger problem.Now, because you are buying stocks and selling stocks, a lot of people get tricked that they're investing. But the thing is, what I described as value investing, when you analyze businesses, that's investing. When you buy in full stocks and you treat them basically as if you were renting them for a day and selling them, you're not investing, you're trading. Or it's both.Joel Bowman:Or speculating. Yeah.Vitaliy Katsenelson:Speculate, exactly. Gambling. Yes. I was kind of, Joel, I was on a... This is six months ago. I was on an AMC GameStop call in one of the Twitter spaces. I just wanted to understand what people are thinking. Oh, and at some point, I tried to explain to them that guys, you're all going to lose money, because this company is worth 95% less than what you're paying for it, and just went through the math. They didn't care.But there was one thing that one woman said that really stuck with me. She said... At this point, GameStop already declined maybe 20, 30%. And she said, "I bought the stock. I go to the movies all the time. I talk about the stock all the time, and it's still declining. Why is investing so difficult?" See, that person thought she was investing, but she wasn't.And so, what I do is investing because I'm treating companies as if I'm buying as businesses. And I think that's the biggest distinction. And I have a long term time horizon.Joel Bowman:I was just about to mention the time horizon too, because again, I've spoken to Chris many times about this, but the idea that if the money that you're investing in the market, you need it in five years, you need to pay for the kids' college or whatever, you may want to question whether that money should be in that particular investment. A longer time horizon, where you can insulate yourself against emotional overreactions that we all tend to have. We panic if things aren't going our way, or we get greedy at the upside, or whatever. But if you have a long enough time horizon and you do the due diligence and study the fundamentals in the beginning, even significant drawdowns or bear markets that we're seeing right now, if you've sitting on companies that you would want to own, whether they were publicly traded or not, certainly that contributes to a fitful night's rest.Vitaliy Katsenelson:Joel, let me give you this insight. If you have a shortened time horizon, volatility becomes your risk, right? In other words, you want a stock, and it declines, and you need the money at this point in time to pay for kids' education, then you have to liquidate the stock. And now the decline that could have been temporary becomes permanent, because you had to sell, because your time horizon was small.When you have a long term time horizon, volatility is really not the risk. A lot of times in opportunity, the risk is a permanent loss of capital. So when it declines, when the company, when stock declines and fundamental reason, the value of the company has declined as well, and that's a permanent loss of capital. When the company's earnings power gets demolished, or when you bought something, like let's say you bought those dotcom stocks that just crashed 70%. I bet if you bought almost any technology company, I'm generalizing, like last October, you're probably going to have a semi-permanent loss of capital. In other words, it's going to take you 10, 15 years to get your money back.Joel Bowman:Right. It takes a lot longer to build up percentages than it does to see them back down.Vitaliy Katsenelson:Absolutely. Absolutely. Yeah. Absolutely. Absolutely. But yeah, so a long time horizon becomes extremely important.Joel Bowman:Yeah. Okay. Let's sort of step back a little bit. I've got so many questions here that I want to get your take on, Vitaliy, and it's been 10 years since we caught up, so I've got a backlog. But I wanted to run something by you that we've been writing about at Bonner Private Research of late, and it ties into what we're talking about here, and this is the end, or at least a pause in the gushing of cheap and abundant credit. This may be, for the first time in multiple decades, or the first time in many young investors' or homeowners' or stock owners' lifetimes, the first time they're seeing persistent hikes like this, which we think may remain higher for longer.But there are a couple of other drivers that have led to this, in our worldview, that have led to this moment of plenty, this age of abundance that we find ourselves in, where if we want any food delivered from any style of restaurant around the world, we can call up, it'll be on our plate in minutes. We fly around the world using cheap jet fuel and travel in a way that kings wouldn't have been able to travel just going back a hundred years. And we take this all for granted.So, along with cheap and abundant credit, which is looking a little shaky, we also have cheap and abundant labor that was essentially because half a billion Chinese entered the marketplace and provided us with cheap goods. This is maybe another one of those “one time” events. And then, of course, cheap and abundant energy to power both the manufacturing and the distribution of all of those things.But we're seeing now, because of various geopolitical concerns, that each of those drivers is, in its own way, kind of breaking down. Whether it's, some would argue, weaponization of the dollar, or let's just say higher interest rates and a contraction in the credit markets there. Maybe we can go through those other ones, and just get your general take on that.Vitaliy Katsenelson:Let me go through them in the reverse order. If you look at the energy, right before the pandemic, we started to buy – unfortunately, I did not see the pandemic coming – we started to buy energy companies. Why? Because energy prices were so low, so low for so long, that we sold the supply. There was just this disbalance between supply and demand, just because low oil prices lead to decline in supply. So, even before the pandemic, you already had a shortage of supply, long term supply.Pandemic made it a lot worse. Then the war in Russia, I'm sorry, in Ukraine, makes it even worse because, number one, the Russian gas is most likely going to be out of the market for a very, very long time.Joel Bowman:Looks like.Vitaliy Katsenelson:Yeah. Yes. And it's going to be very difficult, and it's going to take years before Russia is going to be able to get it out of Russia to other countries. It takes years to build a pipeline to China, whatever, so it's going to be a while. It's very difficult to say exactly how it's going to play out, but also most likely, the production of Russian oil will decline as well.And the problem is, number one, the Western companies left Russia. So, they didn't just provide capital, they provided the knowhow, how to get that oil out of the ground, in very difficult places. And once production declines in the cold climates, it is difficult to restart it. Again, very general statements, but I would argue that it's safe to bet that production of oil out of Russia is going to be lower. And it's the third-largest producer in the world. So, low supply before the pandemic, after pandemic at war, it's very likely the supply will be constrained.On the demand side, you could argue that recession will reduce the demand. However, historically, the demand hasn't declined. Just a tiny bit during the recession, but not a lot. Okay, so I would argue we are probably going to see that decline. Oh, and by the way, I did not even mention ESG. I promise not to make it political, and if we had a different president from a different party in the White House, and one day he said, "Oil companies have to drill," and then next day he says, "Oil companies should not drill, and if you are..."Joel Bowman:It's a disaster. And the messaging is a disaster.Vitaliy Katsenelson:But if you are Exxon or any of those companies that have been villainized for doing what people need, then do you invest billions of dollars in new field developments, if tomorrow the government comes in and says, "You know that ‘excess money' you're making in the high oil prices? Yeah, we want some of that."Joel Bowman:It's windfall tax time. It's nationalization time. Yeah.Vitaliy Katsenelson:Yeah. My point is, it makes it very, actually, those things make things even more problematic, that we're going to see low oil prices. Okay, so that's oil.You mentioned that we had a globalization over previous 20 years basically, right?Joel Bowman:Yep.Vitaliy Katsenelson:Globalization was deflationary. Today, we are going through selective deglobalization. The reason it's selective, because it's not like we are saying, let's say, if there's a factory in Mexico, we're going to take it out. No, we're going to say, we are going to now divide our trading partners in two groups, the ones that we can trust long term and the ones we can't. Ones that have a democratic political regime and the ones that don't.And so, I think what's going to be happening is that we're going to bring a lot more manufacturing from China to countries that are more politically stable, and some of that is already coming to the United States. I mean, we are investing tens of billions of dollars in building some of the data plants in the United States, and they do it for geopolitical reasons. But that means also, most likely, semiconductors will be more expensive to manufacture here than in Taiwan.So, deglobalization, selective deglobalization is inflationary. By the way, China has its own issues. China has a significant demographic problem. In addition to everything else, they have a zero Covid policy, which has been hurting them and their reputation...Joel Bowman:And their supply chains.Vitaliy Katsenelson:Exactly. Apple now is looking at China and says, “do I really want to have my factories in China, or all my factories there? Maybe I should move some of them into the United States, some between, just some move to other places.”Joel Bowman:Or do we want to have our chip manufacturers or our chip suppliers in Taiwan if Taiwan is going to become a dragon snack, to put it bluntly? I used to live in Taiwan about 12 years ago, and they were talking about it then as “not an if, but a when” proposition. And yeah, that was 12 long years ago, so it seems more of an inevitability.Vitaliy Katsenelson:Yeah, and I tell you this, very few people talk about this, but I would argue the restrictions we just put on China in the semiconductor sector, that is the first shot, a significant shot of a cold war with China. We basically told China that... actually told American and Western European companies, you cannot sell them advanced microchips. You cannot sell them equipment that helps them to manufacture those advanced microchips. And this is the interesting one. If you find yourself an employee in China, working for one of those factories that manufactures advanced semiconductor chips, you're going to lose your citizenship. So, our relationship with China is not getting better, it's just getting worse. Anyway, another reason why more and more companies will be taking out their production out of China.By the way, there is some positive here as well, because that means we're going to manufacture more in the United States, which actually helps our labor, but it's also going to make our labor more expensive as well, by the way. So, it's a more nuanced discussion, here.But anyway, you look at this, from that perspective, everything, what you and I discussed so far is inflationary. Now, if you look at the United States, at higher interest rates, and when I say higher, they don't need to be at this level, they can just be higher than they were a year ago, are incredibly inflationary for the United States. Why? We have a... Sorry, I forget how much debt we have. $31 trillion, right?Joel Bowman:$31 trillion. Just passed last month.Vitaliy Katsenelson:Yeah. So, just think about 1% increase in interest rates for the federal government. That's $310 billion. If you look about, that's how much, roughly how much we spend on education. A 2% increase, that's roughly how much we spend on defense. A 3% increase, that's roughly how much we spend on social security. So again, I promise you one thing, I'm quite sure of this, none of those things will get canceled or reduced, because that's not what politicians do. This is how you lose your job as a politician. But what's going to happen, you just going to print more money reaches inflationary.So I think, if you and I talked a couple years ago, I would've sounded a lot more wishy-washy, like inflation versus deflation, and basically I would've said, I don't know, and here's the argument for both sides, and I'm going to invest as if both are going to happen. Today, I think the probabilities have shifted more towards inflation, long-term inflation, than deflation, even though in the short term, if you go into recession, a recession is deflationary.Joel Bowman:And it's not as if we're starting from anywhere near the Fed's acceptable range of when it claims to desired inflation at, around that sort of 2% sweet spot, as if it knows what the perfect number ought to be. But I mean, we're already at whatever it is, eight-plus percent. We're going to get another read this week, I think, so we'll keep our eyes on that. But we're a long way, in real terms, in real interest rate terms, we're still a long way behind the curve, as they say. So, there's a lot of catch-up still to do, and a lot of things can break in the interim before they get to that terminal rate, as they say.Vitaliy Katsenelson:Joel, I want to, just one topic, it just really bothered me. When Ben Bernanke received Nobel Prize...Joel Bowman:Ooh!Vitaliy Katsenelson:I actually have a perfect analogy to explain it. Actually, this makes so much sense actually, if you think about it. Because you have to look for the reasons why they gave it to him. They basically said they've given it to him because he understood the relationship between the financial system and interest rates, or something.Joel Bowman:I thought it was because he had the “courage to act,” Vitaliy. Wasn't that the name of his book, right?Vitaliy Katsenelson:That's right. The Courage to Act. But then I realized, here's my analogy for this: It's almost like giving a prize to a person who starts the fire, then puts it out, and then writes a book about it.Joel Bowman:Right. And my Courage to Act, Joel "the Arsonist" Bowman.Vitaliy Katsenelson:Yeah. It's like really giving the prize to an arsonist who also put out the fire. But here's the thing, this is a very important point. What's going on today in our economy is the direct consequence of what's been happening over the last 15, 20 years, or probably longer than that. And so, yes, our economy did not go to the Stone Age in 2008, 2009, so thanks Ben Bernanke for that. But number one, you did start that fire to begin with, and then you put it out. But arguably, the fire we have today has been caused by the Federal Reserve's policy over the last many, many years, as well.Joel Bowman:Right. That's a good point to raise, too. I think a lot of people, 12 or 10 years is a long time in the memory of a 30-year-old investor or a 25-year-old investor, so we're going back into ancient history for a lot of people who are just around the traps now. But Mr. Bernanke's career was one distinguished without, I think, a single success, where he failed to call pretty much every meaningful and significant moment of his time, including the mortgage backed security crisis, which grew up underneath his nose, which brings us full tilt back to the housing market.But I realize as we're speaking just here, and we've covered a little bit of ground here, but I don't want to sound just pessimistic, that we're sort of identifying these negative things around the world. Certainly we have to be mindful of them, but I want to talk a little bit about your latest book, because in addition to investing in turbulent times and keeping abreast of the latest geopolitical fracas, such as it is, we still have to get up and put our pants on one leg at a time and enjoy our family and make the most of the day. So, tell us a little bit about why you wrote your latest, which is called Soul in the Game. I'm assuming that's somewhat influenced by Mr. Taleb's Skin in the Game. Is that?Vitaliy Katsenelson:Absolutely. Absolutely.Joel Bowman:Okay, very good.Vitaliy Katsenelson:Yeah. And he actually endorsed, actually, this book too, so it's good.Joel Bowman:I saw that. Yeah, that was a nice feather in your cap. Congratulations.Vitaliy Katsenelson:That's right. But Joel, let me, I'm going to ask you a question, but let me, I want to end the investment part on the positive note, as well.Joel Bowman:Please.Vitaliy Katsenelson:As a value investor, I've never been more excited in my life, because it's suddenly, stock picking is back again. Being a rational investor, making rational decisions. When interest rates are very low, the bigger the story... The greater part of your imagination the story can capture, the more money you're going to make as a public company. This is why you had all these companies trading these insane valuations, right? Because there were not trading fundamentals. They were, because it didn't matter, because they can say, Listen, in 2040, we're going to make this much money. And since the interest rate's at zero, it might as well be today, because of the discounted 0% interest rate.Now today, what high interest rates did, they deflated a lot of bubbles, and they brought back common sense. So as an investor today, I'm more optimistic about investing than I've been in years. So, that's from one perspective.Now, let's go to the book. I've been writing about investing for a long time, and then at some point, I had this realization that, and I'm going to quote Freddie Mercury, who said, "There must be more to life than this."Joel Bowman:Oh, I thought you were going to say, "We will rock you." Okay.Vitaliy Katsenelson:And we will rock you. No, that's my next book. That's my next book.Joel Bowman:Okay. A geology textbook. Great.Vitaliy Katsenelson:That's right. Yeah. No, and this is when I realized that, this is when I start writing about topics that are outside of investing, so to write about parenting, Stoic philosophy, classical music, which I'm a huge fan of. And over time, that became a very big part, today maybe 40% of my writing actually focuses on other topics other than investing. And it's very dear to me.So this book, let me try to put it this way. When I help clients at IMA, I just help 300-something families. So, my impact is significant on a small number of people. When I write investment articles, I help a larger group of people, but again, it's still limited to people who just care about investing.With my articles that talk about parenting or classical music... Maybe classical music is not the case here, because it's usually a much smaller segment, but my articles about parenting have a significant audience. My articles about parenting or Stoics can help a lot more people. And this is why I wanted to write this book, because I wanted to help more people. This book is a completely altruistic endeavor. I just really want people to read the book and have a net positive impact on them. That's it.Joel Bowman:And I know my wife, Anya Leonard, again at Classical Wisdom, read the book. I have it on my list here. And she was interested in the Stoic aspect of it, of course, writing about classics herself. And so, it's not hard to understand, I think, why we are enjoying this recrudescence of Stoicism, given everything that's going on around the world. But in a kind of nutshell, how have you found the philosophy, some say the art, of practicing Stoicism in your own life, especially during moments of uncertainty such as we experience?Vitaliy Katsenelson:I feel, I tell you this, I feel somewhat conflicted about what I'm about to say, and here's why. Because I'm a contrarian at nature, and I usually don't like kind of... When I find that everybody agrees with me, that I find kind of a little bit... What's a good word for this? A little bit uneasy.Joel Bowman:Unsettled. Yeah.Vitaliy Katsenelson:Unsettled, yes. But over the last three years, I picked up three different things that became like three biggest facts. I'll give you all three. Chess, pickleball, and Stoic philosophy.Joel Bowman:Okay, I don't know what pickleball is, but I'm down with the others. I think the Queen's Gambit had a lot to do with chess.Vitaliy Katsenelson:Yeah, absolutely. By the way-Joel Bowman:Philosophy's off to the races. But what is pickleball?Vitaliy Katsenelson:You don't know pickleball?Joel Bowman:I'm either terminally uncool, or just late to the game. Or both.Vitaliy Katsenelson:No, it's a huge sport in the United States now. It's, imagine if you're playing kind of, it's like a miniature version of tennis with a different ball. They play it a lot in Paris. And I go play with a buddy of mine who is about my age, and you play against people who are 70 years old and they kick our butt. So it's a very, very popular sport.Joel Bowman:Good for some humility while you're on the court.Vitaliy Katsenelson:There's a lot of humility, yes. But anyway, Stoic philosophy... what happened was, I read this quote by Epictetus, and the quote said, it talked about the dichotomy of control. And it said, "Some things are up to us. Some things aren't."Joel, this is probably the most obvious quote you're ever going to read. But then he goes to explain, what are things that are up to us? And then you find out that there are so few of them. It's basically your values and how you act. Everything else is not up to you. Nothing else is up to you. Once you realize that, that is actually incredibly liberating.So, I went back and started to read more about Stoic philosophy, and I was blown away by that. Why? Well, it started 2000 years ago in Greece. And what's interesting about this, is how little people have changed over the last 2000 years. It's a blink. It's a blink. You read Epictetus or Marcus Aurelius or Seneca, those are the kind of three main Stoics whose writings live through the day. You find that they're talking about things that we're talking about, debating about today.I'll give you one example, which is where Seneca has this expanse, this whole paragraph talking about how people are wasting their time, how they're constantly distracted by frivolous things, and it goes on and on and on about things like this. You would think he's talking about iPhone, Facebook, and Snapchat. Joel Bowman:This is from his piece On the Shortness of Life.Vitaliy Katsenelson:Yes, I think so. Yes. And this is when you realize that... I think if I was a marketing agent for Stoic philosophy, I would call it Stoic practice. The word philosophy, which actually means just love of wisdom, is somewhat intimidating, because we think about kind of skinny, weak white guys, old white guys with beards, who philosophized about things we don't understand, right?Joel Bowman:Sure.Vitaliy Katsenelson:But Stoic philosophy is really Stoic practice, and all it's trying to do is minimize negative emotions in your life. Just trying to bring more tranquility to your life by removing negative stuff. And so, when I realized this, I was completely smitten by that, because what happens, the way I look at it, it's basically an operating system for life.When we are born, our parents basically tell us, kind of help us to navigate through life little by little. Then our friends, then the books, then things happen to us, and we try to adjust. It's a Frankenstein kind of operating system based on now a whole bunch of random factors. Stoic philosophy is, I think, I would argue, or Stoic practice, is lot more organized. It provides a very well-structured operating system. That's what really attracted me to Stoic philosophy.Joel Bowman:Excellent. Well, Vitaliy, I think you've put enough on the table to whet people's appetite if they haven't already checked it out, both in your book, and I'll link to this again in the transcript of this podcast, but Soul in the Game is the name of the book. Vitaliy, thank you so much for spending an hour of your afternoon with me. I really appreciate it. I'm sure our listeners will appreciate it too, and we hope to have you back on again sometime soon.Vitaliy Katsenelson:Joel, thank you very much. Thank you.Thank you for reading Bonner Private Research. This post is public so feel free to share it. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit bonnerprivateresearch.substack.com/subscribe

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Dan Denning on The Fed's Dilemma

Play Episode Listen Later Nov 5, 2022 39:50

And now for some more Fatal Conceits…Welcome to Episode #76 of the Fatal Conceits Podcast, dear listener, a show about money, markets, mobs and manias. All eyes were on the Jay Powell's Fed this week, specifically the chairman's remarks following the much-expected 75-basis point rate hike. Word was that the central bank will “continue to do what needs to be done to get the job done." Actually, they were JP's exact words. “The job” to which Mr. Powell refers is, of course, to get inflation back to the 2% range. What does that mean for stocks and the dollar in the near term? What does it spell for America's already-toppy housing market, the pillar of middle-class wealth? And how will gold respond? The Midas Metal popped more than $50 on Friday. (Silver was up even more, doubling gold's advance in percentage terms.) For answers and insights, I spoke with Bonner Private Research's macro man, up in Laramie, Wyoming, Mr. Dan Denning. Over 45 mins or so, we covered all of the above, plus BPRs Trade of the Decade, the coming Winter Catastrophe, 2022 Redux, and why you should panic now (in an orderly fashion, of course) and beat the rush. Please enjoy our conversation and, as always, like, comment and share our work with friends and family far and wide. Cheers,Joel BowmanThank you for reading Bonner Private Research. This post is public so feel free to share it.TRANSCRIPT: Joel Bowman:All right, well welcome back to another Fatal Conceits podcast, dear listener, a show about money markets, mobs and manias. If you have not already done so, please head over to our Substack page. You can find us at bonnerprivateresearch.substack.com with hundreds of daily articles now on everything from high finance to lowly politics and a ton of in-depth research reports, many of which were authored by none other than my guest today, Bonner Private Research's, macro man up in Laramie, Wyoming, Dan Denning. Dan, welcome to the show. How do you do, mate?Dan Denning:I'm doing all right. It's dark and cold and gloomy here in Laramie as winter approaches, but that's kind of how it feels like in markets right now, so I suppose that's appropriate.Joel Bowman:Yeah, exactly. We're talking off camera just now and you were firing off emails this morning at around 5:00 AM. I'm imagining it was still well below freezing at that point up there?Dan Denning:Yeah, it was supposed to snow this week, but it hasn't, which is good and it's been nice and sunny, but it has been something we've been paying attention to both behind the scenes and when we're writing to the readers, because as it gets colder in the US, we're dealing with this 32% drawdown in the strategic petroleum reserve and then these reports of impending or possible diesel shortages so you're kind of trying to separate what's fact from fake, I suppose, and go beyond what's in the news reports to see if it's actually impacting truckers and travel prices and things like that. So we, Bill, last year, penned a winter catastrophe and we had bad winter last year, but I think it could be worse this year and as you know, because you're organizing it, we're going to address that in early December.Joel Bowman:Yeah, that's December 13 for our readers, listeners and viewers, I guess now that we're doing this on YouTube, but I'll pop a link down below where you can get some more information about registering for that event. As you mentioned, Dan, we're doing a bit of behind the scenes work just to get that all organized. It's going to be the 2022 Winter Catastrophe Redux, which will be more well attended than our first one, given that it was the inaugural event and we had just a few hundred readers on that very first call with Byron King and Rick Rule, but yeah, as you mentioned, the second one looks to be shaping up to be quite the event. Of course, it's the kind of thing that you don't want to be right about, a coming winter catastrophe, but that looks like what's on the plate anyway.So let's start at the beginning, Dan, because we're talking on Thursday the 3rd of November, and of course the big news this week was yesterday's Federal Reserve meeting where Powell & Co. hiked rates by the expected 75 basis points, but I guess it was what followed that hike that kind of got markets a little spooked. We saw a 500 or so point drop in the Dow after Mr. Powell's remarks yesterday. I'm just going to read a quick quote here from the Fed Chairman in which he says "The question of when to moderate the pace of increases is much less important than the question of how high and how long to keep monetary policy restrictive." He said, adding that "It was very premature to discuss when the Fed might pause its increases." Was this more or less in line with what you and Tom had expected and what does it mean for both stocks and the dollar in the near term in your view?Dan Denning:Yeah, I think the answer to the first question is definitely. The market, whether you use the future's market for interest rate expectations or you listen to the people that are quoted in mainstream media as analysts for the major banks or Wall Street firms, at the beginning of the year, they thought that the highest the Fed would go this year was 3.75% and we've been saying since the beginning of the year that it has to be much higher than that in order to bring inflation down from 8% to even 4%. A chart that we've shown repeatedly reveals that rate real interest rates, so interest rates adjusted for inflation, are still negative... and they're negative by a long way. So that would change if inflation halved from here, so the Fed wouldn't have to raise as high, but we've said that people consistently underestimate how high interest rates will have to go before inflation is under control and they probably underestimate the Fed's willingness to raise them that high.So what you get is this mistake that we saw in the summer, and again, this mistake we've seen in the fall, where the market thinks the Fed is done raising interest rates, or will pivot to either raising them less fast or even cutting them, as some people had hoped, and so they bid up the price of especially growth stocks, risk assets as they say, and everybody gets super excited because they think the end is near. But as Powell said yesterday, it doesn't appear the end is anywhere close to being near. He said inflation hasn't come down since last year; that there will be no pause and that the so-called terminal rate or neutral rate, is at least 5%. So all that could change if the Fed issues a press release and has another press conference, but in terms of talking to the markets about where interest rates are headed, the message couldn't have been any clearer yesterday and I just don't know why people aren't listening to the Fed, so I think that's one reason Powell spoke so forcefully.Joel Bowman:It's a strange situation, isn't it, when we get strong inflation prints, for example, or when things in the market seem to be breaking, and investors take that as of reason to bid up stocks because they think then, okay, the Fed is now going to have to ease off because things are starting to break. Powell said yesterday that he is going to "continue to do what needs to be done to get the job done" and by getting the job done, he explicitly mentioned bringing the rate of inflation back to around the 2% range. You've written about this before and so have both of Bill and Tom, but what does that imply for a real rate? And in other words, how far does the Fed have to keep raising before it can get, as they say, ahead of the curve, do you think?Dan Denning:Well, if you look back to the '70s in a similar situation, where I think Powell is studying his playbook, you saw that the Fed prematurely cut interest rates when inflation began to come down and then inflation came roaring back, so from that point of view, they probably want to see whatever inflation target they have, whether it's 2% or 4%, which I think... I think it's more likely they'll raise their inflation target because it'll be harder to get it to 2%, but they'll want to see it there for a while and it appears now that the only way to do that, at least according to the Fed, is to sort of crush the economy into a recession, to destroy demand at the retail level because people don't have money, which means higher unemployment, none of which are great, but as long as the Fed sees that there's no disorderly action in the stock market...and more importantly, I think, in the credit markets, where higher interest rates don't precipitate a bankruptcy at the corporate level, like a high profile bank or a brokerage or a really highly leveraged financial player who could then spread contagion into the rest of the market. If that doesn't happen, the Fed is happy to either to continue to raise rates or, a possibility that people haven't considered, is just leave them at a high rate for much longer than expected, until they see inflation figures come down.And a lot of people say, well, if there's a ceasefire in Ukraine, then the oil price will come down and energy is a huge component of the CPI... or if X happens, then inflation will come down... but I think what Powell has made clear, and the market isn't listening, is that they're going to wait to see that number come down and stay down before they decide to sound the all clear signal. And stocks just weren't priced for that. They were priced as if interest rates were at or near their peak. And that's just clearly not the case yet.Joel Bowman:What does this spell for the greenback, which is already at multi-decade highs in some cases against foreign currencies? What can we expect going forward there?Dan Denning:Well, it should get stronger, shouldn't it? I mean, the wider the interest rate differential between the US bond market and the Japanese bond market or the European bond market or other markets like Australia, then you'd expect the dollar to remain strong. I guess what that means is this weird feedback loop that, and it's what we saw this summer, is that the higher interest rates create big problems for leveraged borrowers, especially those in emerging markets, that have borrowed in dollars because now it's getting more expensive for them to pay back their dollar denominated debt. So it creates a demand for dollars to pay that debt back before it gets more expensive and also it creates a demand for other so-called safe dollar denominated assets. So if you look at, for example, the one year and two year US treasuries, a year ago, the yield on the one year US Treasury was barely above 1%. Now it's just below 5%.So for foreign investors or large institutions and central banks looking to park cash in a strong currency that actually now has a respectable interest rate, that creates a demand for dollar denominated assets, which further distresses the price action in emerging markets and currencies that are under pressure so, not great, but I think what Powell has said as an echo of what US Treasury secretary John Connally said in the '70s, that the dollar is America's currency, but everybody else's problem.This is a really important point Tom has made, which I think not a lot of people, I haven't really seen it made elsewhere, and it's underappreciated, is that in the context of everything that's happening in the world right now, geopolitically, if you view Russia and Saudi Arabia and OPEC using oil and energy as a weapon against the United States, and perhaps China too, using COVID lockdowns as a way to keep prices high for Chinese exports, the US counterpart to that is the dollar, the stronger the dollar is the more it mutes the effects of inflation on energy and imported products in the United States.So Tom believes that the Fed is using the dollar as a financial weapon to counteract energy as a commodity weapon and in that sense, if Powell is acting both to bring inflation down, but to use the dollar as an economic weapon, then it could stay higher for longer than people expect. For US investors, the other implication, which we can talk about if you want, is what that means for gold because there's been some interesting things that happened this week in the gold market that we need to pay attention to.Joel Bowman:Well, let's talk about that then, because a lot of people, particularly our readers, most of whom I would say are in the US, they've been adhering to what was Richard Russell's old mantra was, and one that both you and Tom have echoed of late, which is "cash now gold later" and they've been looking at the price action in gold, which has been more or less range bound in dollar terms but as we've been talking about, the dollar is of course at historic highs right now, but viewed in terms of other currencies, Aussie dollar, pound, euro, et cetera, we see slightly different story. Where do you see us as on the "now-to-later" curve with regards to cash now gold later?Dan Denning:Yeah, that's a great question and we take it up. In fact, we decided to change the format a little bit for the subscribers, the paid subscribers. We had intended, at the beginning of the year, to review them quarterly because that's about the appropriate amount of time to review the performance and then decide if a change needs to be made, but because we've got so many new readers who are not familiar with that strategy, or only read about it in February, we've decided to revisit that every month in the monthly strategy report. So for paying subscribers, they can take some comfort that this discussion is now a more regular discussion because it needs to be a more regular discussion.But with respect to what we said at the beginning of the year, we said, no bonds, lots of cash, lots of gold, less real estate and that turned out to be pretty spot on, which is great, but the question is, what now? So I think what you're seeing with the higher government bond interest rates one year, two year, 10 year, really most of the US yield curve is now above 4%. That makes annuities and fixed income products slightly more interesting to investors than they were a year ago, and certainly more interesting relative to stocks because if stocks look like they could go down another 20% or 30%, then putting short term cash in a money market fund or a CD or a Treasury I bond that has a respectable yield is now a lot more attractive to people. We think gold is doing exactly what it's supposed to do, which is preserve your purchasing power, so if you look on a year-to-date basis, gold's down 11%, which is about the same as the Dow, but that's after the Dow rallied almost 15% from its lows in October.So now that this Fed pivot is not going to materialize, I would expect probably the Dow, the S&P 500 and certainly the Nasdaq to close or to go lower, whereas gold is pretty much staying where it's at. So on a relative basis, we think gold is doing what it should do for you in your asset allocation strategy, which is do better than everything else. And of course, the Nasdaq's down actually 32% and the S&P's down about 20% so I wouldn't be surprised to see gold outperform at least this month and probably through the end of the year. And you see that two interesting things have happened in the price action with gold. One, retail investors have kind of gotten frustrated because gold hasn't gone up and inflation's 8% and they're like, what good is gold if inflation's 8% and I'm not making more money?And our answer is you're not trying to make money in dollar terms with gold, you're trying not to lose money, and we'd like to be doing better, but it's better alternative than sticking money in the bond market or increasing our allocation to stocks. The interesting thing that happened in the third quarter is that according to the World Gold Council, which keeps track of these things, central banks added more gold than they ever have before in any quarter in the history of data from that organization. They had a 399 tons of gold and don't know exactly who the buyers were, but we think it's probably the usual suspects so China, which doesn't always report, Russia, which has an obvious interest in diversifying its currency service, and then some of the oil and gas exporters who've been making money hand over fist have been converting it to gold.So on the one hand, retail investors kind of sitting on their hands lamenting the price action, and on the other hand, this huge quarterly surge in central bank gold buying and in fact, the year-to-date buying by central banks through the first three quarters is already greater than any year in the last 20 years so you can see that this financial war about hard assets versus the dollar, you can see what's going on in the background. So I like that price, I like that piece of data because it confirms to me that at the bottom of this leveraged pyramid of financial assets sits gold, and in any private portfolio, you ought to have some portion of your wealth safely stored in that and for the long term, just ignore the week-to-week, day-to-day price fluctuations because they really shouldn't matter that much.Joel Bowman:Yeah, interesting. It's almost like what our good friend Chris Mayer talks about, having skin in the game and inside knowledge into the operations of a particular company. One wonders, do central banks know something that the rest of the world or the rest of the investors don't know when they're, as you say, hoarding record amounts of gold at this moment? But with respect to stocks, which you mentioned just then, and of course they are still down considerably for the year, but not as much as they were just a month ago, October was, if I'm not mistaken, I think the best month ever for stocks, or certainly for a very, very long time, you'll have the exact stat there.When you and Tom and Bill talk about a significant drawdown in stock markets, you toss around some pretty big numbers. We saw, obviously last week, a lot of earnings reports between Amazon, Meta and Microsoft, something like 350 billion worth of market cap was wiped out after some pretty shoddy reports and grim forecast for the rest of the year. I think only Apple is the last man standing there in the Dow. For how long can we expect this to hold up and what's our outlook for Q4 for stocks?Dan Denning:Yeah, that's a great question. I mean, Bill Bonner, our founder and patron saint, during his sabbatical he made a great point which he's been making for a long time, that the last 20 years and really since 1982, if you want to go all the way back that far, since 1982, the stock market's been underpinned by three pro-growth, structural features, cheap energy, low interest rates, and the lower and cheaper cost of global labor, which is really China since it came into the world economy in 2000 when it entered formally into the World Trade Organization. All have been really favorable for high GDP growth but what hasn't happened is you haven't seen high productivity growth. What you have seen happen is high growth in the multiples, people are willing to pay for growth stocks and at the forefront of growth stocks were the technology stocks from 2000 to now.And the earnings numbers weren't terrible in terms of the amount of revenue generated by these companies, it's an impressive amount, but what's notable in all other cases is the rate of growth has slowed markedly, particularly in advertising for Facebook or Meta and for Google, but also in the cloud. Cloud computing, which for Amazon is particularly important because the cloud is the only business segment that runs at an operating profit. It pays for the rest of the retail business and if the cloud business is growing less quickly, then it supports the thesis that the leading sector of the market for the last 10 years, the tech sector, will not be the leading sector of the market for the next 10 years because the growth phase underpinned by those three things is over. That's not a cyclical change in the market. That's what we call a secular change, a long term change.And that's why our forecasts for the indexes are not a 20 to 25% bear market and then back to business as usual, it's a 40 to 50% decline in the indexes with a 60 to 80% decline in the most leveraged and aggressive growth investments, which we've already kind of seen with Arrk Innovation Fund and Spotify and Netflix and Snap and some of these other tech companies. So our whole premise since we started last year, as you know, is to prevent a big draw down and loss in your retirement savings during this transition from the high growth phase to whatever comes next.So everyone's like, great, great, yep, it's over now though, right? So 25% down we can get back to business. And what we've said is this is not business as usual, this is a new era, as they used to say in the early 2000s, but it's an era where all the fundamental pillars that uphold the stock markets prices are changing. So it's not all bad news because for example, we think energy is going to be the big winner in the next 10 years, which is why we made it the trade of the decade and if you look at some of the best performing stocks this year in the Dow, one of them is Chevron. Exxon would be, but it's not in the Dow anymore because-Joel Bowman:It got booted.Dan Denning:... right, for Salesforce. So there are these little pillars of light, a thousand points of light or a dozen points of light as George Bush might say. So we're still looking, but I think Tom's strategy is the correct one that you have to be really opportunistic and tactical and to echo Chris Mayer's point, you take your chances when you see a good business opportunity or a good trading opportunity, but from a strategic point of view, when it's a bear market, you don't want to own too many stocks and so we continue to be underweight stocks compared to what you would get in a more mainstream, institutional portfolio and that won't change anytime soon.Joel Bowman:So let's then I guess move on from the last 10 years of growth, growth, growth and which, as you said, seems to be coming to a fairly cataclysmic end and something that you mentioned just there, our trade of the decade, which is essentially long conventional oil and gas, we have a specific proxy trade for that, but the convergence of those three enormous macro trends that Bill has underlined for us, the end of cheap and abundant energy, the end of cheap and abundant credit, and the end of cheap and abundant labor, all for various reasons, including the weaponization of all three by various geopolitical players around the world right now, really sets a kind of perfect storm to use an overused metaphor for energy going forward.When I spoke to our mutual friend, Doug Casey on this podcast just a few weeks ago, maybe a month or so ago, he brought up the oft overlooked statistic that if you go back to the seventies, which a lot of people are talking about now for very obvious reasons, high inflation, et cetera, et cetera, the oil and gas producers and explorers made up something like 30% of the market cap of the S&P 500, that's down to about 3% last year, it may have inched up with some strong performance in that sector and of obvious selloffs in others this year so maybe up around 5%, but it's a long way from its historic high and it's a long way from the kind of CapEx and R&D investments that you would expect to power a 21st century economy, which is largely or if not entirely built on the fossil fuel revolution.So do you maybe just want to catch us up on where we are on the trade of the decade thus far, and any catalysts that you see in the near to medium term that might be getting us to where we think we're going to be headed?Dan Denning:Yeah, great question. We're still really early in a decade which is an arbitrary time so it's not like we think that it'll be exactly 10 years, but Bill has made a couple of these trades since the millennium, since 2000. And some of it's based on just sector performance. So it's a little bit like The Dogs of the Dow strategy that you buy the worst performing Dow stocks at the end of the year, they're going to be the best performing stocks and not everybody, the data backs that up mostly, although some people say that in a bull market you just keep buying the best performing stocks, that you buy momentum, you don't try to buy value or a beaten down value because then you get caught into value trap. But what we'd looked at when we went into the trade was that energy was historically small as a percentage of the S&P market cap.It had its worst 10 years of any of the 11 sectors in the S&P and that because of regulation and the energy transition and the anti-fossil fuel narrative from both Wall Street and Washington, that the companies had decided, okay, fine, we won't invest in oil and gas if you're coming after our business, it doesn't make sense to. So all of those had set up for a big, big turnaround in the performance of the oil and gas sector. That's only just started to happen. I mean, on a financial basis it's definitely started to happen because of high oil and gas prices but in terms of investment flows, institutional money going into oil and gas, that's still complicated by the ESG policies of a lot of the pension funds and other funds like BlackRock and Vanguard about whether they're going to commit to investing in companies that might bring oil and gas online.So we don't really care about any of that because we think at the end of the day, 82% of the world's energy still comes from fossil fuels. It's unchanged in the last 30 years despite the growth of renewables. It's exactly the same really so we think that it'll be that way for a while and that even if there is an energy transition toward more electric vehicles or toward maybe more natural gas fired plants rather than coal, that it's going to take a lot of fossil fuels to fuel that transition, to manufacture everything you need to have an energy economy that's based on electricity. And we see stories about, well, there's going to be an OPEC of lithium and electric car battery technologies getting better and better. Great, no problem. Maybe that's true. But in the meantime, just look at the free cash flows being generated by major oil and gas producers.They're great. And the big risk to us right now is that the rate hikes by the Fed trigger not just the mild recession, but a massive recession which destroys demand for energy and brings prices down, which would lead to a correction in the stock prices of those producers, but over 10 years, not something we're too worried about given the other trends so if you're entering the trade and we write about this on a weekly basis, you just look for weakness in the particular investment that we recommended. And by weakness, I mean it trades below a moving average or it's relative strength indicator, which is a technical indicator under 30.That's not happening right now, but it is something we update readers on who are new to the research, who like the idea, who believe in the thesis and who want to enter the trade so we may have another opportunity to enter the trade before the end of the year, but again, over the 10 years, we think the big factors that are pushing oil and gas prices higher should be very favorable to the free cash flows of those producers and it should trounce any of that other crap in the EV space. That's what we think.Joel Bowman:I'll have to get that last sentence as a pullout quote for the transcript here, Dan. This I guess brings us full circle to the winter catastrophe that we opened the conversation with at the top, and something that you and I have been looking at in particular lately. You mentioned the diesel or distillate shortage in the United States. I had a look at a couple of figures the other day writing under a guest column by our good friend Byron King and I think the situation is, I mean, as you said, it's difficult to sort the wheat from the chaff with regards to what's a little overblown and what is cause for concern but a report out by the Energy Information Agency has the US reserves at something like a 50 year low. Actually, it was even further than that, it went back to I think 1951 when the population of the United States was a mere 150 million beating hearts.It's obviously more than double that now. Officially, it's something like 332 million and obviously probably a lot higher than that. Added to that, not just a more than doubling of the population, but we obviously have a more modernized economy. We have ACs in every other room, we have, you know, if you plug in your Tesla in, that doesn't go to a windmill or a solar farm, that's going to an electrical grid that demands real fuel and I think one other point, just to add very quickly, is the other parts of the supply chains that tend to break down when you have an industrial fuel like diesel that is in short supply.So the number of commercial vehicles, this is trucks that freight your goods, your medical supplies, that stock your shelves at your local grocery store. 76% of these commercial vehicles operate on diesel fuel and they deliver 70% of the freight tonnage around the country from sea to shining sea. So is this something that people should be particularly concerned about? I mean is it going to be an acute problem in the near future, or is there's something that's just going to see a bit of a price spike and hopefully we'll have some mild weather and we'll see you on the other side?Dan Denning:Yeah, it's an important question because it's not simply a financial question, it's what level of preparation is it reasonable for you to take given the risk that there's an interruption to our supply of diesel fuel, which translates into things not being on the shelves in the store, whether that's medicine or food, or whether it's fuel at the pump for your own vehicles. So we don't want to be blase about what the risk is, or we don't want to exaggerate it either. The truth is, the refining capacity of US refineries has been pretty much maxed out all year so even if we were releasing more oil or could release more oil from the strategic petroleum reserve, we couldn't turn it all into distillate fuels and we couldn't get it all into the pumps and that's assuming we're not exporting some of it, which we are, whether it's crude oil or whether it's distillate fuels.So the refining bottleneck is a major issue and part of the problem when you run your refineries at 90% of capacity or 95% of capacity for months on end, as things start to break down and when they do, then you have even less product coming online so that's a real thing to keep your eye on and it's already started to happen. But as to the level of preparation you need to take, I'd be prudent. I think if you, like I grew up in a big family and we always had extra food even though people were eating it all the time, it was hard to keep extra food ready to go but we don't associate life in... Most Americans, or most people watching this probably don't associate life in the 21st century with the idea of having to prepare for much higher food prices or an actual shortage of food.I mean, you can call DoorDash or Uber right now, and they will deliver cheap calories to your door running on fuel so we don't have bread rights yet but I think one thing we've learned in the last two years from COVID, and really from the response to COVID by shutting down the global supply chain, is how short and fragile the just in time supply chain is, and how long it takes to recover once government has mangled it up. So you'd be foolish to look at what's happened in the last two years and not take some sensible level of preparation for both your food and fuel supplies. And I think that's as an important investment decision as you can make this winter as whether you buy the Dow or whether Apple is going to hold up. By the way, you asked about that, and I didn't mention it, but I will finish with that.Apple has held up really well. It hasn't made its lows from June, I think, which was around 139 and I think it's a great litmus test for how long this market can hold up because anybody who manages money has to own Apple for whatever reason, because it's a great company, because it's performed so well and to me, it's like a fortress stock that everyone flees behind the gates and they lower the drawbridge or they raise the drawbridge and everyone hides in Apple because of its liquidity, because it's widely owned, because it's a quality stock. So when Apple gives up the ghost and makes a new low, then we'll start talking about whether the market has made a low. But until that happens, I think you shouldn't try to time the bottom of the market. You should probably try to fill up the bottom of your freezer with some frozen beef and chicken and things that you can cook later and then step away.The trends we're talking about, we think will take years. And so from week-to-week and month-to-month, they don't require a lot of buying and selling. You just have to get the strategy right and I think right now we feel pretty comfortable with where it's at, but things can change quickly. As we saw with the Fed's announcement. If the Fed came out and pivoted because of data, then you could see another, you know, you could see a lot of volatility in stock prices but we don't think that changes the overall primary trend in markets.Joel Bowman:All right, thanks, Dan. You guys are doing a great job there. Just once again, please head over to bonnerprivateresearch.substack.com. Readers, listeners, and viewers will be able to get all of Dan, Tom and Bill's writings on all of the above subjects and plenty more and I guess the takeaway here is panic, but in an orderly fashion and see if you can't beat the rush.Dan, thanks for joining us from your fortress of solitude up there in Laramie. We'll catch you again soon.Dan Denning:Okay. Thanks, Joel.Thank you for reading Bonner Private Research. This post is public so feel free to share it with investors, traders and speculators alike.... This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit bonnerprivateresearch.substack.com/subscribe

Death DOES Concern Us: With Michael Fontaine, Massimo Pigliucci, Donald Robertson and Anya Leonard

Classical Wisdom Speaks

Play Episode Listen Later Nov 2, 2022 84:40 Transcription Available

How to Grieve: From Cicero and Stoicism to Modern practices, How Can Philosophy HELP US Handle Loss? Panel DiscussionIn 45 BCE, the Roman statesman Cicero fell to pieces when his beloved daughter, Tullia, died from complications of childbirth. But from the depths of despair, Cicero fought his way back. In an effort to cope with his loss, he wrote a consolation speech―not for others, as had always been done, but for himself. And it worked.Cicero's Consolation was something new in literature, equal parts philosophy and motivational speech. Drawing on the full range of Greek philosophy and Roman history, Cicero convinced himself that death and loss are part of life, and that if others have survived them, we can, too; resilience, endurance, and fortitude are the way forward.This panel discusses the revelations of Cicero's consolation and how they relate to both the ancient philosophy of Stoicism and modern behavioral cognitive therapy... all with the aim of finding a better understanding on how to grieve.Watch eminent professors and authors, Michael Fontaine, Massimo Pigliucci, and Donald Robertson for this thought-provoking, important conversation. About the Speakers:Michael Fontaine is Professor in the Department of Classics at Cornell University, New York and author of many books and articles, including: How to tell a Joke, The Pig War, How to Drink: A classical Guide to Imbibing, and most recently, How to Grieve: An Ancient Guide to the Lost Art of Consolation.Massimo Pigliucci is the K.D. Irani Professor of Philosophy at the City College of New York and author of many books, including How to Be a Stoic: Using Ancient Philosophy to Live a Modern Life... and most recently, How to Be Good: What Socrates Can Teach Us About the Art of Living Well. Donald Robertson is a writer, cognitive-behavioral psychotherapist and trainer, specializing in teaching evidence-based psychological skills and is the president of Plato's Academy Center. Donald is the author of several books and many articles on philosophy, psychotherapy, and psychological skills training, including How to Think Like a Roman Emperor: The Stoic Philosophy of Marcus Aurelius, and his most recent project, Verissimus: The Stoic Philosophy of Marcus Aurelius, a graphic novel has just been released.Anya Leonard is the Founder and Director of Classical Wisdom, a site dedicated to bringing ancient wisdom to modern minds. Co-founded in 2013 with Bill Bonner, in conjunction with Les Belles Lettres, the French publishing house. She has recently published a children's book, Sappho: The Lost Poetess, dedicated to the life, works and remarkable recent discovery of a poem written by the 7th century Poetess, Sappho.You can learn more about Classical Wisdom and our mission to bring ancient wisdom to modern minds here: https://classicalwisdom.substack.com/

new york director death founders live art guide french professor modern greek philosophy drawing concerns joke classics cornell university cornell plato stoicism lost art bce marcus aurelius living well consolation cognitive behavioral therapy cicero city colleges modern life cuny sappho massimo pigliucci donald robertson poetess pig war modern stoicism imbibing tullia bill bonner irani professor verissimus the stoic philosophy michael fontaine

Bill Bonner on Ben Bernanke's Bubbles

Play Episode Listen Later Oct 13, 2022 31:07

And now for some more Fatal Conceits…“I think those people at the Nobel Committee must have a sense of humor,” quipped Bill Bonner, in response to the questionable judgement that resulted in Ben Shalom Bernanke being awarded the Nobel Prize for economics earlier this week. “They're either very dumb or very cynical,” Bill continued. “And I'm not sure which it is because, if you remember that time, Ben Bernanke was wrong about everything. And no major issue came to him that he was not wrong about.”Alas, 14 years after Mr. Bernanke's preposterous “we may not have an economy on Monday morning” speech, in which he presented one of the most galling false dichotomies of the modern era (pass this unprecedented – and lately unread – stimulus bill… or the sky will fall), and we are now reaping the whirlwind of his profligacy.Over the course of a half hour or so, Bill shared with us his thoughts on the end of the Age of Abundance, the reason our current financial predicament differs greatly from what Volcker faced in the ‘70s (Hint: It begins with D and rhymes with “regret”) and why those born after 1980 cannot know, first hand, what a return to the “Old Normal” will entail…All that and plenty more on Ep #74 of the Fatal Conceits podcast. Please enjoy and, if you have a moment, share with a friend…Also, if you're interested in purchasing some of Bill's wine, which we talk about towards the end of the episode, their Tacana 2020 vintage is now available to select buyers. The first half of the allotment (reserved for the Bonner Wine Partnership's private Tacana buyer's list) sold out in a day. The rest probably won't be around for long, so if you want to grab a few bottles… for the cellar or the bunker… don't dilly-dally. More information here: And for those of you who are less audio-inclined, you'll also find a full transcript of today's interview, below. Until next time…Cheers,Joel BowmanThank you for reading Bonner Private Research. This post is public so feel free to share it.TRANSCRIPT:Joel Bowman:Welcome back to another episode of the Fatal Conceits Podcast dear listener. It's the show, as you know, about money markets, mobs and manias. If you have not already done so, please head on over to our Substack page. You can find us at bonnerprivateresearch.substack.com. On that page, you'll be able to find hundreds now of essays authored by today's guest, Bill Bonner, in the daily section. We've got plenty of research reports from Dan Denning and Tom Dyson. And of course, many more conversations like this under the Fatal Conceits Podcast tab at the top of the page. So without further ado, I think you can probably see in your screen there, framed by gilted cornices, remnants of a bygone era of abundance, Mr. Bill Bonner, welcome to the show. How do you do sir?Bill Bonner:Thank you Joel. It's a pleasure to be with you.Joel Bowman:You're up there in Baltimore at the moment, that's correct?Bill Bonner:In Baltimore. And you're right, it is the bygone remnants of an ancient civilization. Baltimore was by the way, the richest city in America in say the early 19th century because it had such a great harbor. And it was also connected, through the Cumberland Gap, it was connected to the whole Ohio Valley and all that area over there on the other side of the Appalachian Mountains. So it was a big important port for people coming from Europe and a big important port for people making mostly food things that they exported it to Europe. And people got rich. And movies from say the 1920s or so, maybe a little bit later, they will frequently have a rich person as somebody from Baltimore. And that all seems so unlikely now. It's hard to even imagine.Joel Bowman:To be rich like a Baltimorean is like to be rich like an Argentine.Bill Bonner:Same thing.Joel Bowman:Exactly. And I'm racking my brain here, but how on earth were they able to get rich without ESG governance and diversity boards and equity programs…?Bill Bonner:That was before the foundation of the Federal Reserve. I mean, how did they know what interest rates to charge? They were building in the early 19th century here in Baltimore. They had huge factories. They made things, made things that they exported out of profit. How did they know how to do that without the feds showing them what interest rates to charge and so on, without the Fed printing money to stimulate them? Nobody stimulated them at all. They were stimulated by the desire to make money I guess. And they did quite well with it in that. But now we have, thank God, we have the Fed to stimulate the economy when it's needed to support the stock market when it seems to be falling and to provide us with the interest rates that we need. How they know what interest rates we need has never been clarified. But that's one of mysteries of the Fed.Joel Bowman:Yes, we certainly couldn't rely on the market for any, shall we say, “self stimulation”?Bill Bonner:NoJoel Bowman:Top down only. Speaking of which, that dovetails into news this week of, I don't know whether you would call him our colleague, but another economic luminary, Mr. Ben Bernanke, who was awarded the Nobel Prize in economics earlier this week. This of course is the man who had the “courage to act," at least according to himself, and who saved us from “not having an economy on Monday” as he warned us with such certainty...Bill Bonner:October the fifth, 2008. He went before Congress and he said, Look, if you guys don't pass this act, which I think was what was known as the TALF Act, it was a lot of spending to try to stimulate the economy, that if you don't pass this, we may not have an economy on Monday. He was talking on Friday. And thank God he rose to the challenge and showed that courage to act because otherwise we still wouldn't have an economy.Joel Bowman:Incredible. It does seem so "through the looking glass," the up is down back is forwards, when we see that not only did the man who failed to foresee the bubbles that had been created during the Greenspan era and that had led to these enormous imbalances and malinvestments, in particular the housing market. I remember yourself writing about huge irregularities in the mortgage back securities markets and Eric Fry writing about that. Our colleague Dan Denning was on the case of course. So it seemed like everybody except Federal Reserve economists were on the case. What does it say that 14 years later, having stimulated, it seems now, an even a larger bubble, that we not only look back and have not learned our lesson, we're gifting the guy the highest prize there is in the dismal science?Bill Bonner:Well, I think those people at the Nobel Committee must have a sense of humor. That's all I can think of.Joel Bowman:That's big sense of humor.Bill Bonner:They're either very dumb or very cynical. And I'm not sure which it is because Ben Bernanke, if you remember that time, he was wrong about everything. And no major issue came to him that he was not wrong about it. He was the one who said the subprime problem before the crisis of 2008, the subprime problem crisis was "contained." Of course it wasn't contained at all. He had all these things that were idiotic, like zero rates. He came up with that QE, he didn't invent it, it was the Japanese who developed it. But a lot of these things which now we see clearly are the cause, the proximate cause, not the only cause, but the proximate cause of our inflation and our economy, which is now melting down in order to try to contain inflation, those stemmed from policies put in place by Ben Bernanke. And not the only one because Janet Yellen kept doing the same thing and Powell came along and followed right in their footsteps.But for the Nobel Committee to award him a Nobel Prize is really quite remarkable. And it calls into question our whole elite process. Why do they think that he should get a prize for that? And then to have the hubris, the conceit, the unmitigated gall to write a book called The Courage to Act. I thought it was a joke when I first heard about it. I said, no sensible person would do that. Even if he believed that he had the courage to act, even if he believed that he had saved the economy, you still wouldn't put it out there. That makes you sound like an utter fool. What it does is it invites the wrath of the gods. There's someone way up there they must be after him. Now I don't know what they're going to do, but they're going to be after him.Joel Bowman:Pride before the fall. And for a man with a legacy unblemished by, as you said, a single success in the real world. So it does beg a lot of questions. But let's fast forward then 14 years after that fateful October Friday to where we are presently. And as you look across the landscape, I know you spent a lot of time down here in Argentina and then split between both sides of the Atlantic. When you look forward to what has happened in Argentina, they've been at the forefront of every boneheaded economic and financial policy known to man, real pioneers in the dismal art. When you look from here to where you are now in the United States, you look over to what's happening with the Bank of England or in the Japanese bond market. It does seem that there are enough signs that sort of point to this time maybe actually being different and this time maybe being the end of what you and Dan and our colleague Tom Dyson have called the Greatest Financial Experiment in History?Bill Bonner:Well, I think that's exactly right and I think people are having a very hard time coming to grips with it. Even people in the financial industry, they're so used to what they think as 'normal.' I was just speaking to some of my colleagues here in Baltimore about it and trying to explain it from my standpoint. And I realized that everybody I was talking to was born after 1980. I mean they were literally not born in any time other than the boom that we have known for the last 40 years. In 1980, of course then Paul Volker got control of inflation. Interest rates came down ever since. And there were a lot of things going on. Most important was the entry of like 500 million Chinese people into the market. And those people produced things at a low price.But for these people, I'm talking about people who were born after 1980, it's very hard to get to understand that the whole circumstance of your life, the whole circumstance of your life has been phony. Faith been synced up by the Federal Reserve to give the impression that everything is always up. The stocks and financial advisors will tell you this to these young financial advisors say, Well yeah, stocks go down, but they always go back up. And so what you have to do is buy the dip. Now they're all out there looking for the bottom. The bottom is the point in which they don't go down anymore. Now they're going to go up, so you got to buy. And they have these charts and graphs that show that you buy it every dip, it always goes up.But it's not that simple at all. If you had bought stocks in 1966, which was a good year for a stock market, you would've held them for the next 16 years until 1982 really. And the prices would've been about the same. But because inflation was happening, you would've lost 75% of your money. That was a long time to lose 75% of your money. And to talk to somebody and say, Well, you just hold on, they'll go back up. Well maybe they'll go back up, but it could be after you're dead. You're not going to have an infinite amount of time here.And so there are times in history, and I think this is the key point, that if you look at anybody who is telling you they have a good track record, and of course that's everybody. And in the financial industry, they boast about what they've done and so on. All of that happened during a very special time which no longer exists. Now that's a hard thing to under for anybody to understand. And it's not that I'm saying, by the way, I'm not saying this is a new era. I'm saying this is the old era. What we've been through in mostly the last 10 years. But you could stretch it and explain that whole 40 year period was a grotesque and unusual series of things that came together, mostly including federal money printing by the Fed and QE and all the other things that they were doing. And that era is over and it ended in 2021. It ended when the bond market turned around, when actually it was 2020, it's the end of 2020. The bond market turned. When that happened, that was the end.And since then nothing has worked very well because the fundamental aspect of our financial lives is altered. And it no longer is a market with falling interest rates. It's no longer a market that the Fed can support by driving interest rates lower. It's a different world in which now the Fed is battling inflation. And once it decides not to battle inflation anymore, which I think it will, then you're going to see worse inflation. So that won't be like the period from 1980 to 2020. Not at all. It's going to be a whole different world with a different battle going on that'll be very hard to understand. And people say, Well, your stocks are going to go up. Well, they probably are going to go up, but they're going to go up like they did in Zimbabwe. They're going to go up like they did in Venezuela and like they did in Argentina. All of those markets were once the world's top performers. But when you adjust for the inflation, they were going down, it gets more complicated.And by the way, you have the advantage of being in the most complicated place in the world financially. And the Argentines learned to do these calculations. They have the blue dollar and they have the black dollar and they have the white dollar and they have the soy dollar. I'm not sure what that is. But now they have a new dollar. Did you know this as of yesterday, the Qatar dollar?Joel Bowman:Oh, I haven't heard about the Qatar dollar...Bill Bonner:The World Cup is taking place in Qatar and for Argentines who want to go, they have a special exchange rate.Joel Bowman:That's very interesting because I know I was aware, of course having lived here over the last dozen or so years, that we do have a dollar for every color of the rainbow and every gender you can imagine and pesos down here, they self-identify as all kinds of things. But I was made sort of brutally aware when I was on vacation just a couple of weeks ago to Brazil, I had forgotten that there is a clawback tax. This is part of the capital controls that happen here when you use an Argentine credit card abroad. I made the mistake of just handing it over for a hotel payment and then getting home to see my receipt and realizing that I'd had it sort of an extra 40 or 50% clawed back out of my account by the state. But this is the kind of shenanigans that happens when inflation gets out of hand.Bill Bonner:People, they find ways to try to obscure it, try to disguise it, try to eliminate it, but in doing everything but the one thing that really will work, right? They want to control prices. Now they're talking about controlling gas prices and states are providing people with extra money. There are all kinds of things and people find to try to overcome the fundamental reality of rising prices. And as in Argentina, they don't work, they never work.Joel Bowman:But it doesn't stop them from trying.So let's go back a little further then, because I was speaking to somebody just yesterday about this, it's a common kind of rejoinder to this narrative that we present in at Bonnet Rrivate Research, and that is where people say, Well, we've seen this before. It was the 1970s. Look, we had an oil embargo where a major oil producing block took supply off the global markets. We had the Nixon shocks, we had double digit inflation, it was runaway. And then we got Volker, and he marched in and whipped everyone into shape. And then as you said, then we're off to the races for the next 20, 40 odd years, rather. So what about today is different fundamentally than that seventies landscape that people think will just kind of, well, we'll muddle through and then we'll be off for another to a moonshot again?Bill Bonner:Well, the fundamental difference is 30 trillion dollars. The federal debt in 1980 was one trillion. Actually, it was below, it was actually 900 billion, below a trillion. Now it's 31 trillion, 30 times as much. That's the fundamental difference. And it's added to, it's not just the federal debt, it's also private debt, household debt, corporate debt, all at record levels. So they take them together and the whole sum of debt in America now is about 90 trillion. And what happens is, in this process of rates going up to bring things back to normal, the cost of all that debt goes up. And you soon realize that you can't pay it. That is not going to work.And that's what happened just two weeks ago in England when the traders saw what was happening and they were bidding up the yields, which is to say they're bidding down the prices on UK government bonds. And pretty soon all those big institutions, the pension funds, they rely on the price of those bonds to make their numbers work. And then suddenly it became clear they weren't going to work. And so the bank had to intervene. The Bank of England intervened with support stimulation, whatever you call it. They were buying bonds in order to save them from bankruptcy.And so what I suspect, I expect, this is what you call a high probability hunch, that the US is in the same situation, really even a worse situation in some ways. And as the Fed stays the course raises rates to try to get ahead of inflation, as they do so, we're going to see some things like what we just saw in England that certain institutions, could be Goldman Sachs, it could be JP Morgan, it could be a state pension fund like CalPERS in California. They've got billions of dollars. And they have done the same thing because this theory was pitched to them by Goldman Sachs of what they call LDI, which was matching your liabilities to some long-term goal. But what it really meant was they were ratcheting up the risk in order to try to improve the results. You can do that if you're a young speculator. But if you're managing the pension funds for a lot of retirees, that is practically criminal.So what's going to happen is somebody's going to get in big trouble and suddenly there's going to be that meltdown crisis on Wall Street in which the Powell and his fellow bankers, they really are part of a banking cartel in order to save themselves and their clients and their members Wall Street itself, they're going to say, Well, okay, that was a good idea. We need to get control of inflation, but not right now. Now we have to save the system because otherwise it'll go totally bad. I would say again, a high probability hunch is that that's going to happen and we're going to see a pivot from the central bank because they just owe too much.So your question was what's the difference now than from 1980? Well, the difference is all of that debt that they didn't have. Volker could raise rates to 20%. He could do that. He was condemned. He practically had to have an armed guard. People were threatening his life. But he could do that because America could afford it. Also, by the way, in 1980, it might have been 1979, stocks had already been squeezed so hard by inflation that they were already very, very cheap. They're not yet very, very cheap here. So we have a lot to lose. Trillions of dollars still to lose till we get there.By the way, we like to measure things in terms of gold, and in terms of gold, for a brief time you could buy the entire 30 Dow Jones industrial stocks for one single ounce of gold. And today, what is it? 18. What we're looking at is a totally different situation in which we have high deficit. The deficit was announced just yesterday for the current year of 1.4 trillion dollars. And this is at a year without really a crisis. A crisis hasn't appeared yet. They're running huge deficits. The debt is multiplying even without them. And we're in a situation where we can no longer continue on this course of action.And so what will happen, I believe is we'll see something will come up, some Lehman Brothers moment as they say on Wall Street will happen. And then the Federal Reserve will be forced to change towards inflation. And once that happens, it'll be the next stage. The stage we're in now is deflation. We're deflating all of those, a lot of those promises, obligations, debts and so on from the bubble era. That will go on until it becomes really painful and then they'll start inflating it again.Joel Bowman:And so this is what sets the backdrop for something that Richard Russell wrote about maybe 10 or 12 years ago. But it's the idea, and Tom Dyson of course has written about it over on our Substack page as well, and that is the idea of "cash now gold later." So gold after the pivot when hyperinflation, is off to the races...Bill Bonner:And we see so far that advice has been very, very good. Nobody really took it totally because it just felt awkward. We saw inflation running at 8%. So who wants to hold cash when inflation is running at 8%? But in fact dollars have ended up being the best investment so far this year. As long as we're in the deflation stage, you want cash and after the deflation stage you want something else. Probably gold, maybe stocks, stocks go up too. But you have to adjust that price by inflation, which is then out of control for the foreseeable future. That is going to be a different world. And that's a world that you probably know better than anyone because the inflation of Argentina is about 90%.Joel Bowman:Officially 90%. I tell my friends down here that Americans and Brits and Australians are worrying about 9% inflation. And they asked me to repeat myself, Sorry, did you say nine? We would kill for a 9% inflation. That would be a day in the sun for them.And so from then, from the past and the setup to where we think we are right now, I was speaking with our colleague last week, Mr. Byron King, and he and I spoke a little bit about the end of these three cheap abundant stimulants of this modern world that we've all come to just take for granted. Certainly in the last 40 years, and you've alluded to a couple of them already. But we've coming to the end, through various geopolitical kerfuffles and conflicts, of cheap energy. And we've outlined this over at Bonner Private Research. This feeds into our trade of the decade, which is long conventional energy. But that whole era of cheap, reliable local gas from various places seems to be coming to an end. This era of mass produced manufactured goods and tight supply chains unruffled by policies or global lockdowns, that seems now to be coming to an end. And of course as you've spoken about, we have potentially the end, at least for the foreseeable future, of cheap and available funny money, cheap and available discounted credit.Where do we go exactly from here? And I mean is it time to just build a bunker and buy gold and do nothing? I mean, how does the average person live through this if they're in that state of mind?Bill Bonner:One thing that we learned from the Argentine example is that you can live with inflation at a fairly high level. And this is not the first time they've done it in Argentina. You can live, but you can't live very well. The economy falls apart and you need to have protection from the local currency, which of course is what you do and what foreigners in Buenos Ares do because they operate on dollars rather than pesos, not prisoners of the local peso economy. And in a larger scale, when the economy turns around with the pivot on the Fed and more inflation in the US, that will be a similar reality in America, which you will not want to be dependent on the dollar completely, which is why you'll probably want to move assets into things which are not dollar dependent like gold, minerals, real things, timber. I'd like to be in the timber business. It looks good to me. Farming, a lot of things which are real and don't depend entirely on the value of the dollar. So I think that's where you're going to end up.It's not the end of the world by the way, no, it is not the end of the world if things go on, but they get more confusing. And they get a lot more confusing and people don't know what to do or what to make of them. And that's where you get the real problems because they feel cheated, and they are cheated. The whole idea of inflation is to cheat people. And so the guy who's worked all of his life, he's expecting his pension and his pension comes in and he realizes it's only worth half what he thought it was going to be worth. That guy gets pretty mad and he justifiably he gets angry and next thing you know he's out on the street or voting for somebody that he probably shouldn't vote for or whatever. People look for solutions. They want solutions. That's when they turn to the guy who has the easy solution. And that guy is almost always a fraudster.So it's a problem. And you get a big breakdown in society. Argentina, they had that inflation of, I'm not sure if it was the eighties, which ended up in the generals taking charge and military dictatorship was very common. In Venezuela you have that puppet government. I don't know what the world they are doing, but the guy Madura said that he had a crow or something on his shoulder who was whispering in his ear channeling the Chavez who was dead.Joel Bowman:Sounds as reasonable. Maybe we should get the Nobel Committee to give that guy a prize for telepathy from the great beyond or something.So speaking of the end of world and real assets, I promised our friend and our colleague Diego Samper that we would mention the solution to all of life's problems, all of the above. And that is your latest harvest of Tacana wine from your ranch down here up in the northern reaches of Argentina. I don't know how many people have looked at this on a map, but it's way up there in the north, right up close to the Bolivian border and it's really extreme country. We've been up there, we've been up there a few times.Bill Bonner:As you say, the solution begins with that popping of the cork.Joel Bowman:Around 6:00 PMBill Bonner:That's the most pleasant sound of the day. You pour yourself a drink and here in the autumn, here in Maryland, in the autumn, recently it's been chilly enough. So I just had a little fire in the fireplace, and at six o'clock I sit in front of the fire with a glass of Malbec and for a while it doesn't seem too bad.Joel Bowman:Yeah, it's palliative. So tell readers who haven't maybe experienced it yet the difference between, and I've spoken to Will, your son Will Bonner about this, the difference between what you can expect from a high altitude Malbec grown in really unique and extreme conditions and the watery diluted over sugared dyed stuff you might pick up at the supermarket.Bill Bonner:You stole my thunder there. But that is the difference that the high altitude, what it's doing is it the extremes between day and night. And the extremes between day and night require a thick skin to survive. And so the grapes grown at that elevation, they tend to have these very thick skins, and in the skins is all the flavor. So when you get that, the high altitude, not just our place, but any place in the valley, because we're in the valley which is the highest in the world for wine. You get wine that is very strong. And some people don't like it because it's too strong, but you get used to it soon enough and then everything else seems weak. When I drink my own Malbec, I feel like, well, there's real wine and everything else seems to be an imitation.Joel Bowman:Well I think “having a thick skin to last one through” is probably a good point to end our powwow today, Bill. I'm not sure where we're going to catch up next, but I hope there's a glass of high altitude Malbec involved in it and we can get a front row seat to whatever it is about to happen next in this passing parade.Bill Bonner:Well thank you Joel. It's been a pleasure.Joel Bowman:Yeah, thank you Bill. Cheers.P.S. Readers and or listeners wishing to grab a few bottles of high altitude Malbec will want to be nimble. Bill doesn't sell his Tacana bottles to supermarkets or restaurants, but instead directly to his dear readers… like you! But they typically sell out pretty quickly. If there's any left by the time you read this, you be able to secure your supplies here. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit bonnerprivateresearch.substack.com/subscribe

Bill Bonner— The Crisis That Could Bring Down the American Empire

Play Episode Listen Later Sep 12, 2022 46:18

"Civilization arises from the bottom; it doesn't come down from the top. When the government gets into the picture, civilization goes backward." — Bill Bonner A small group of elites with very different interests from the mass population decides what the government will do. And now, those elites have set their sights on regulating the 'very thing that makes it possible for 8 billion people to live on planet Earth'—energy. The fallout could be the very thing that ends the American empire. So, what can we do? Bill Bonner is an American author of books and articles on economic and financial subjects. He is the founder of Agora Financial and a co-founder of Bonner & Partners publishing. He's the author of Financial Reckoning Day, A Modest Theory Of Civilization: Win-Win Or Lose, and many more titles, including a new (yet to be titles) book to be released this fall. On this episode of The Wiggin Sessions, Bill joins me to share his insight on the cornerstone that civilizations are built on and why the current economic situation in the US is bigger than macroeconomics. Bill shares how more legislation always leads to across-the-board losses and how power always corrupts (and destroys) successful empires. Listen in to understand why Bill thinks we're on the verge of a major agricultural and energy crisis catastrophe and how to protect yourself and your family during these times of high calamity. Key Takeaways Bill shares the critical date in history that is the cornerstone of civilization Why over legislation make everyone poorer Bill shares how the period we're in right now is being misinterpreted in the market The only thing the FED can do to control inflation Why the economic situation we are in now is bigger than macroeconomics. How "fashionable" changes have created an economy that no longer works Why the elites have a parasitic interest in controlling society Who is really winning with the sweeping climate bill (hint: it isn't the trees) How the high cost of regulations has depleted the US economy Why Bill thinks the decisions made by government bureaucrats will lead to a major agricultural and energy crisis catastrophe The most important thing to do during times of high calamity Connect with Bill Bonner Bonner Private Research Connect with Addison Wiggin Consilience Financial Be sure to follow The Wiggin Sessions on your socials. You can find me on— Facebook @thewigginsessions Instagram @thewigginsessions Twitter @WigginSessions Resources Agora Financial A Modest Theory Of Civilization: Win-Win Or Lose The New Empire of Debt: The Rise and Fall of an Epic Financial Bubble Bill Bonner—Safe Havens and A Modest Theory of Civilization - EP02 Byron King—The Danger in Weaponizing the US Dollar EP48

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Chris Mayer talks Deals from Hell, Reveries with Rousseau and his own take on General Semantics

Play Episode Listen Later Sep 4, 2022 41:47

Welcome to another Fatal Conceits Podcast. In today's episode, we're joined by our good friend and regular favorite on the show, Christopher Mayer. Long time listeners will know Chris as the portfolio manager and co-founder of the Woodlock House Family Capital Fund, which he began with Bill Bonner back in 2018. Chris is also a published author who just released his latest book, Dear Fellow Time-Binder: Letters on General Semantics, which you can find here. His blog, in which he ruminates about life, markets and “this thing we call investing” is considered essential reading around the Bonner Private Research office. Check that out, here.In today's conversation, we take an unhurried stroll through Chris's library and get his take on Jean-Jacques Rousseau's Reveries of a Solitary Walker, Robert Bruner's Deals From Hell, the latest Buckminster Fuller biography and plenty more besides. Please enjoy and feel free to share our work with fellow readers, thinkers and solitary ramblers…Cheers,Joel BowmanThank you for reading Bonner Private Research. This post is public so feel free to share it.TRANSCRIPT:Joel Bowman: All right. Welcome back to another episode of the Fatal Conceits podcast, dear listener, a show about money, markets, mobs, and manias, not necessarily in that order. If you haven't already done so, please check out our sub stack. You can find us at bonnerprivateresearch.substack.com. And on the site there you'll find hundreds of articles on everything from high finance to lowly politics and everything in between including, of course, many more conversations just like this one under the Fatal Conceits podcast tab at the top of the page. Today, we're delighted to welcome back to the show long time friend of Bonner Private Research and the portfolio manager of Woodlock House Family Capital Fund, which he co-founded with Bill Bonner back in 2018. A good friend of mine, Mr. Christopher Mayer. Welcome to the show, mate. How do you do?Christopher Mayer: I am well. Thank you for having me on, always good to talk to you.Joel Bowman: Yeah, absolutely. You're in a new place up in Maryland?Christopher Mayer: Yeah. I live in Mount Airy now. It's a nice little town, very green, lots of golf courses around. It's open, it's nice. I like it here.Joel Bowman: Good stuff, mate. We were speaking just before we hit the record button here and I told you that I would be remiss if I didn't at least throw out one financial question at the very top of the segment here. I guess what everybody wants to know is, after our June lows, we've had a 20 odd percent bounce in the S&P, what many would consider to be the classical definition of a bear market rally. Is this something that, first of all, you agree with? And secondly, does it concern you, as somebody who's in it for the long term and more focused on individual stock selection?Christopher Mayer: Yeah. Well, everybody wants to know the unknowable, right? Is this the bottom or we have more to fall or are we off and running? I don't look at it that way. I'm focused more on the individual companies I own. And I have to say, this is probably one of the easiest bear markets I've been in yet because I have now second quarter reports in hand for all my companies except one, and they're all firing on all cylinders. I mean, if you just looked at the financial statements, you wouldn't see any cause for concern. You'd be surprised that the stocks were down at all. So I think times like this are an opportunity. What's remarkable, I suppose, is the swiftness of this decline. So we're through August, this is the fifth worst start for the S&P 500, going back to 1928. So that's historically interesting and that ...Joel Bowman: Anything interesting happened around 1928-29 or there abouts?Christopher Mayer: Yeah. People like to make different comparisons, and it doesn't have to be catastrophe. I saw somebody on Twitter had put out charts where they said one for the bulls, one for the bears. And they had set up the decline that we see now and matched it up perfectly with '07, '08. But then someone else, they had matched up perfectly with another market where it went straight up. So, when do that kind of data mining you can find the pattern to make whatever argument you want to make, but they're all different in different ways.And this one feels different in that way, in that the underlying performance of companies so far is strong and there are pockets of the market that are weak. Of course, if some of the retailers have disappointed and banks earlier, didn't do so well, but by and large things seem to be holding up pretty good. So I'm not concerned. I think this is an opportunity for sure. And if you have any kind of time horizon, five years at least, I think you're going to do pretty good while picking up some things today.Joel Bowman: When we spoke for your segment on Bill's round table, which we recorded, I guess, maybe a month or so ago, you mentioned of course that with the benefit of hindsight, which we would all love to luxuriate in 24/7, you look back at those other market drops that you saw in 2008 and before and now they look like little blips. So who knows what the future will hold, but if you had the steel to hold and even pick up some bargains during that time with some stock selection, you could do very well.Christopher Mayer: Yeah. And the stock that I mentioned, I think on that call has put in a new 52 week load today, so... It's even better now, right? Yes, yes, yes, yes.Joel Bowman: There you go. All right. Well, looking at your bookshelf behind you there, one of the things that I love about our conversations, and for listeners and viewers now who are just joining us, I know we've got a lot of new readers on the Bonner Private Research sub stack, so welcome if that's you. Chris and I have had a few conversations here now, maybe three or four where we thumb through Chris's bookshelf and just do a little bit of a deep dive into what makes Chris tick as both an investor and a thinker and a writer. So I'll link to a couple of our previous conversations there so readers can get a little flavor of what we're about here. As we were emailing a little back and forth in preparation for this call, Chris, you nominated a typically, characteristically eclectic clutch of books, as you tend to do. Do you want to take us from the top, maybe beginning with the classics? Where do you want to start?Christopher Mayer: Yeah, we can begin with the classics. So a lot of these books behind me are old philosophy books. This is my main study here, but then across the hall, I have another library where my investment books and other books are. And then downstairs, there's another little section where some fiction is. And since we moved this library is about half the size it was, but it's the way it goes. But the classics I had recently read and thought I would share is Rousseau, the Reveries of the Solitary Walker.He wrote this as his last book and it's a series of 10 walks. So he goes off and he writes what he was thinking about on these different walks. If I were to describe it, I would say it's a rumination on happiness. What makes people happy? What makes them unhappy? And so this is old Rousseau looking back, and he's an interesting guy. He's a really good writer, but I have to say he's also a hard guy to like sometimes. I don't know. You mentioned in the email that you had read his Confessions, which I have not read yet, but I've heard about them. Yeah.Joel Bowman: Yeah, I read that recently, actually just in the past, I want to say six months or so, and maybe a spoiler for some listeners who haven't gone through much of their Rousseau yet, but yeah, he had a long running feud with Voltaire after a friendship earlier in their life. Voltaire was pretty savage in his attacks on Rousseau later in his life, especially for perceived hypocrisy around raising kids and education and that kind of stuff. It's pretty hard to like him after you discover some of those warts, those and skeletons in the closet.Christopher Mayer: Yeah. Yeah, it was unbelievable, but there are a lot of things like that. But then I think also he's very thin skinned. He seems to take offense pretty easily. But having said all that, he's also a good writer and deep thinker. And in this book, he talks about things that make him almost sound a bit like an Eastern philosopher. He starts talking about, what makes people happy comes from the inside and not being too bound up with externals and being able to be more unaffected by the vicissitudes of life. And he really comes to appreciate nature. There's one letter where he talks about how he gets in a boat and goes into the middle of a lake and just lays at the bottom of the boat, looking up at the sky and loses himself for hours in a peaceful meditation. So I don't know, it's a fun read. And it's not heavy reading either, it's pretty easy to read.Joel Bowman: Yeah. I think some of these other works, Emile in particular, is notoriously difficult.Christopher Mayer: And he's known for his political stuff, so I know that that can be difficult too.Joel Bowman: Yeah, The Social Contract and whatnot. Do you make anything of the rambling philosopher at all? There were others, differing vastly in their world views, such as Nietzsche who wrote in a very aphoristic style. He would go on these long walks and just meditate on what he thought was important. Obviously more recently, Taleb wrote his book of aphorisms and it seems to be one type of medium through which to distill your thoughts and get some clarity for anything like that.Christopher Mayer: Yes. I think of Henry David Thoreau also. He'd do these walks and he'd write in his journal.Joel Bowman: Yeah.Christopher Mayer: Emerson was a great keeper of a daily journal. Kierkegaard was also someone who wrote avidly in a journal. I have his journals right there. But yeah, I think there's something to that. And then even in some of the great Eastern philosophers too, they wrote in little snippets, like Lao Tzu or Laozi's Tao Te Ching and those guys. And that compares to these heavy, weighty treaties that Hegel and Kant would write, they're impenetrable. So I think there's something to say for that.Joel Bowman: The critique on the top of my finger, yeah.Christopher Mayer: That's critique of pure reason?Joel Bowman: Right there, yeah.Christopher Mayer: I have that there. That's over right here. Yeah.Joel Bowman: These big, weighty tomes. Those system builders, the Hegels and the Wittgensteins and whatnot, they can get so dense. It's almost sometimes a little impenetrable, but going back to ... you and I have spoken about Thoreau before, and of course Walden. He was social distancing a long time before it became cool on the outskirts up there in New England. I often wonder that, just by occupational hazard, we have our noses so close to the screens, we might be watching ticker symbols or analyzing charts or looking at company reports and that kind of things, if we wouldn't benefit a little from just stepping back, getting some perspective, going to play a game of golf, going for a walk in the woods and decluttering from time to time.Christopher Mayer: Yeah, definitely. I think that's a good point. And there's the science about that too, about what happens if you press yourself too much. Your brain needs some time to recharge. Concentration is almost like a resource, and if you constantly are at it, you got to give yourself a chance to regenerate. It's also interesting, some of these philosophers, like Nietzsche, some people think that it's because he had such intense migraines and a lot of other ailments that he preferred to write short because he couldn't sit there for that long and write long pieces. I don't know if that's true or not, interesting theory. But it does also seem like some of the philosophers who write shorter do have some love of nature too. They do tend to get outside and they're walking and then they write down these observations. So yeah, I think there's some value in detaching. Even Bill has told me that before. He says we should have some other outlet other than markets. For him, he likes his masonry and he's always working with his hands, but it's good to have something else.Joel Bowman: Yeah. Over the summer, my wife Anya and I and our daughter were touring around a little bit of Europe. We went to visit the Bonners in their country estate out in very rural Ireland ...Christopher Mayer: Yeah. I was in early June as well.Joel Bowman: Oh, yeah. That's right.Christopher Mayer: We were close in there. We just missed timing.Joel Bowman: That's right. Yeah. But it is funny to see. Bill will do his daily work and then he'll throw on the dungarees and march down the country lane and spend a few hours doing some masonry work and come back all dusted up for lunch or whatnot. But yeah, I think it's almost akin to when you teach your children, for example, when they've forgotten a word, they get stuck on something. They want to say something and for the life of them, it won't come to them while they're thinking about it. And you have to distract them and get them thinking about something else, talk about what they did that day or whatever and then, all of a sudden, there it is.Christopher Mayer: I think in the investing world, I mean, there are freaks like Warren Buffet who seems to have no interests other than investing.Joel Bowman: Big banks. Yeah.Christopher Mayer: Yeah. I mean, I don't know if you've ever read The Snowball, which is the biography on him.Joel Bowman: No.Christopher Mayer: He's really a strange guy. He has a diet of a six year old, lives in the same house all that time, not particularly well-read at all. I don't know if he'd even know who Rousseau was. I mean, he just doesn't have that kind of background and no real hobbies or interests. I mean, he does play Bridge, so maybe that counts, maybe that's something.Joel Bowman: Yeah.Christopher Mayer: But it's very strange.Joel Bowman: He's almost like an idiot savant. You have all these arrested developments in other aspects of one's life. But then when it comes to analyzing markets, his the brain just goes into overdrive.Christopher Mayer: A lot of the better investors I know do like to read and they are curious. So I think that's a good trait to have, because when you think about businesses, you're learning about people and people have different philosophies and styles. You often think you can tell this history of the world through any different lens. You could tell it through investing. You could tell it through music. You could tell it through food.Joel Bowman: Yeah.Christopher Mayer: If you go deep enough, they all come together and these same philosophical topics eventually crop up.Joel Bowman: It's interesting, isn't it? That was one of Anthony Bourdain's observations that he would use. You mentioned food and we've talked obviously about travel and music and things like that before. He was a great believer that the same conversations are essential to human nature no matter where you go around the world. And you can use something like food, something as common and as communal as that ceremony, as a way of getting into all of the things that were happening in wherever he was, Phnom Penh or Nairobi or what have you. He would talk to people and then get into the rest of it. You could learn about supply lines. You learn about living standards. You learn about history. You learn about the politics of the place, the economics. All of the kinds of things that you see reflected in a stock market, for example, you might see if you really pay attention reflected in just breaking bread with someone in some far flung place around the world.Christopher Mayer: Yes. I agree with that, and I'm definitely a big Bourdain fan, so maybe that seed was planted. He's a guy I miss. I'd like to have him around, see what he thinks of some of this crazy stuff going on. Of course there's a number of people we could say that about, but he was a good one.Joel Bowman: We were mentioning as well recently reading the biography of Bucky, or Buckminster Fuller.Christopher Mayer: Yeah, Buckminster Fuller. Yeah, it was a big, fat book. It came out just recently. It's called Inventor of the Future by Alec Nevala-Lee. And when I first saw it I was very excited because I thought, "Wow, Bucky, as he would like to be called, getting the Royal presidential treatment, this big, fat biography. It's hard to describe what he did. I mean, he was an inventor and he was a poet and he did all kinds of things in his life. He was a philosopher as well. He wrote books and he was a coveted speaker. So he did a lot of different things.I read this biography and I think it is the definitive biography of his life, the when and the how he did this then and here and there. It sorts through different events and separates some of the myth from what probably happened. So in that sense, it was interesting to read it. But in the other sense, it focused a lot on his personal failings. He had a number of affairs and he had some other problems, so took away some of the magic. If you didn't know who Buckminster Fuller was and you picked up this biography and read it, you'd walk away thinking, what's all the fuss about?Joel Bowman: Right.Christopher Mayer: But he was something. I mean, Steve Jobs loved Buckminster Fuller. You know that famous Apple ad "think different" and it goes through 16 or 17 different icons? Buckminster Fuller is in that ad and that was at the request of Steve Jobs. He received 30 honorary degrees. He had something like 25 patents. This book, I didn't feel like it really brought home any of that. He was again, a very coveted speaker all over the world, he had fans all over the place. So anyway ...Joel Bowman: That's interesting, isn't it? When we talk about historical figures, even as recently as someone like Buckminster Fuller, one wonders if they would even be given a start today or whether they'd be canceled before they got going. I wonder if people would focus so much on their shortcomings? I mean, you're not reading a Buckminster Fuller book for marital advice, presumably. You're reading him for his philosophy on this or his inventions or his thoughts on this and that. I wonder in our haste to dig up the worst dirt on everybody, how much of the good we miss out on.Christopher Mayer: Of course there's a lot of people like that in history, right? If you were going to go through all the shortcomings, you'd hardly read anybody. I mean, shoot, Heidegger's one of the best examples of that for the 20th century. He's a Nazi, he's out.Joel Bowman: Ciao.Christopher Mayer: I mean, look at some of the stuff Hemingway wrote, homophobic stuff and misogynistic stuff. Forget it. So yeah, I don't know. It's a good point.Joel Bowman: All right, mate, let's move on to your second book here. Is it Deals from Hell, I think we've got up next. That's a great title by the way.Christopher Mayer: Yeah. It's called Deals from Hell, M&A lessons that rise above the ashes by Robert Bruner. This book was sent to me by a fellow money manager. And well, most of the book is case studies of M&A deals. But if you were to get this book, I would recommend at least just reading the first three or four chapters, because what it really does is that it kills this myth that M&A is a bad thing, mergers and acquisitions. There's a prevalent negative view among people, even professional investors, they don't like acquisitions. And their view is, when you do an acquisition, most of the time it destroys value for shareholders. And in this book, he goes through a lot of research and studies that have been done in M&A and he comes to the opposite conclusion, that M&A does pay.Joel Bowman: Oh wow.Christopher Mayer: And it's interesting why that is the case. So he says, an objective reading of more than 130 studies supports the conclusion that M&A pays. And one of the reasons why the conventional wisdom fails, as he says here, people generalized too readily from the findings of a single study. So there are some very high profile disasters, right, in mergers. And that's what gets all the attention versus all the little deals that get done along the way that worked out perfectly well. So the tendency is to exaggerate the failures and the key line here that I double starred, he says: "All M&A is local," which I really like. You really have to look at it on a case by case, deal by deal basis. And it took me a while to get over that hurdle, but now I've found some companies that are really great acquirers of other businesses, just systematically are able to add and plug in businesses to their growing little empire and do very, very, very well.Joel Bowman: So is this something that's affected the way that you think about the universe of potential investments that you come across on a daily, weekly, monthly basis?Christopher Mayer: I would say I had discovered this earlier. I wouldn't say this book turned my opinion on what I think, because I'd discovered that on my own, that M&A is really nuanced. And I've discovered a number of these companies. People now call them "serial acquirers" and they have done very, very well. There's a number of them in Sweden. There's a couple in the UK. In the U.S., there are several as well that just continued to acquire companies as their main avenue of growth. And they've been wonderful investments. So what makes those successful versus the failures? This book helps highlight that too. You've got greater propensity of failing if it's a very large deal, if it's very complicated, versus smaller deals, or if you're doing something that's in a business unrelated to yours. There are a number of things he goes through. But I think the value in this book is really busting that general myth and forcing you to think more nuanced about the topic of mergers and acquisitions.Joel Bowman: That's interesting. I like those myth busting books, those that turned things that you might have thought previously on their head. I'm wondering if the general consensus is such that mergers and acquisitions are bad might not offer a little pocket of hidden opportunity, an overlooked opportunity for people who could get past that stigma.Christopher Mayer: Yeah, I think it did for a while. And then I think a lot of these serial acquirers are now priced pretty well. So I don't know that that's necessarily true anymore, but it might be. Part of the reason I think is that it can be difficult to model these things because you don't necessarily know when the deals are going to strike or what they're going to look like. And if they deploy a lot more capital than you model, then there's going to be some big surprises. So it's a tough thing to predict and project.And so if you're willing to go with the uncertainty and you trust the capital allocation, trust the team and the process that they have, and they have a track record of successful deals. And you can do that. You can look back and see whether deals were successful or not. You can see whether there are impairments. You can see what happens to the overall companies' returns on capital, whether they go down over time as they do acquisitions, watering it down, or whether they're able to preserve it or even grow it.And it depends on the amount of disclosures companies give you. Sometimes you can really dig down and you can see how certain subsidiaries they acquired, how they've done sales and profit wise. And you can back in and say, wow, that was a really good deal. So I think that's the key. It's like most things in investing, in life. You can't go through it too generally, everything has nuance. And our culture forces everything to be squished and reduced to a headline or reduced to a soundbite or reduced to a one single powerful message that you can deliver, but on most things, there's a lot of nuance and complexity.Joel Bowman: Yeah. And oftentimes I think that looking beyond that the black and white or the binary conception of the world can flesh out a lot of useful information. I was going to ask, because you touched on a few different investing jurisdictions there, Scandinavia, Europe. I know that you invest, around the world, that you have an international portfolio...Christopher Mayer: Yes.Joel Bowman: Are there things that you'd look at in particular when you go into foreign markets, say for example, the transparency of their reporting, the maturity of the market in general, or does that all depend on price?Christopher Mayer: Yeah, there's definitely interesting jurisdictional differences. So even on this topic of M&A for example, there's a solid pocket in Stockholm where there's a dozen of these serial acquirers and they're all good at it. For some reason, it's like a Silicon Valley of serial acquirers there. Culturally, there's something there. There's about it and you don't see anything like that in Germany or France. It's just different. And in the UK, there are a few. And then in the states, there are several. But it's interesting to me sometimes how you can have such big differences in regional markets, even if you compare Sweden to the other Nordics. I mean, there's a lot of differences there in how business will run. For example, a lot of the Swedish serial acquirers will report on return on capital employed. I mean, they'll be right there, a number that they're tracking and targeting. And as an investor, I'm like, that's fantastic! Here's what you want to think about. Right? And not this BS about sales growth or earnings. These guys are focusing on the real things that matter. They get capital allocation. So yeah, I mean, those kind of things are pretty neat when you find that.Joel Bowman: Yeah. You toss a line over the side of your boat and you find a lot of what you like, you start to bait up again. Good stuff. Just going from the title there, I haven't read the book, but I expected there to be some horror stories in there. Some actual "deals from hell"?Christopher Mayer: Yeah. I mean, well the classic is the AOL, Time Warner deal. Time Warner bought AOL at the top. And yeah, I mean, then you've got some horrific charts here where they announced the merger and then the company becomes worth less than the deal value was. I mean, it's just a remarkable amount of destruction of wealth on some of these things. So yeah, there are definitely horror stories in there.Joel Bowman: Right. They're the headline grabbers that you were mentioning before that shaped public opinion.Christopher Mayer: Well, that's it. That's exactly right. Those are the ones. When people think of disasters, most people can think of these ones.Joel Bowman: All right then. Let's move on, Chris, to your own latest release. How many is this for you now, mate? You've got to be working on half a dozen?Christopher Mayer: This is number five.Joel Bowman: Number five. Okay. All right. Congratulations. Let's get into it.Christopher Mayer: It's called Dear Fellow Time-binder: Letters on General Semantics.Joel Bowman: All right. You're going to have to back up a little bit here for our listeners. We're going to go back into some previous conversations. Maybe you could do as your man Korzybski might do and help "map the terrain" for us.Christopher Mayer: Right, well, if you read, [my book] How Do You Know?, this book is a second crack at those ideas, except that I drop the investing focus. So, How Do You Know is really applying these ideas to investing. And then this is just a more general exploration. I call it letters. I was actually, as I say in the preface, I was inspired by Seneca's letters. He wrote these letters where he explained stoicism, and there's some debate about whether they were really letters or not, whether he would really mail them, but they were written in the letter format as if he was teaching somebody. And I thought that's a good way to do it, so I did this. I thought, if I were teaching someone of these ideas, how would I do it? What are these ideas?You mentioned Korzybski. Yes, Alfred Korzybski was a guy in the 1930s who created this discipline called general semantics. As you can think of it more as an aid to critical thinking. It focuses on the assumptions that we make with different symbols and language and how they interplay with how we behave. And there's a lot to it actually. There's a lot of different things to it. So it can get deep and get into all kinds of things about causation and things we take for granted. So what makes this book different, too, is it's published by the Institute of General Semantics and they gave me access to the archives for Et Cetera, which is their journal they've been publishing since the 1940s. And another publication they have, The General Semantics Bulletin. So I had these two archives.I was able to go back and I mined them because there were some interesting characters that taught these ideas over time. You won't know them now, but they're in the book, people like Wendell Johnson, Irving Lee and S.I.I Caldwell, these different people. They're interesting characters on their own. And so I was able to pull out different things from those archives. So it was really interesting to read in the 1940s, what people were thinking about, worried about. War of course hangs over the whole thing and so it was very appropriate then because they were looking at things like propaganda and taking apart the meaning of all these different terms and phrases and the ideas behind them. So, that's one thing that was really fun about doing this book. And I just did it on the side. Some of the letters were already published in their journal, Et Cetera, over the last couple years. And then finally the book came out this year, so I wrote most of it actually in 2020.Joel Bowman: As you're speaking now, I'm thinking about the messaging, let's call it, what used to be called propaganda before it underwent a public relations campaign itself, and is now called public relations. I think it would've been in the early 1900s when Eddie Bernays was just getting his start in the United States. He was the fellow that brought the world the phrase, "Making the world safe for democracy." And that was the banner under which he convinced Woodrow Wilson to commit American troops to World War I. America was a largely war weary continent as it had only just emerged from its own civil war a generation or so previously. And all of a sudden, with the right "messaging," we have troops marching off to war. And it does make you think, if that was happening then, and if it was happening in the forties, if this was on people's minds, it would be perhaps naive to think that this wasn't happening at some level today.Christopher Mayer: Yes. I mean, it's interesting to think about why that stuff works. Why does that phrase have power, "making the world safe for democracy?" What does that even mean when you think about it? And so that's what general semantics looks at. I think the biggest thing I've taken from Korzybski really is just that, to be conscious of what he would call "abstracting." So there are all these words and phrases that we use that really don't mean anything when you think about it. They mean whatever people want them to mean. They have dozens and dozens of different meanings, "democracy "for example. "Recession" would be one. Capitalism would be one. You hear people talk, especially politicians, about our "capitalist" system. And then you talk about other people and they're like, What are you talking about? We don't have a capitalist system. We've got something else entirely.Joel Bowman: It's a corporatocracy.Christopher Mayer: Yeah, exactly. Right. So all the kinds of labels we throw around. Even political parties. Saying someone is Republican or Democrat doesn't really say much.Joel Bowman: Right.Christopher Mayer: It's freighted with assumptions. And then sometimes words as we know them have become so freighted with connotations that we have to invent new words or we have to drop them. We can't even say the old words anymore. You look like you may have some examples to throw in there.Joel Bowman: I know. I'm not going to a risk cancellation by listing off a shopping list of unmentionables. But yeah, it's certainly the way. And I think also with regards to the way semantics is treated in our modern public discourse. We have a narrowing of definitions that we're permitted to use or that we're almost shoehorned into.Christopher Mayer: Yes.Joel Bowman: I'm wondering if while you were mining these archives, doing research for your own work, if you came across any time when the range of concepts, the range of language that we had available to us was so narrowed that it impacted the way we're even able to conceptualize and think about things in the first instance.Christopher Mayer: Yes. There's a hypothesis I talk about in the book is called the Whorf-Sapir Hypothesis. And the idea is that the language we use actually actively shapes what we think, just like what you're saying. I can think of Whorf's examples because he used to work in insurance and he would say things like ... let's say there was a fire started in some factory and he would have to investigate the fire. And he would find out there were these drums that were labeled "empty gasoline drums." People would be very careless with them. They assume they're empty. But they're not empty. They'll have vapors in them that are very flammable and so on and so forth and that led to their mishandling which started the fire. Another one, I remember there was a time where he talked about how there was this pool of water where they would sometimes dump flammable liquids and things. And they would be a vapor there and someone was there smoking a cigarette and then they threw the match in the water, think it would put it out. Instead, it lit the whole thing on fire and ...Joel Bowman: The exact opposite, unintended consequences.Christopher Mayer: Yeah. So his point was you, if you label these things differently, we would actually think differently about them. If you didn't say they were empty gasoline drums, you called them something else, people would behave differently. That's a slightly different point than what you're making, but I mean, it's so endlessly fascinating, because you can go on about this forever. But part of this book too, is there's a lot of little helpers and things. I know just from studying general semantics, to give you one example, there's this whole thing about being mindful of absolutes. So when people say things like "always" and "never." Anytime I hear people use those, it's like a little light goes on in my mind. You have to be careful of that. So you get suspicious of certain words and it can help you ask questions, follow up questions. Like somebody will say, "Well, these immigrants are all thieves. And you'll be like, really? "All" of them?Joel Bowman: Mergers and acquisitions are "always" a bad idea.Christopher Mayer: Exactly. They're "all" terrible. "All" of them? Every single one? So there are little clues like that, words that will perk up. And as an investor, that's important because I spend a lot of time talking to people and asking questions and trying to parse their answers.Joel Bowman: We've never lost shareholders' investments. Never? Interesting. Yeah. All right, Chris, tell us where we can get your book here, it's Dear Fellow Time Bender. I'm assuming it's on Amazon. Anywhere else in particular?Christopher Mayer: Yes. It's not very expensive. It's 12 bucks. It's 150 pages. I think it'll be a fun read for people who like to think about these kinds of ideas. Yeah, Amazon and fine bookstores everywhere as people like to say, right?Joel Bowman: Fine bookstores.Christopher Mayer: And the Institute of General Semantics, they sell it as well, so you can Google that. You won't have any problem finding it. And I don't get any proceeds, by the way. I don't get any royalties or anything. It's done for the Institute, so all proceeds goes toward them.Joel Bowman: Okay. I'll include a link to Chris's book (SEE HERE) and the others that we've spoken about here, Deals from Hell and Rousseau's Reveries, the very last book of his life. We didn't even get into talking more about his other particular ideas about some very interesting things. I think mostly people tend to focus on, as you said, his political persuasions, the Social Contract and that kind of stuff, but his works reward a whole summer of study at the very least.Christopher Mayer: I think so. I think if I had to sum up the big idea from that book, I'd say it was his idea that people were naturally happy, but they become unhappy by comparing themselves to other people and focusing too much on external things.Joel Bowman: Hell is other people, as Sartre said, if you let yourself only exist in other people's opinions. Okay, Chris, I feel like we could go on for quite a bit longer, going through your bookshelves and mine, but let's leave it there and we'll pick it up again next time.Christopher Mayer: Yep. Thanks, JoelJoel Bowman: Thanks a lot, Chris. I really appreciate it. And for listeners, again, please head over to the Substack page. You can get plenty of research reports, columns from Bill Bonner, Dan Danning, Tom Dyson and myself, and many more conversations like this, including the ones I referred to, our past conversations with Chris Mayer, where we noodle through more of his extended archives. And with that, we'll be back next week. Thanks a lot. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit bonnerprivateresearch.substack.com/subscribe

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65. Did you see Bill Bonner's video?

Live.2.100

Play Episode Listen Later Aug 31, 2022 42:04

This week, Brett talks about a new video he discovered by Bill Bonner, and how he is predicting that were approaching "Americas Nightmare Winter" Sign up for the FREE Webinar on August 10th at 7pm EST. go to RothWebinar.com to register! Please like, subscribe, and leave a review. We appreciate it!

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Dan Denning on Where to From Here?

Play Episode Listen Later Aug 20, 2022 29:26

Welcome back to the Fatal Conceits podcast, a show about money, markets, mobs and manias… not necessarily in that order. In today's episode, we're joined by Bonner Private Research's macro analyst, Mr. Dan Denning, who's been monitoring the markets from his “fortress of solitude” up on the high plains of Laramie, Wyoming. After the worst first six months for stocks in half a century… the worst market for bonds in over two centuries… and the worst for a standard, 60-40 portfolio in… ever, we wanted to get Dan's take on where he thinks we're headed from here.We talk fed hikes, inflation, jobs, housing, energy, BPR's “trade of the decade” and the looming threat of China's imploding housing market… and all in (just) under half an hour!For the less audio-inclined, there's a full transcript of the show (lightly edited for clarity) below. Otherwise, happy listening…Cheers,Joel BowmanThank you for reading Bonner Private Research. And welcome to our new listeners! Just so you know, this post is public, so feel free to share it with friend and foe alike...Joel Bowman: All right. Well, welcome back to another episode of the Fatal Conceits podcast, dear listener, dear viewer, as it were, if you're joining us on the YouTube channel. If you haven't already done so, please head over to our Substack page. That's bonnerprivateresearch.substack.com. By now, you'll be able to catch hundreds of articles from myself, Dan Denning, Bill Bonner, and Tom Dyson, about everything from high finance to lowly politics, and plenty more in between.There's plenty of research reports up there as well and also many more conversations just like this, which you'll find under the Fatal Conceits podcast tab at the top of the page. I'm delighted to welcome back our in-house macro analyst Mr. Dan Denning, who joins us today from the high plains of Laramie. Dan, how are you doing?Dan Denning: Yeah, good. It's been a busy couple of weeks, but still blazing hot summer here, so no complaints.Joel Bowman: As I sit here shivering in my sweater at four degrees Celsius. Mate, you and I were just speaking before we jumped on the recording here, we should make a special mention to a lot of new readers who have just joined us over the past few weeks or the past month. Welcome if you're joining us for the first time. I thought we might start with just getting up to speed with where we've been both with the project and with the markets for the first half of this year.I think most of our readers probably know the basic setup. Worst first six months for stocks in half a century, inflation at a 40-year high, worst first six months for the bond market maybe ever, and likewise for a balanced portfolio. Do you want to just catch us up to where we are now, eight months-ish into the new year? I know we've had a bit of a bounce of the June lows. There's talk about whether or not that's a bear market bounce or the road to recovery. Where do you map us at this juncture?Dan Denning: Yeah. I think that's the right question because there's the price action in the market and then there's the big picture. Taking our lead from Bill, we always start with the big picture, which is taking over decades, not just months or weeks or even years. From that point of view, not much has changed since the first half of the year or really since we started in January.That forecast or that prediction, if you will, is that the markets were extremely overvalued, mostly as a result of interest rates that had been left way too low for way too long. Then we expected lots of inflation because of both the fiscal policy, which is to say the stimulus spending from commerce. Then the support that the Fed gave to markets, which translated into higher consumer prices.There were a few other complicating factors like the result of the pandemic lockdowns and their impact on the supply chain. That is a really important story for investors ,that the de-globalization that the pandemic has kicked off is probably going to push inflation higher or keep it higher for longer than we think the stock market expects. But it was almost inevitable that after such a terrible first half of the year, you would get some sort of recovery or bounce in markets.Really the important question is, is that the end of the bear market, or is it a bear market bounce or a rally? I think our view, and I speak for Tom as the investment director and Bill as well, is that it falls pretty squarely within the definition of a bear market rally, which is easy to say academically, because you can look at it and say, "Well, the S&P is up by almost 20% from the June lows." Some of the more aggressive growth-oriented indices and stocks like Apple, the NASDAQ, they're up more than that.These are really challenging moves for investors looking at the long term, because in the short term you feel like I'm missing out and maybe I'm wrong, but from our point of view, nothing has changed technically or fundamentally to suggest that the primary trend in the markets is still down. So that's what our investment strategy is set up to address is, how do you preserve your capital? How do you avoid the big loss and how do you prepare for this stagflationary environment where you have high prices that are sticky and lower stock prices?There's a lot involved. There's interest rates involved and real interest rates and things like that. I'd say we got initial confirmation in the first half of the year that our macro thesis was spot on and since then we've seen sort of a counter cyclical reaction in stock markets. You never want to say the stock market is wrong. You never want to say that the price action is wrong, just because it disagrees with your thesis.But I'd say based on the levels in the stock market right now, we're not going to change our call about where we think things are headed.Thank you for reading Bonner Private Research. This post is public, so feel free to share it friend and foe alike...Joel Bowman: You mentioned stagflation there and prices. We've obviously got financial asset prices on the one hand but then prices of everyday goods and services that people consume on the other hand, that's obviously a big part of the picture. What do you say to people who make the case that inflation has peaked?I heard somebody use the metaphor the other day that the pig had moved through the python, this massive $6 trillion cash giveaway is moving through the system and now we're on the other side of that. What do you say to that argument?Dan Denning: Yeah. I mean, I'd say it's wrong. I think there's certainly an element that inflation was exacerbated by one-off factors, but that to me seems like the conventional explanation that it came easily and it will go away easily. History suggests that's not the case, that there's a lot of inertia once inflation gets hold. Part of that is just monetary and then part of it's psychological. If you look at real interest rates, so you look at the Fed funds rate adjusted for the inflation rate, it's still negative.It's around 6%, maybe almost 7%. Markets seem to have gotten ahead of themselves in saying that inflation will come down and the rate of interest rate increases has probably already peaked as well so they might continue to go up by 50 basis points or 25 basis points. But 3% is probably where the Fed will stop and therefore it's okay to go buy growth assets again at really high premiums, at high price to sales ratios, high price to earnings ratios.Those ratios are down a little bit from last November, but they're still elevated based on their historic high, so things aren't cheap right now. They're not cheap either especially if you think that we're headed toward either a recession or we've been in a recession, or that we'll have stagflation. You're pricing stocks as if interest rates were going to be lower or inflation was going to be lower and earnings were going to be higher.To me, that's a very rosy scenario and the risk if you're wrong is that there's still another 30 to 50% drawdown out there for equity prices based on where they normally revert in a mean reverting crash. Again, what I've been looking at lately, Joel, is I've been looking at the credit markets, especially if you look at some of the junk bond exchange traded funds, those have started to roll over a little bit.I say that because sometimes the credit markets are a little bit better indicator of financial conditions than the stock market. I'd say people who think that the Fed is done raising rates and that inflation's going to come down quickly, are hoping that's the case but the historical evidence is that it's not the case.Joel Bowman: You mentioned real rates, i.e. adjusted for inflation, and we're probably maybe something like 600 basis points behind the curve, as they say, where historically I think it was Volcker who jacked up rates to 600 basis points beyond the curve to get inflation under control when it was at roughly this level 40 years ago.Just sticking with real-world adjusted prices for a little bit, I know you've talked a lot about real wages, for example, and just to get back to your observation then that a rosy outlook necessarily entails increased earnings for corporations, I'm wondering how people who make the peak inflation argument are factoring in higher earnings when people's real, that is to say adjusted-for-inflation earnings, are lower and even going backwards.Dan Denning: No, I don't know. I mean, we both read the same people and we try to keep up. I mean, it's an important thing to keep up with data, evidence and arguments that could indicate that you've missed something or that you're wrong about something. But when you look at credit card debt exploding to its highest levels ever, a number of people taking out new credit cards and then the employment figures they vary from month to month, they're volatile. Are they leading? Are they lagging? Are they even correct?These are surveys. They're not necessarily hyper-accurate accounts of what's going on in the labor market, but if you look at the trends for real wages adjusted for inflation over time, those are easier to understand and they're easier to extrapolate.That compared to what's going on with energy prices, with healthcare costs, with food prices, with the cost of rent, with the cost of existing homes and new homes, those suggest that it's just harder than ever for normal people on a median wage and a middle class salary, even the rarest of things, a home with two wage earners, a mother and father who are both earning income, it's just the cap is getting bigger and bigger.I don't find it credible to think that there's going to be a huge rebound from the consumer in the second half of this year that justifies paying higher prices for stocks right now. Now, you talk about the stock market, we still look at individual companies where the setup is more favorable.I think that's an important point to make is as an asset class, our view on stocks is mostly bearish, but part of our strategy is to own some of them anyway, as part of a diversification approach and to focus on companies that have pricing power, companies that don't have debt, companies who for various reasons that are particular to their industry or to their management seem to be bucking the trend.That doesn't hedge your risk that when you own stocks in the bear market, most stocks go down, but Tom's actually been really... I say, actually. He's been doing it his whole career. He's been pretty good at finding these little pockets of opportunity. For new readers, or I think who would like to be more aggressive, we're simply not going to do that. We're not going to be aggressive on the short side because we're bearish and we're not going to try and surf these rallies and time the market perfectly in and out.I think Tom's going to continue his bottom up balance sheet analysis of companies that have a favorable setup and then trade them. I say trade, I mean, these are not long-term holds. We have one long-term hold, which is our trade of the decade, but the other stuff is not meant to be held for years. It's months or longer, but he'll be clear about all that when he sets them up.Yeah, it's difficult because we all have to do something with our money and it's hard to sit there and watch the market go up and wonder if you've missed something. I think we're on top of the macro trends and nothing has changed in the first half of the year that would cause us to think we're missing the boat on this.Joel Bowman: Right. Well, let's make that transition then for readers who are following along from what you've outlined then as Tom's tactical trades. They're these little pockets of the market where he sees perhaps an asymmetrical risk or favorable winds blowing, given a particular set of circumstances, but over the longer timeframe, which is to say the remainder of the decade, we've set up the /trade of the decade' as Bill has called it.This is essentially long conventional energy sources and there's a particular play on that for our readers. Do you want to set the backdrop there and maybe just talk about the slight correction in oil prices that has manifested over the past couple of months. Where we are with that?Dan Denning: Yeah, sure. I mean, that's an important one because if you want to do something, that's the simplest one to do. I would encourage people to read that report, which we'll probably update before the end of the year, because when we put it out at the beginning of the year, it was really based on two or three important ideas, none of which have changed. In fact that they've all gotten stronger and to extent that data has come out since then, I think it's confirmed what we said.The first one was just purely driven by the price action in the energy sector over the last 10 years. Anyone who's familiar with the idea of the Dogs of the Dow, that if you buy the worst performing Dow stocks from the last year and they tend to be not always the best performing, but they rally, or you can buy the best performing stocks from the previous year.The momentum investors would tell you to buy the best performing stocks from last year because they're probably going to be the best performing stocks this year. Contrarian Dogs of the Dow approach is to look for stuff that's done so poorly that it can't get much worse. When it gets worse in the Dow, they just kick you out of the Dow anyway. That's actually what happened with ExxonMobil.When we were looking, we looked at both the size of the S&P energy sector as a percentage of the entire S&P 500 and the performance of that sector relative to things like financial stocks and tech stocks, especially, and it couldn't have gotten any worse. Well, I mean, I suppose it could have gotten worse, but worse would've been the death of the coal industry and the death of the oil industry, which funnily enough, some people were calling for at the end of last year.They were saying, "That's it. Oil's never going to reach a hundred bucks again and it's uninvestable." I think Jim Cramer at one point said oil stocks are uninvestable.Joel Bowman: That's a great contrarian indicator for you right there.Dan Denning: Yeah. The magazine covers as well. The Economist had a lump of coal in a bell jar saying... I don't remember what it said, something like the end of coal. But those are cultural indicators of what's going on with liquidity and asset allocation and investor sentiment. It was underinvested in from that point of view, but that was the first point that it was bound for a rebound over the next 10 years, compared to the previous 10 years.The second point was because of regulatory action, which was mostly hostile to fossil fuels that the oil and gas company majors especially had dramatically reduced their capital investment in exploration and in production so that if demand recovered from the pandemic drawdown, which you would expect it would recover at some point, then the industry was not in a position to rapidly increase oil and gas supply to keep up with recovery demand.Our idea there was that demand would grow. It would resume, and it did quickly. You had the added complicating factor of the war in Ukraine with Russia and how disruptive that has been to energy supplies. That's a big story, which we probably can't get into here, but the idea that energy is being de-globalized or it's being politicized in a way that it hadn't before.The basic argument was just supply and demand, that the case that fossil fuels were dead was overmade, and that even if you believed that we were moving to renewables in this energy transition, it would be probably decades, not years and certainly not months and it wouldn't be seamless. That was a favorable setup.The third, which is probably a little more controversial is the very idea that we're moving seamlessly to an energy transition where the internal combustion engine will be replaced by electric cars and wind, solar and renewables, hydro, will all eventually replace coal and gas and we won't need nuclear is a pipe dream. It's a thermodynamic pipe dream and we're already seeing that.We didn't expect this at the time, but I saw this morning that Germany has two months of natural gas reserves, thanks to its dispute with Russia. That's a country and an economy that set themselves up as if they would always be able to get cheap fossil fuels, but switch miraculously to renewables. You and Byron King have had a lot of really productive discussions on why that's not true and what will happen if you make policy based on those assumptions.On the investment side, our conclusion was that for those three reasons, the underperformance in the previous 10 years, the underinvestment in the capital required to increase supply and the overemphasis on the energy transition and the idea that everything would be green and electrified, that over the next 10 years it would be hard to find a sector that's going to do better than oil and gas. That you can probably ignore the short-term price fluctuations.We get that a lot from new readers saying, "I didn't get into the trade when you made it. Is it too late?" What we say is we'll revisit it from time to time to look at when is an attractive time to enter the trade, and that means there's going to be drawdown. We were up by over 130% at one point, and then it came down, then it goes back up. The whole idea... Bill's idea of a trade of a decade was you just didn't have to pay attention to any of that over 10 years.Find yourself an attractive entry point to the trade, put as much money in as you're comfortable losing, and then forget about it. Don't agonize. If you can't sleep because you've made an investment that's supposed to work over 10 years, then probably it might not be the right investment for you. We'll update that report. I think those three points are still in our favor, and if anything, I think the decline in the oil price has been overdone.That's an interesting issue, which I'll get into in a weekly update in the next couple of weeks, but I wouldn't worry too much about the price action in the oil market.Joel Bowman: I should mention there that we recently unlocked a transcript that we recorded back in late December of 2021 with Bill's longtime friends, Rick Rule and Byron King. We had a really great discussion. This was when we were just getting going with Bonner Private Research and they were generous enough to give us their insights on what was happening in the energy markets.Of course, nobody could have foreseen the events in Eastern Europe unfolding as they did, but that served really just to exacerbate the situation that they had seen there. You can go onto bonnerprivateresearch.substack.com and check out that unlocked transcript. I'll put a link in the notes below this show, but Dan, we're almost out of time here, mate. I've just got one little black swan type question.A few of our readers have written in asking possibly off the back of one of Tom's observation, he's been writing a little bit lately about the slowdown in China and the bursting property market there. I think he noted that the Wall Street Journal had called the Chinese property market the single biggest asset class by value on the planet and that's something in the order of $53 trillion or some absolutely mind-boggling number there.Given what's happening over there in China, are you at all worried about being dragged into a global recession? What that knock-on might look like with regards to oil prices? How does that impact the thesis? I know it's kind of a big question to end on, but...Dan Denning: No. It's a great question. I mean, those are the things we're paid to think about and try to figure out ahead of time. I think it sort of graduates in scope. If you want to start with the oil markets, if China's in a recession or if they're locking down cities or if the property market collapses, or if there's disruption in their property market that causes slower economic growth, then that's going to impact their demand on oil.They've also shut down a bunch of factories in different places, so I think it has impacted oil demand, which has shown up in the oil price, which was something frankly I had neglected to pay attention to because you just talk about the global oil market and you forget that there are some components of it that drive the price more than others. That I think is something worth keeping an eye on.I think the two other... To be concise, there are probably two other things we'd look at. One is the financial stability in China and how that plays into whether China has an alternative to the dollar or the truth is China's capital market is still mostly closed to the rest of the world so they could have a property collapse and their banks could collapse, but the government would absorb those losses or they'd transfer them to someone else in the system.That doesn't mean it wouldn't have a domestic impact. When people have money that they think is in a bank account and it turns out that it's in an investment product and they can't get that money, then that makes people upset. We see some of those stories, probably not as much as we should, but I think that's also a cautionary tale for investors in the West and the United States is that money in the bank. Yeah, I mean, it's FDIC insured so I don't want to suggest that it could be seized like that, but that's what can happen.China's capital markets aren't ready for prime time. It's not going to replace the dollar or the U.S. bond market anytime soon, but I think the highest level about instability in China economically is how it plays into their strategy with regard to Taiwan and challenging the United States militarily.We didn't talk about those things because basically from when China entered the World Trade Organization in 2000, until the beginning of the pandemic, there was what we called the symbiotic relationship between China and the United States where China exported goods to the U.S., generated huge trade surpluses, which it reinvested in its own economy to build its infrastructure to re-migrate about 500 million people from the countryside to the cities. That's done. It's not entirely done.In fact, it may have been overdone in terms of the amount of investment they made in real estate to resettle those people. But if you have an economy where voters... Well, they don't really vote, but if you've got people that are unhappy because they're not sure their money is safe anymore, and you've got a conflict with Taiwan, and you're trying to decide whether the Russian war and Ukraine gives you an opportunity to conduct a military operation that the U.S. might not be able to resist, those are all things that... They're not black swans, because we can talk about them.A black swan would be something we just didn't even think about and weren't prepared for. We know that there's a possibility for military conflict in East Asia. We don't know if it'll be the North Koreans. We don't know if it would be the Chinese. We have no idea if China would suddenly say, "You know what? We're not worried about our economic situation anymore. We're going for territorial acquisition maybe as a way to distract our people from our crashing economy."As you said, China's property market is something like 300% of GDP. It's a massive sector which has suffered from massive inflation. It's one of those you have to keep your eye on because when you take your eye off it, that's when it's most likely to blindside you literally because we're all paying attention to semantic debates over what a recession is or over where interest rates will top out.In the meantime, you've got this giant lumbering economy that may be in crisis mode, and they're making noises about a conflict. Yeah, it's an excellent question and we'll be covering it more for the rest of the year, for sure.Joel Bowman: Excellent. All right. Well, just on the subject of recession, obviously, Dan, the correct definition is a recession is that it's only a recession if it comes from the recession province in France, otherwise it's just a sparkling economic gut punch. Mate, your readers, our readers, Bonner Private Research readers are going to be able to catch all of your weekly updates every Friday.Tom writes to our readers every Wednesday, so please be on the lookout, members, for those twice weekly updates. Again, as I said, it's bonnerprivateresearch.substack.com. Check out the dollar report, the strategy report, trade of the decade report and all the transcripts that we post from our special private summits, the latest of which Bill convened a round table to ask our panel, nine guests, two very simple questions, that is to say, what is going on in the markets and what are you doing with your personal money?We had a bunch of newsletter veterans, many of whom our readers would recognize. Alex Green, Porter Stansberry, Doug Casey, Byron, yourself, Tom, Rick Rule, and others besides. I'm sure I'm forgetting some. Jim Rickards.Anyway, it was a really all-star lineup. Obviously not everyone agreed because we had nine different people looking at different sectors of the market and trying to keep their eyes on this huge, complex global setup. Anyway, lots and lots of really interesting thoughts there. Again, head over to the Substack page where readers will be able to check that out. In the meantime, Dan, keep safe up there in Laramie, mate, and we'll catch up again very shortly. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit bonnerprivateresearch.substack.com/subscribe

united states history china apple dogs france germany west russia chinese ukraine russian cheers wall street journal taiwan markets wyoming economists fed oil substack gdp mate eastern europe nasdaq north korean celsius dow east asia s p fdic exxonmobil world trade organization laramie jim cramer denning volcker jim rickards doug casey rick rule bpr alex green porter stansberry bill bonner byron king tom dyson

TRANSCRIPT: Byron King on Russia, Energy and Gold - Part II

Play Episode Listen Later Jul 29, 2022 24:49

And now for some more Fatal Conceits…Last week we brought you Part I of our conversation with Harvard trained geologist and natural resources expert, Byron King. There was a lot on the table for discussion.For instance…Have you noticed news from the Ukraine seems to have dwindled over recent weeks? What was once non-stop, wall-to-wall coverage now garners comparatively little attention. Of course, there are other issues at hand… like inflation at a four-decade high… the worst start to the year for stock markets in half a century… and for bond markets in over 200 years… And now, we learn that the US has registered two consecutive quarters of negative GDP… the common definition for a recession, and the one practically everyone who follows the economy at all still uses. But all that doesn't mean the impacts of the war – and the west's response to it – are not working their way through the system. In fact, the knock-on effects for international energy markets, global supply chains and even sovereign currencies could hardly be overstated. As usual, Byron had plenty of insights on all of the above, and more. (If you missed Part I of our conversation, you can catch up here.)In Part II of the discussion, we pick up the action with the idea of a “methane-backed ruble.” That is, what happens if and when Mr. Putin decides he wants to back his national currency, which is stronger today than it was before the first tank rolled across the Ukrainian border, with Mother Russia's vast energy reserves? What does that do to the heretofore assumed petrodollar hegemony? Might Japan, almost entirely dependent on foreign energy (mostly from Russia), be forced to settle its contracts in Russian rubles? What are the other BRICS nations (Brazil, India, China and South Africa) thinking, as they stand by and watch the weaponization of the US dollar? Might an alternative to the petrodollar begin to look attractive to them?There's so much to cover, from the war itself to Russian military supplies, the unipolar verses multipolar political landscape, the philosophy of Eurasianism and much, much more…You can listen to the entire episode by simply hitting play above or downloading the Substack app (see the little headphones button there to listen in). Oh, and if you like what you hear, please help us spread the word by sharing this episode with comrades and enemy combatants alike, right here…For Bonner Private Research members, there's a full transcript, lightly edited for clarity, below the paywall and on our Substack Page. If you're not already a subscriber, but would like to enjoy the many benefits that come with membership, you can sort that out right here.We hope you enjoy the show…Cheers,Joel BowmanJoel Bowman:Welcome back to another Fatal Conceits Podcast, dear listener. A show about money, markets, mobs, and manias. Not necessarily in that order, of course. If you haven't already done so, please feel free to check us out on Substack. You can find us at bonnerprivateresearch.substack.com. There, you'll find hundreds of articles on everything from high finance to lowly politics, plenty of in-depth research reports, and of course, many more conversations like this under the Fatal Conceits Podcast tab at the top of the page.In part one of my conversation with Byron King, which we published last week, he and I spoke about the ongoing war in the Ukraine and what that means for international energy markets. Specifically, Germany's coming "energy Stalingrad." We also looked at what a decade or more of under investment in the real, stuff-based economy means for us today. That's everything from a lack of real investment in research and development through to a paucity of human capital. And we spoke about the ongoing financialization of the Western economies and what that might look like in reverse, during a de-globalization phase. If you haven't already done so, you can check out part one of my conversation with Byron King. Again, that's on our Substack page at bonnerprivateresearch.substack.com. In today's episode, we bring you part two of my conversation with Byron. We pick up the action while we're wondering about the potential of a gold and/or methane backed ruble. What impact might that have on global markets and, of course, the long enjoyed petrodollar hegemony. Might all that be coming to an end? I also ask Byron where he sees markets headed for the back half of the year and ask what he's doing personally with his own investments. There's all that, and plenty more, on the table in today's conversation. I invite you to please enjoy it after the break. Getting back to the money underpinning all of this, Byron, I asked you back in May about the possibility of a golden/gaseous ruble. You called it a methane-backed ruble, I think. How has that played out now? You mentioned, obviously, Putin playing his hand with the energy markets. What developments are you seeing along the lines of a potential bifurcation of global monetary systems and so forth?Byron King:Oh, I think that we are watching a slow unfolding of the next step of de-dollarization. I don't think the Russians perceive any real reason to make it all happen in a hurry. The Russians are still insisting on rubles for natural gas, and so there are countries in Europe that are making these deals. I mean, Hungary is like, "The rest of you guys in the EU, you do what you want, but we're Hungary. We want natural gas. We get cold in the wintertime. We want that Russian natural gas," and the Russians are like, "Yeah, sure. We'll make you a deal, and we'll work it out with you." Serbia is in the same boat.There are companies in Italy, in fact, that are again talking with the Russians. "Listen, guys. We want to work with you. We want to make a deal with you." You see that, but at the same time, you've got the high level political types. The Northern European political honchos, who are still banging the drum about how we're going to sanction Russia. "We're not going to buy anything from them," and everything else. It doesn't matter to Russia. They're going to sell their oil, their gas, etcetera to China, to India. Russia just fired a huge shot across the bow over in the Far East with the Sakhalin-2 project, where they essentially nationalized it.They said, "I mean, we know that you foreign companies own sections of this, but we're taking them from you and it's ours now." Now, if you're Japan and you are entirely reliant, 98% reliant on imported energy, much of which is Russian oil, Russian natural gas, you have to be looking at this and thinking, "Oh, my God. Holy smokes. Now, what?" There's so many things going on. There's so many moving parts to it. I mean, the Saudis are talking about not adhering a hundred percent to the old petrodollar idea.Joel Bowman:They're in talks with the Chinese, right?Byron King:Yeah. They're making deals with the Chinese to sell oil in Yuan. The Saudis, they'll take Chinese Yuan, and then they'll go back to China and buy Chinese things.Joel Bowman:And that's 25% of the Saudi total (oil) exports, straight to China, a not insignificant portion. And so, what happens then with Japan? To go back to the Far East, for example. If, let's say, Mr. Putin decides, for his next chessboard move, that he's going to demand gas sold down into Japan – again, another not insignificant market – if he demands that be settled in rubles?Byron King:If they want to keep their houses warm, their industry's running, the chemical industry working, they're going to have to make a deal with the Gazprombank. I mean, Gazprombank, the bank owned by Gazprom, is set up to say, "Okay. We will take your Japanese yen," or, "We'll take your dollars. We, the bank, and we'll convert them to rubles. We will be able to say that you are buying gas in rubles." But, what's really going on here is, there's an international currency exchange going on. Yen for dollars, dollars for rubles, however the wiring diagram is on any given transaction.But what it does, it strengthens the ruble as a currency. I mean, the ruble today is a stronger currency than it was back in February. Again, before the first Russian tank rolled across the border. I mean, when President Biden says, "Oh, we've turned the ruble to rubble," it's like, "Well, that didn't last very long now, did it?" Yeah, sure. In the context of a week or two, you crashed the ruble and things were in turmoil for a little bit, and then the ruble just got stronger and stronger and stronger. We talked about this before. When the Russians said, "We'll pay 5000 rubles per gram of gold." That 5000 has changed since then, but that's still out there.There is a ruble to gold, ruble to natural gas, hence energy to gold if you do your geometry, your 10th grade geometry. If you start to connect these little angles here, there is a ruble energy gold connection to whatever the price of natural gas is, or gold is, in dollars, that feeds back into the strength of the ruble. I think one of the big issues is not what happens when the dollar collapses. "When the dollar collapses." It's what happens after. What will replace it?Joel Bowman:Right. What replaces a petrodollar? What does that look like geopolitically as well, very interestingly, because the US, since the collapse of the Soviet Union back in '89 or '90, has maintained this dollar hedgemony, as a kind of unipolar superpower in the world. As you mentioned at the beginning of our conversation, 30 years of diplomacy that has gotten us essentially to where we are today. Now, it looks like that is being turned to rubble. Just to point out the facts.Byron King:Absolutely. I mean, I think most Americans have a sense that, "America, we're a big powerful country," and everything. If you said to them, "Do you understand the concept of a unipower," They would think, "Well..." If you talked it through, they'd be like, "Yeah, okay. That means we're number one," and all this sort of thing. Well, that's a myth. That is a myth. That's mythology, because America is not number one. We are not an energy-dependent country anymore. We have completely mismanaged our own internal energy system. We're having brownouts and blackouts across the country as the summer unfolds. We've mismanaged basic things, like food supply. I mean, what big powerful country doesn't have baby formula for months at a time? It's crazy.I mean, it's not that America is a weak nation. No, we're not, but the rest of the world, they're coming out of their shells. Industrially, there is simply no competition in basic industry to, say, China. I mean, they pour over a billion tons of steel a year. The United States last year, 2021, poured 85 million. I mean, it was 12 to one. China poured 12 tons of steel for every ton that the US poured. What'd they do with it? Well, they're building China. Building railroads, building cities, building ships, building whatever. Big country, big build out. In terms of Russia and Russian technology, there's this very strange concept in the US and in the West that the Russians are... "They're dumb. They can't do anything right," and all this sort of stuff. I don't know about that.I mean, if you look at the International Space Station orbiting over the earth, two thirds of that space station was built by Russia. I mean, for 10 years, we couldn't even get our astronauts up there without riding on Russian rockets. When people say, "Well, they're getting their butts kicked in Ukraine." No, they're not. I mean, who says that? They must be reading Western propaganda, because if you actually follow the facts on the ground, the Russians are using maybe 20% of their combat power in Ukraine. They're moving at their own pace. They've got weapons and systems behind the lines that they've never used just because they don't want to show us what they look like, but we suspect we know what they are. We don't ever want our guys to face their guys using those weapons, because it's going to be a mess.Putin talks about "new physical principles." Well, that gets back to the unipolar/multipolar aspect of the world. The world is going multipolar. The West has a certain philosophy about what life is and what the culture should be, but so does Russia. There's a concept in Russia, and very, very few people talk about it outside of Russia, it's called Eurasianism. There's a whole school of thought around this in Russia now. It's like, "We are not Europeans. Especially, we're not you Western Europeans, with all your decadence and all your weirdness. We are slightly European, but we're really Eurasians because we span the continent. The iron ribbon of the Siberian railroad ties us together." But, there is a whole school of thought in Russia called Eurasianism. That is how they see their future.That's a whole talk in and of itself. I mean, people write books about it. If anybody's listening to this and they're curious, go to Amazon and dial in "Eurasianism" and you'll find a whole bunch of books all about it written by ivory tower scholars. It's not something that you're going to hear on 60 Minutes, or the nightly news, or something like that, but that philosophically is what's animating a lot of what's going on in Russia, Russia-China, Central Asia with all the 'stans down into India. There is a whole sense that, "Okay. You Westerners, you had your couple of centuries of expansion, colonialism, and all that sort of stuff. You've played a really good game with this petrodollar thing for half a century. You pay us these alleged petrodollars and we send you real tankers full of oil. The dollars never even leave your country, because they wind up back in your banks and your treasury bonds. Somehow or another, we send you stuff, but we don't anything back for it. We're coming to the ending whistle of that game. It's just a question of when, not if.Joel Bowman:It does seem ultimately a kind of war of attrition, as you mentioned, with Russia happy to bide its time there on its Western front. It does seem like Putin will be able to go without Netflix and McDonald's for a lot longer than the West will be able to go without titanium and noble gases, for example.Byron King:Absolutely. People say these things that are just silly. They say, "Oh, the Russians are running out of ammunition." Every two weeks, there's a headline, but they have another two weeks worth of ammunition. No, they're not. I mean, are you kidding? ILook, I'm an American retired military guy and I know, I absolutely know Russia has entire mountains hollowed out filled with ammunition, with train tracks running right into them. If they need ammo, they just load up another train and off it goes. They have everything they need, whereas in the US... For example, just look at US artillery round production for the last, say, 10 years. If you took every single artillery round that the US Army Marine Corps produced in the last 10 years, and you somehow magically put them in Ukraine and fired them off, you would have about a month's worth of ammunition supply. 10 years would be shot off in about four or five weeks.Joel Bowman:That's incredible.Byron King:Right. The last three years of ammunition production would probably last about five days. I mean, that's the rate of expenditure. We say, "Well, we'll just buy more ammo." No, we won't. You need an ammunition factory to do that. You need a big plant. You need steel, you need chemicals, you need electronics. You need people who actually know what they're doing. People think, "Oh, yeah. You just crank those ammo rounds out like hot dogs," or something. Actually, no. You don't. I mean, you practically hand build an artillery shell, which means you need hands, which means you need somebody attached to the hands with a brain inside their head who knows what they're doing. Russia has factories for this. Russia has entire cities where they do this stuff. We don't in the United States, nor in the rest of NATO and everywhere else. It's depressing to talk about, except it happens to be true.Joel Bowman:Yeah. Again, if it hasn't been clear thus far in the discussion, this is just the facts. This isn't in praise of one side or another. This is just trying to basically get to the bottom of what's going on without any political persuasion here. Just the facts, as I said, but it does appear, when you read the Western media, that the "two weeks to run out of Russian ammunition" is the new "two weeks to flatten the curve." And we know how that claim went. Byron, I know you've got a shoot off for another appointment here. Finally, I've got a quick question from our mutual friend, Bill Bonner, for you. It's going to be a huge, huge achievement for you to condense an answer into the couple of minutes that we've got remaining, but maybe you can give a plug for some of your own writings, let people know where they can find all that good stuff. But to Bill's questions, he wants to know, Byron, what the hell is going on in the markets, and what are you doing with your own money?Byron King:Well, I am as worried as anybody else about the markets. The markets have slid down. I think they have further to fall. I mean, I think they could plateau along for a while, but I think they could also fall some more. It's July, and in August, half the world goes on vacation, although that doesn't mean that bad things don't happen in August. Then in the fall, typically... If we're going to have another market crash, why not in the fall? But me? I'm invested in mines and miners. A whole bunch of juniors that I know very well. And when I invest in a junior mining company, it's because I know the people. It's because I've visited the project, the site. It's because I've held the core from the drill rig in my hand. It's because I've looked at what they have. I believe in the asset. I believe in the technical people. I believe in the management. When I'm investing, that is what I do.I think energy has a nice, long upside to it. We've passed that inflection point where we can just fix it with a quick remedy, or whatever. Standby for energy to be more and more expensive over time. We were talking about Germany, and we were talking about exporting LNG from North America to Europe. Well, if we really do turn natural gas into a global commodity ,as LNG, then we in North America are going to be paying far higher prices. If you heat with natural gas, or you use natural gas for industry, it's going up.Where I live, I heat our house with natural gas, and I fully expect my natural gas bill to triple this coming winter. Like a lot of other people, I have cut back on things. I mean, I drive less because gasoline is twice the price. I'm a much more discerning shopper in the supermarket. I actually look at the labels and look at the price tags on things before I toss them in the cart. The travel that I'm doing, it's business-oriented travel. If I can get somebody else to pay for it, that's even better. Get the company that I'm going to go visit to pony up. "Okay. I'll come and look at you, but you guys have to share the burden here." Now, I'm not slash-your-wrist depressed, or anything like that. No, I think there's incredible opportunities out there for patient investors who are looking for bargains. But you've gotta be willing to ride the rough waves.I think gold/silver are wealth preservers over time. It's just a question of when and how long. Other things, like copper and other base metals, they absolutely have to do well because there's not enough out there considering the future demand that's happening as we speak. I mean, the battery metals, the technology metals. We could talk about that all day, but there are some incredible opportunities out there just waiting, which is not to say that in biotech, in robotics, in AI, and in medical system people aren't going to be making huge amounts of money investing in that too. That's just not my strength. If you're looking for the best biomedical ideas, I'm not your guy. But, in terms of what I'm looking at right now? Well, this is the 78th anniversary of the Bretton Woods Conference in New Hampshire, back in 1944. Then, Nixon took the world off of the Bretton Woods standard in 1971, so it's the 51st anniversary of that come August 15th.I anticipate that there is going to be upheaval in the basic units of currency that we use to denominate everything. I mean, we call them dollars now. A long time ago, people called them seashells, or whatever. For a while, people called them gold. What's going to replace the dollar? I don't know, but something is. Something's going to. I think, on the other side of that event horizon, you want to have real things that will preserve your value in whatever it is that they are denominated in or calculated in. At some point or another, a chunk of copper is always going to be worth something. This copper is from Keweenaw Peninsula, Upper Peninsula of Northern Michigan. This is elemental, native copper. This got pulled out of a rock by a glacier. That's why it's rounded looking. This other one here is from Keweenaw too, but this I chopped this one out of a rock. This was copper. Anyhow. This stuff is future wealth, is preserving your wealth.Joel Bowman:Sounds like "stuff" is due for a comeback. And if there's anybody who knows a thing or two about getting stuff out of rocks and from under basins and subterranean, high-pressure deposits, it's Byron King. Mate, thank you so much for giving us the low down on everything from the geopolitics unfolding over in Europe to what we can expect back here in the West, in the Americas. And we didn't even get to South America in this call. We'll have to save that for an entire another discussion.Byron King:Another time. Thanks so much, Joel.Joel Bowman:And thanks to you, Byron. Thanks so much for your time. Always a pleasure to chat to you. Again, readers please head on over to bonnerprivateresearch.substack.com for many more conversations like this and plenty of articles, reports, and other resources besides. Again, it's been a pleasure. This is Joel Bowman for the Fatal Conceits Podcast. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit bonnerprivateresearch.substack.com/subscribe

Byron King on Russia, Energy and Gold - Part I

Play Episode Listen Later Jul 19, 2022 33:36

And now for some more Fatal Conceits…In today's episode of the Fatal Conceits podcast, we speak with energy and resources expert and Harvard-trained geologist, Mr. Byron King. In Part I of our conversation, Byron gives us his impressions of the recent PDAC miner's conference up in Toronto, explains why “revenge travel” is turning airports into zoos and digs into all the resources that you didn't even know came from Russia… but that the world will have a tough time doing without nevertheless. We also talk about Russia's relationship with China, the west's continuing underinvestment in human capital, the financialization of our once great economies and plenty more besides.This Fatal Conceits podcast episode is public, so feel free to share it with goldbugs, geopolitics nerds and energy nuts alike...It's always a pleasure speaking with Byron, a man with a deep understanding of military history, geopolitics and all the various processes that go into inventing, building and transporting the “stuff” we depend on to keep the world's engines running. Please enjoy our conversation with Byron King and look out for Part II this time next week.Cheers,Joel BowmanP.S. Members can find a transcript of the show, lightly edited for clarity, below. If you are not already a paid up member of Bonner Private Research, but would like to access the many resources available to subscribers, you can join us today, right here…Joel Bowman:Welcome back to another Fatal Conceits Podcast, dear listener, a show about money, markets, mobs and manias, not necessarily in that order. If you haven't already done so, please be sure to head over to our Substack page at bonnerprivateresearch.substack.com. There you'll find plenty of articles numbering now in the hundreds, maybe the thousands on everything from high finance to lowly politics, and of course, many, many more conversations just like this one under the Fatal Conceits Podcast tab.Today, I'm delighted to welcome back to the program a long-time favorite of the Bonner Private Research readership. He's someone I've known for many, many years: Mr. Byron King. He's a prolific writer, a Harvard-trained geologist, a renowned energy and resources expert, and among the most popularly requested guests on this show. Byron, it's a pleasure to welcome you back to the show.Byron King:Well, hello. And it is a pleasure to be with you. Thank you.Joel Bowman:Byron, just before we jumped on the recording here, we were talking a little bit about the ease of traveling around the world, flitting from one continent to the other. And I know it's been a lot in the news lately and potentially this ease of travel may become a relic of the past if energy markets continue to go the way that they're going. But before we get to everything that's happening in Europe and everything that's happening globally, I want to just catch up with your travel.Since we last spoke back in May, you were up at the PDAC miner's conference up in Toronto. You sent us at Bonner Private Research, a couple of choice pics of the place. It looked more like maybe a rock concert than a mining show. It was mobs. Give us your impressions from the front lines of the heavy diggers.Byron King:Yes, the Prospectors and Developers Association of Canada, which is PDAC, P-D-A-C, is an annual mining conference. Usually, it's one of the biggest in the world. The last time they had one was in March 2020, literally just days before the world shut down. They did not do it in 2021. In 2022, they were going to schedule it in March, but because of sort of residual COVID reasons, they moved it to June.Now, there are a couple of interesting points there. Usually, the PDAC Conferences is in March because that's a time of year in the Northern hemisphere when a lot of people are not out in the field exploring. The winter is just ending, snows are melting, things are muddy, mucky, you can't get around. So traditionally, that was when all the miners could come down into the big evil city and get together and have their conference. Well, they moved it to June because of COVID, so that created some issues because a lot of people would rather be out in the field working in June and catching the good weather, the good field season.So fewer people showed up on the technical end, a lot of the geologists, a lot the engineers and what have you were out in the field. Now management tended to show up and they actually liked it because they said, "It means that my geologists aren't here and nobody can poach them away from us."Joel Bowman:Very good.Byron King:Because there's a shortage of people in the industry. It's not a COVID thing. It is just a demographic issue that after all these years of under-investment, when you say under-investment, we're not pouring money into new mines and equipment, all that.It also means you're not hiring people, and so when the young people go to college or university, they say, "Oh, gee, where can I get a job? Well, I'm not going to go into the mining industry because there're no jobs."Well, here we are now, years later, and we're saying, "Gee, we have a whole bunch of gray-haired, white-haired people, but there's a whole missing cadre of talent there." You really can't do too much without a lot of smart people working together. That's true in mining and it's true and everything else. That's one angle to it.Now, the good news is, and you mentioned that I had sent you some photos from up there, I was stunned when I showed up. It was Monday, Tuesday, Wednesday conference.On Monday morning the line was unbelievable just to get into the convention center. It's the Rogers Convention Center in Toronto. Big, huge, sprawling facility. Gigantic. There was a line outside the door and the Toronto police were out there, in a nice way, with sort of crowd control measures, lining everybody up, going through these mazes of rope lines and everything else. They can only feed so many people in at a time. And the fire marshal has his rules and all those sorts of things. So it was absolutely crowded. It was absolutely mobbed. There was a large contingent of presenting companies there, management teams and the investor relations people. Not so much the technical folks, because like I said, they're out in the field.A lot of people were there, investors, they looked like just sort of retail investors, tire kickers. A lot of people who are just "mining curious." Some of these people were not part of the mining crowd that you would expect to see. They're not part of the gold bug crowd, the gold stacker crowd, that kind of thing that we've seen in the past. I think what we're starting to see, in an investment sense, is that a lot of people, after a couple of decades of go-go, tech-tech, Bitcoin-Bitcoin, all this sort of chasing the vaporware, chasing the ethereal returns, we're coming full circle.And look, people made money in this stock market, but they made money chasing things that were really hard to put your hands around. I mean, you can't really touch a Bitcoin. It's a little electronic thing. It's not a coin, just in case people don't know that. There is no such thing as "a bitcoin." They try to pretend that there is, but there isn't.But a lot of people, I think, are looking now saying, "Oh gee, looking at the way the world is and the way that monetary policies are going, where is the dollar headed?" Things like that. They want to get tangible. And so, what can be more tangible than rocks and minerals and ores and mines and big plants that stamp out metals? And so we had the gold/silver aspect, of course, but then it's all the other things too. It's the copper, lead, zinc, that the world needs. It's the battery metals for the battery cars. It's the technology metals for all the tech.So it was a crowded situation up there. And over and above that, I'll just mention that international travel, it's fun once you get on the airplane and you go wheels up. I mean, once the airplane takes off, it typically flies where it's going and lands where it's supposed to. But it's those stupid airports. Holy smokes. They're awful! I mean, I actually drove to Toronto for that trip, but I've been on some other trips elsewhere in the last couple of months since we've spoken and it's just miserable. The terminals are crowded. The ticket counters are crowded. The baggage area is crowded. The restaurants are crowded.It's all these people with their revenge travel. "Oh, I didn't travel for two years and I'm going to travel the hell out of it now." And at the same time the airports downsized and the airlines laid off their baggage handlers and they laid off the ground crew, they laid off the gate agents and ticket agents and everything. And so now we have to deal with kind of resurrecting it.It's what our friend Bill Bonner has said numerous times in his daily essays that, "When you shut off an economy, it's not like you turned off the light switch and now you flick the light switch and it all comes back on and the lights are just as bright." No, once you power down and once things sort of relax and just sort of recalibrate to a certain level, you don't just pump it back up, and up and up it goes again. And so we see that in airlines and we see that everywhere. We could talk about that all day.Joel Bowman:Yeah, absolutely. And you put a lot on the table there all the way from under-investment in human capital. There's a whole cohort of students who opted for, let's say, "softer" types of academic pursuits and who forgot how to make stuff and how to build stuff. And actually, that stuff is kind of important in this world if you want to do things like feed people and medicate people and shelter people and move people around. And there's this entire scaffolding that undergirds an economy which you don't get to learning about in gender studies courses, alas.But just to double down and underline your commentary there on travel. Again, it's something that we just kind of take for granted, whether it's business, pleasure or emergency travel. There're many, many reasons that we are traversing the Atlantic or the Pacific, or what have you.Over in Europe, where I've just spent the past three weeks, some in Scandinavia - Denmark and Norway - plus Ireland, the UK and a little bit in Spain. Every single one of those countries at various times during the past month has seen pilot shortages, worker protests, canceled flights, the kind of zoo-like atmosphere at the terminals that you described before, where there's not enough people to get too much stuff done.And a lot of this is the result of so-called supply chain disruptions. But as you alluded to then, it really goes back to turning off the switch of an economy for a couple of years, under-investing for a decade, maybe more before that, and then expecting that we can just resurrect this magical cornucopia, this plentiful energy supply, where things are just there when we need them. But that's, as you said, not exactly how it goes.Byron King:Exactly right.Joel Bowman:So, I just wanted to bring us back to where the rubber meets the road here. This is a subject that you touched on, or rather a place you touched on at the beginning of our little Bonner Private Research project here, when you wrote some very prescient words on the situation in Germany and their energy... situation. I don't even know what we would call it at this point. It's approaching a full-blown catastrophe. And now seems to have bled over into France and the Netherlands, where other dominoes are falling. Do you want to maybe catch us up to speed on what's going on in Germany and then we can work our way across the continent back to the US?Byron King:Oh, sure. Yes. We go back many months to 2021, back to last year. I wrote an article that you were nice enough to publish, titled Germany's Energy Stalingrad. It's a not an unintentional use of a very emotional word, by the way. Stalingrad was the destruction of a German army that was encircled in the Soviet Union in the Second World War. And there were so many ways in a tactical, operational, strategic sense to avoid marching your army to destruction. Obviously, the Soviets are very glad that they destroyed the German army. One side won the war, one side lost the war. Ok. But you would think the side that lost the war, the Germans, would learn something about not losing other wars, not doing stupid things.Now that is translated into a certain sort of German politics that they have these days. There's a certain intentional, non-martial, unmilitary aspect to Germany now. Most of their combat aircraft are grounded. They don't work. I don't know that they have any working submarines. They have a very small handful of tanks. The army is relatively small. And that's probably fine, in a world at peace. But at the same time, they have done everything in a strategic sense to completely screw up their energy situation. For any country, any group of people anywhere, there are three things you need: you need food, you need water and you need energy. Germany has never been able to grow enough food, which is, with the whole "Lebensraum" thing. That goes back a hundred years. More than that actually.I guess they have enough water, but Germany's never had enough energy. It became an industrial power based on coal. They have no particular oil or gas resources. By virtue of trading with the world, they've been able to get the energy they need. But then they intentionally, for the last 25 years, adopted this green-ism, green thinking, and it's the noble virtues of green, that we are virtuous because we are green. And it's kind of like, well, you can afford to be virtuous because you are economically privileged. You're a wealthy country... For now. You've got money, you can buy the things you need and you feel good about yourself. So, "We're going to be green."Now, you go to a place like Germany and you see solar panels everywhere, and you think, "Wait a minute. I understand how the world works in terms of orbiting around the sun and all that. You get a lot of sun in the summertime and you don't get much in the wintertime." And then you have, "Oh, we have windmills and they're doing great." Well, what happens when the wind doesn't blow? Intermittent energy is not a way to run a modern economy. People who say, "Oh, we're going to have renewable energy and run our world." No, you're not. Okay? Don't label me and don't call me names. I'm just telling you that you're wrong. It's not going to happen. But they walked themselves into this.Now, for better or for worse, they tied themselves to the natural gas system of Russia. Okay, if you're going to do that, then you need to adopt a certain kind of politics between yourself and Russia that will keep the lines pressurized. Maybe it's the US pulling puppet strings or it's the NATO concept or it's the EU concept, that of just, "We want their natural resources, but we don't want to like them. We don't want to deal with them. We don't want to accept them for who they are." And then you get into the whole, "Oh, the Russians are this and the Russians are that." I don't want to go there. But there is this thing... The Russians are Russians and the Western Europeans are Western Europeans. And yeah, I get it. I'm in North America. I was not part of Napoleon's invasion army, but I understand there is a thing going on there between East and West. We had our window, our 30-year window of post Cold War opportunity to make things work with the Russians.But here we are today. I mean, I'm not making policy, but here the world is today. The Western world at least is somehow thinking that they can put Russia into a corner and bully them around. And the Russians, of course, have a completely different view of it. The Russians are saying, "If you don't want our natural gas, we've got lines of steel pipe ready to ship it elsewhere. We'll ship it to China. We'll build a pipeline across the Tian Shan mountains and send it down to India. We'll do what we have to do and we don't need you."Which gets back to your question about Germany. What's going on with Germany? Now they are backed into a corner. They have painted themselves into a corner on energy. I told you so. We wrote about it a year ago, and even earlier in other publications.But yeah, it's crazy. I suppose the only good news out of this is that Germany has become an energy example for the rest of the world not to emulate. Don't be those guys. Don't do what they just did, which is paint yourself into a corner. So that the newspaper articles in Germany are talking about, "We're not going to have hot water this winter. You're going to have three hours of hot water a day. There'll be three one-hour windows every eight hours that you can wash your dishes or take a shower" or something like that. German industry, which is the backbone of their economy, is chemicals industries, metals industries, manufacturing industries, all of which need natural gas. Or they need some sort of an energy to make it work. And what are you going to do when it's not there?Now from an American standpoint, I am just appalled at the energy ignorance in America or the energy dissimulation, the idea that, "Oh, don't worry. We have plenty of natural gas here in America and we'll liquefy our natural gas. We'll LNG it and we'll send it over. We're going to have a Berlin airlift to Europe. Except instead of flying coal into Berlin like we did in 1948, we're going to send you LNG." It's kind of like, no we're not. No, we're not. We don't have enough wells. We don't have enough pipelines. We don't have enough LNG capacity. We don't have enough tankers. We don't have enough people. We don't have enough tanker crews. We don't have... And then over in Europe, they don't have enough unloading points to even receive it. So anybody who says, "You don't need that Russian pipeline gas, we'll just send you the LNG." It just strikes me that people are just living the lie.Joel Bowman:Right. It shouldn't go without mention the perhaps very not-coincidental timing of the scheduled maintenance on the Nord Stream 1 pipeline that Mr. Putin has conveniently scheduled in. And as you outlined some of the warnings that the German minister of energy is giving, preparing his nation, "We're going to have hot water shortages." They're also talking about closing down public swimming pools. I've seen them even beginning to dim the street lights. This is Germany, a highly industrialized economy in the 21st century that is in many ways kind of a canary down the decommissioned coal mine, a warning of sorts for the rest of us in the West.And just for a little context for our listeners here, Germany's economy it's a $4 trillion economy. This is a $4 trillion GDP. California, for comparison, is about maybe three and a half; Texas is two. So it's a couple of Texas's worth of industrial output. This is not insignificant.And energy costs there, I had a look at a couple of scary charts. For the 10 year period from say 2011 to 2020-21, before those prices began shooting up, the Germans were averaging about 50 euros per megawatt hour. That's for base load electricity. It's now about 350 euros an hour. This is a sevenfold increase in the underlying costs of critical energy. Think of all of those inputs, all of those factories, every cog, every widget, every everything.And the situation is potentially even worse in France, where their underlying base load energy cost has gone up from about the same average, about 50 euros per megawatt hour over that 10 year period, to now closer to 450 euros. So when you put together France with Germany, and let's say we throw in the Netherlands there, that's another trillion dollar economy, we're looking at something approaching a third of the industrial output of all of Europe. Now kind of weighted under these regulations, being hamstrung by green ideology, and are now really, really struggling to keep the lights on. How long until these dominoes fall our way?Byron King:Well, oh my gosh. There's about 10 different angles on that one. In one respect, Europe's problems are North America's benefit. People are saying, "Oh, the dollar is getting stronger." And yeah, the dollar is stronger and gold is actually sold down a little bit lately. Dollar up gold down. But gold's still in the $1,700 range. I'm not worried. But one of the reasons for that is that if that money is exiting Europe, it's exiting euros and moving to North America to the dollar, the US dollar, because markets are forward looking entities and markets look ahead and they say, "Huh, I don't know how Europe is going to power its way through this mess. It's July, and what's Europe going to be like in December, January, and February?" Right now, as we speak in the middle of July, Europe should be importing gas from wherever and filling the storage caverns, and they should be importing oil and refining it into fuel, filling the oil tanks and things like that.They should be doing all those things, storing up the acorns for the winter, like the smart little squirrel, so that when the winter comes, they have something to use. But they're not doing it. And we mentioned the Nord Stream pipeline. There's a pumping system made by Siemens, the German conglomerate company. Every now and then you have to uninstall the turbines and you have to take them and refurbish them and clean them and fix them and replace parts and all sorts of stuff. That's happening in Canada, of all places. They put them on a boat and sent them to Canada. And there's this issue in which Canada didn't send the turbines back because of sanctions on Russia. And so the Russians are using this as, "Okay, well, if we don't have the turbines, what do you want us to do? We can't pressurize the pipe and send the gas."So the question is, what happens now? Is this just some sort of a political game that the Russians are playing? Like, "If you're going to jerk us around, we're just going to shut your gas off without really saying we're shutting your gas off. We'll blame you for it," which would be a perfectly valid strategy. That's a very Russian way to do it. I mean that as a compliment, frankly. Joel Bowman:You play your cards you've got, sure.Byron King:Yeah, but meanwhile every day, every single day that those cubic meters of natural gas do not show up in Germany and go down into the storage caverns or whatever, that is going to be a tight day come January and February, when it's cold and dark. What can I say to the German minister of energy? "Good luck, sir. Good luck, my friend."Joel Bowman:He's going to need it.Byron King:It's been years in the making. It's been years in the making, but it's being made right now. I've used the analogy of the Ukraine conflict. It's Pandora's box and it has opened. We've opened the Pandora's box and a whole lot of bad things have come out of Pandora's box. We call it the Ukraine. The thing is, though, that that box was there long before the first Russian tank ever rolled into Ukraine. I mean, there were a whole lot of issues, global issues, regional issues, national issues, all stored up in Pandora's box. And when the military operation began and the west immediately defaulted to, "We're going to sanction Russia, we're going to do this, we're going to do that. We're going to send weapons to Ukraine. We're going to fight to the last drop of Ukrainian blood." When all that happened, that opened up the box and all these issues that were frozen issues came out of the box and now they're thawing out; energy issues, food issues, fertilizer issues, manufacturing issues. And it has to do with globalization. It has to do with financialization. It has to do with de-industrialization.People say, "Well, all that world's fertilizer that we want to trade in the worldwide market, a big chunk of that comes from Russia and Ukraine." Yeah, because elsewhere in the world, like in the United States, we've under-invested in that here.Or when people say, "Well, we've got a shortage of diesel fuel." Yeah, because in the United States we've been closing down refineries for a long time. We've been converting real refineries, oil refineries, into these biodiesel refineries, where you basically take cooking oil and turn them into diesel. But they're not available anymore to refine diesel, but where were we getting diesel from? We've been importing it from Russia.It's just amazing. Russia in so many ways is the marginal producer of so many things. And as you learn, everybody learns this in economics 101, the cost of anything is set at the margin. I mean, if the cost of a share of stock is a 100 bucks, well then the whole market cap of that company is based on $100 shares because somebody was willing to pay a $100 for it. Joel Bowman:Right, those marginal producers and the price being set at the margin makes me think of swing voters. This is where elections are won and lost. This is where prices are set. At the margins.Byron King:Well, yeah. I mean, Russia has the most excess oil beyond its own internal consumption available for export, for example. Russia, I believe, has more oil available to export every day than Saudi Arabia, because Saudi uses a lot of its own oil internally. Look at other things, look at Russian natural gas. Russia is one of the largest natural gas exporters in the world. And because they're a continental power, they can string pipelines and do it. They've got that Power of Siberia pipeline that is sending immense amounts of natural gas to China. And there's a Power of Siberia number two, and even number three on the books.Look at the minerals that Russia has, and the metals. Russian nickel, Russian copper, Russian titanium. Airbus and Boeing have talked a good fight about, "Okay, we can get by without Russian titanium." Well, yes, you can for six months, eight months, a year, maybe you can stretch it out, whatever, but you're not going to get too far without Russian titanium.Look at things people don't even think about. They don't even think about noble gases like helium and neon, argon, things like that. You say, "Well, who uses helium? For party balloons?" No. I saw an article. It's in the Harvard Crimson, the school newspaper, not too long ago, about how physics students at Harvard are changing their PhD goals, because they don't have enough helium to do the work that they need to do in particle physics, which requires all sorts of helium-based materials and sources. I think you and I have talked about this, I think was neon gas. Well, who needs neon gas? Well, you need neon gas to make those computer chips that we don't seem to have enough of. Where does neon gas come from? Well, Ukraine and Russia. How do you get neon? You liquefy air and you bring it down to certain temperatures. And at certain temperatures, you have liquid nitrogen, liquid neon. And then you have to separate it. It's very complex and it's very energy intensive, but I mean, Russia has invested in doing it and in the US, certainly we haven't. So it gets into that whole under-investment thing. We've under-invested in things that we need. We've under-invested in people that we need to do the things we need.It's easy to say, "Oh, we have too many people majoring in gender studies," or whatever. Yeah. We do, I agree. You know what else we have? We have too many people who major in applied math or physics or something like that. Then they go to Wall Street and write algorithms and trade because they can make more money using their math skills trading on Wall Street.But of course the good old days of working at the research lab for General Electric or whatever, those are gone because there is no General Electric research lab anymore. Jack Welch made sure of that. And so many other companies are the same. Where corporate America used to invest a huge amount, a large, significant portion of its cashflow into real R&D, the good old days of AT&T, Bell labs, the good old days where oil companies used to do R&D. Oh my goodness, even companies like Boeing, I mean, they have very, very low R&D in terms of what they need to do.You would think that companies would do that work, but they're not, and they haven't. It's because they've been Wall Street driven. Instead of putting the money into R&D, which might take years to pay off, if ever, they'd rather just buy back shares of their stock or just pay a higher dividend and make the Wall Street analyst happy.Joel Bowman:Alrighty. Thank you very much for listening, folks. That will do it for Part One of my conversation with Byron King. As you can probably tell there's lots more left on the table that we discussed, which we'll say for Part Two. You'll be able to find that next week. Byron and I talked about the imminent bifurcation of the global monetary system, what a gold/methane-backed rubble might look like. And we got into a bit of the nitty gritty with regards to the situation over in the Ukraine and had a few prognostications about where that might be headed and what it might mean for energy markets, both over in Europe and back here in the United States. We also spoke about what Byron's doing with his own money and where he sees markets going for the second half of the year.I hope you'll join us for part two of my discussion with Byron King next week. In the meantime, as always, please head over to our Substack page. You can find us at bonnerprivateresearch.substack.com, We hope to see you there and on our Fatal Conceits podcast next week. Thanks a lot. I'm Joel Bowman. Cheers!© 2022 Bonner Private Research, Carrick Road, Portlaw, County Waterford, Ireland. All Rights Reserved. Any reproduction, copying, or distribution, in whole or in part, is prohibited without permission from the publisher. Information contained herein is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. It is not designed to meet your personal circumstances–we are not financial advisors and do not give personalized financial advice. The opinions expressed here are those of the publisher and are subject to change without notice. It may become outdated and there is no obligation to update any such information. Investments should be made only after consulting with your financial advisor and only after reviewing the prospectus or financial statements of the company or companies in question. You shouldn't make any decision based solely on what you read here. Neither Bonner Private Research nor its employees and writers receive any compensation for securities or investments covered herein. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit bonnerprivateresearch.substack.com/subscribe

Ordinary People

The Castle Report

Play Episode Listen Later May 27, 2022 12:10

Darrell talks about ordinary people and what they face in this new world today. A world run by powerful and wealthy people who meet in dark cabal to decide the fate of ordinary people and their prodigy. Transcription / Notes ORDINARY PEOPLE Hello this is Darrell Castle with today's Castle Report. This is Friday the 27th day of May in the year of our Lord 2022 and this is also Memorial Day weekend when we pause to remember all those who served and especially those who died. Today I will be talking about all those ordinary people and discussing what they face in this new world today. A world run by powerful and wealthy people who meet in dark cabal to decide the fate of all those ordinary people and the fate of their prodigy as well. To introduce this Report, I turn to the words of economist Bill Bonner. “Basic expenses—food. Shelter, and fuel—are going up so fast, households have less and less left over for discretionary spending, which leaves the big box retailers with a lot of unsold product in the box. And today we feel their pain—the misery—desolation—and anguish of the working classes, both at home and abroad. These are the guys and gals with chainsaws and work belts—with 18 wheelers to edge into a tight spot—with a night shift to complete without falling asleep—with croissants to bake or laundry to wash. These are the people who made the world what it is. They fell on Normandy beaches—built the Brooklyn Bridge—put down the hardtop roads—baked the cookies—and delivered the mail. And now they are still the people who add the most real value to our lives. Not the hedge fund managers, influencers, or policymakers—but autoworkers, farmers, UPS drivers, cooks, baristas, and waiters—carpenters, plumbers, and masons. And here's the gist of our story: the masses have been cheated, deleted, and mistreated. And it's going to get worse.” Well amen Bill, in fact I could stop this report right now and thanks to your eloquent words my point would be made, but there is more to the story. The elite class, some 2500 of the world's most powerful and wealthy, gather as I speak in Davos Switzerland to plot their dark, satanic agenda of world domination. They go on and on about climate change, limiting your meat intake, advising you to eat bugs and take the subway, while flying in on their private jets and flaunting their lifestyles. Their words reveal in clear focus the enormous divide between the elites and ordinary people. To kick things of in this year's meeting of the World Economic Forum we had a speech by the WEF founder and author of the book, “The Great Reset” Klaus Schwab. Mr. Schwab, a German, but of course there are no nationalities to him, gave the opening speech and it was a real doozy. He said “the future is not just happening; the future is built by those of us in this room. We have the means to improve the world, but two things are necessary. 1. We must act as stakeholders of the world with stakeholder responsibility, i.e., act responsibly. 2. We must collaborate and work together.” This speech was given to a group of people who consider themselves far superior to the other 8 billion or so people in the world. They have not been elected or even delegated the power to build our future. Their dark vision of the future is unworkable and dystopian, but in their efforts to implement it they will tear this world apart as they are already doing. Many dictators and so-called leaders were in attendance at this meeting and that tells me where their loyalties lie. The loyalty and fidelity of the leaders of this world from Joe Biden to Emmanuel Macron, to Boris Johnson owe their allegiance to the people in that meeting and not to us. In fact, they hate us and place loyalty to their ideology over the well-being of their constituents, all those ordinary people. The evidence that they hate us is enormous and accumulating daily. Start with COVID and the economy destroying, soul-crushing restrictions placed on the formerly free world over t...

covid-19 lord joe biden german memorial day basic shelter ups boris johnson world economic forum emmanuel macron normandy schwab ordinary people wef brooklyn bridge davos switzerland bill bonner darrell castle castle report

Fatal Conceits Podcast with Ronan McMahon

Play Episode Listen Later May 26, 2022 48:54

In this week's Fatal Conceits Podcast, we're joined by globetrotting editor of the Real Estate Trend Alert, Ronan McMahon... If the past few years have taught us anything, it's that the “new normal” is unlikely to look anything like the “old normal.” That goes for the financial world as much as it does the job market and practically everything else about the way you live, work and even spend your leisure time. The “Great Covid Interruption” (and the governments' responses to it) accelerated a nascent trend away from congested, overpriced, high-crime metropolises toward remote work and retirement destinations… many of them overseas. Just as Californians and New Yorkers are ditching their overtaxed, over-regulated, over-mandated home states in record numbers, opting for relaxed and rural alternatives, so too are Americans and Europeans in general looking beyond their own borders, wondering…“Could I enjoy the same – or even better – lifestyle on the Riviera Maya… or Los Cabos… or Portugal's wild Costa de Prata? And could I do so… for a fraction of the cost?”With inflation biting big time at home… and self-serving politicians looking to tighten the screws further on honest, working folk… maybe it is time to look for a better way?We caught Ronan mid-migration, en route from Mexico's Baja Peninsula to his summer residence in Ireland. What this man doesn't know about international real estate opportunities is simply not worth knowing. So whether you're looking to invest some time and/or money abroad… or you just want to escape the rat race for an hour and imagine yourself on a white sandy beach with a margarita and a good book, this episode of the Fatal Conceits Podcast is for you…Saludos!Joel BowmanP.S. For readers interested in learning more about Ronan's work, you can access a 100% risk free trial of his Real Estate Trend Alert service for 90 days, right here…As always, go right ahead and drop any comments… including YOUR favorite overseas destination (and why it is so)… in the section below. Also, feel free to share our humble podcast with globetrotting friends and desk-bound foes alike, here…TRANSCRIPT:Joel Bowman:Welcome to the Fatal Conceits Podcast dear listener, a show about money, markets, mobs, and manias, not necessarily in that order. If you're a first time listener or you are joining us once again, please do head over to our substack page, that's at bonnerprivateresearch.substack.com. There you'll be able to find hundreds of articles and research papers on everything from high finance to lowly politics, and plenty more besides, including many discussions under the fatal conceits podcast section, just like this. And for today's episode, I'm delighted to welcome back. One of my very favorite guests, a long time personal friend and friend of the Bonner Private Research family, a man with I think possibly the coolest job title in the world that is International Real Estate Scout. Please welcome Mr. Ronan McMahon. How do you do sir?Ronan McMahon:Joel, lovely to be here as always, doing good.Joel Bowman:Fantastic. Now mate, last time you and I spoke, if you'll recall on this podcast, I was in your sometimes hometown of Cabo San Lucas on the Baja peninsula in Mexico. And you were in, I guess, one of your other sometimes homes on Portugal's west coast. Where do we find you today?Ronan McMahon:I'm talking to you today from an Airbnb in Guadalajara-Joel Bowman:Of course, you are.Ronan McMahon:Of all Places. I did just to kind lower the sexiness of it. I'm not quite beachfront. I'm looking out at beautiful flowering, Hacienda trees, but I'm making my way east, my eastward migration from Cabo San Lucas to Ireland to Portugal is underway.Joel Bowman:Okay. Yeah, we were mentioning just before going on air here, that we're both in the midst of packing for our seasonal migrations. For listeners who are unfamiliar with your no air condition and no heating rule that you've imposed upon your life, do you want to give us your migratory pattern of an International Real Estate Scout?Ronan McMahon:Absolutely Joel. So the maybe starting where I'm now in terms of this block of the year, summer is in Ireland. I'm Irish as you well know, I like to take that high summer in Ireland where we've got these long summer days until 10:30, 10:45 at night, everything is green, everything is beautiful. The weather can be okay. It can be mixed. I don't really mind if it's rainy because I'm coming from sunny, Mexico, and I've got my fix of sun. Then typically both shoulder seasons, spring and fall. I like to be in Portugal. It's actually the silver coast that stretch of coast, north of Lisbon, amazing big wide, long sandy beaches, kind of wild Atlantic weather, but it's warm and it's pleasant and I'm right on a beautiful beach and on a great ocean front golf course in Praia del Rey, and got wide open spaces, great food, really, really special place to spend time.And then my winters are in my home in Cabo, San Lucas, Mexico. So there again, I get these beautiful winters in Cabo where it's kind of mid seventies, low eighties, nearly always t-shirt, but often it's long pants in the evening. So following that route, I learned a couple of things Joel when I started traveling, first is weather and at this very conditions are very important to my overall sense of wellbeing. I had asthma, and a mild asthma, when I was young I would've told you it wasn't a big deal, but then when I moved to a low humidity place or spent time in a low humidity place, like Cabo San Lucas, I started to realize, geez, I really, really feel a lot better with this sunshine and low humidity. And I also don't do well in heat. That's the Irish boy in me.So I found life is a lot better when I just move around and follow both weather conditions and places that agree with me. And along the way too, I'll get to scratch a lot of those itches. I mean, I love to live in places that are really quiet and have the sense of isolation while being relatively close to an international airport. But I also like to get my big world class city fixes. So I think no year is complete without some time in London and Paris and so that's how I like to organize and work and do my research and do my deal making along the way as I go.[Ed. Note: Learn more about Ronan's Real Estate Trend Alert, and how to start your own 100% risk free trial, right here.]Joel Bowman:Well, I want to get into that work that you're doing and that you've been doing, of course, with Bill Bonner, for goodness, as long as I've known you. And that Bill has been doing since going back, I guess, to the seventies, with the founding of International Living, but just right off the top, it seems like just such a kind of bond spy-esque, existence, just sort of cruising from one place to the next. But you've spent the better part of your career showing people how actually to do this and actually sort of where the rubber meets the road with regards to how they can potentially make that happen in their life. But I wanted to just go back to one point that we mentioned in our last conversation on this show, and that was over the past few years, there seems to have been this catalyzing event with the sort of the global pandemic and people have been locked in their homes for a long time.And now it seems they've gotten out the world is just beginning to start opening up again. They're starting to look over the back fence and reimagine themselves on these sort of grand tours, if you will. But I think one of the points you brought up last time was that a lot of people who had been living in very high price cities, maybe San Francisco or Chicago or New York, came to find that actually, they weren't really getting the bang for their buck with regards to rent, let's say San Francisco, I think it's the highest in the U.S. at some astronomical figure, but it did seem like the pandemic catalyzed a bit of an outflow from those cities. There were, of course, these famous zoom towns and people commuting to work.I know there was a lot of talk about that trend reversing, or maybe even just contracting in the wake of the pandemic, but it does seem like people who got a bit of a whiff of freedom are reluctant to give that up. And that maybe actually, this is the beginning of a kind of reverse migration from those big cities that people are now trying to get out of. Does that resonate with you and your experience?Ronan McMahon:I mean, first of all, Joel, I would say straight up, you will have heard no talk from me of reversal, not for a second. And secondly, this has been the... It's a big acceleration rather than something that COVID has triggered. So let me right back to the start because you're scratching on something here that is so integral to the way the world is changing, it's so integral to the opportunities that we have in terms of how we organize ourselves, and so integral to investment opportunities. So first of all, this was happening anyway. So over the last 10 or 15 years, just this thing of remote work, remote managing a business, remote and enjoying your retirement. That was really, really becoming a thing.I was seeing just the explosion of beach cities, like Playa del Carmen in Mexico, or Lagos in Portugal. So this is all happening anyway, and along the way, there have been a few kind of accelerating events. And it's really interesting to look at these accelerating events because they might surprise you. So one accelerating event was the last crisis, the great financial crisis followed by the Arab spring and instability in the Middle East and North Africa. So I think a lot of people perceive these jolts to the system as somehow leading to stagnation. But what it really means is that the people who are in a position financially and in terms of skills get out. So the great recession, the last financial crisis, upended things, people moved to where... It just challenged everything.So people moved to places like the Costa del Sol in Spain, and they figured out how to make a better life for themselves. And likewise, with the Arab Spring, now this is for a very different type of group, but I think it's a really, really interesting example because all that instability led to an influx again, into places like the Costa del Sol in Spain and Paris. So when the system gets shaken up, what happens is people reassess. So before COVID, we had been seeing this it was almost like a rough run, people left... Maybe that's an inappropriate analogy, but the people left San Francisco, because it was too expensive and too this and too that and to the other thing, and they moved Austin. And then from Austin, they were moving to Tulum or to Panama or to Lisbon. And then COVID hit and everything goes up in the air and people are going straight from San Francisco to Cabo San Lucas or Tulum.Even though people are flooding into Austin as an example, many, many people are also leaving and going to these other locations. During COVID, we saw how older people were less inclined to travel. Since things have started opening up and freeing up, they're traveling in great numbers to enjoy their time and enjoy their retirement. I'm seeing more and more of these places, these very desirable places to spend time. Think about living in your dream beach city, you've got pristine white sands, you've got the best restaurants imaginable, you're surrounded by a group of like-minded individuals, your accommodation, and all your costs of living are a quarter or a fifth of what they're in in San Francisco.These places are developing into their own ecosystems with their own startups, with their own vibrancy, with their own energy. This genie is not going back in the bottle. Now, Joel, that's not to say people won't return to offices to some extent, and that's not to say that every company will be remote or stay remote, but just remember the have a dramatic impact on places like Cabo San Lucas are like Lagos in Portugal. It just takes a very, very small percentage of San Francisco tech workers or New York bankers, it just takes a very small amount to them to really, really move the needle. And this is creating maybe the biggest investment opportunity of my lifetime in places like, these places I'm talking about.And I'm thinking particularly about kind of Cabo San Lucas as I speak with you because tomorrow we open a new opportunity that's members only to my group of real estate investors. And in Cabo San Lucas, we've just seen incredibly fast rates of capital appreciation from our members only deals. And we've seen rental rates more than doubled since pre COVID. So it's been a great opportunity in terms of financially for us to be able to tap into these trends too.Joel Bowman:Yeah, that's fantastic. And I'll include a link to the work that you do at Real Estate Trend Alert in our transcript here. (See Ronan's RETA service here.) When you and I was speaking about Cabo San Lucas and I was ironically there and you were in Portugal at the time, one of the things that struck me that you had observed, and this is speaking as a, I won't say a young father, but the father of a young daughter is that when people move to these... To work remotely in places like Cabo and places like in, on the Maya Riviera, et cetera, or in Europe, they bring with them a certain demand for example, education for their kids. And you were seeing small communities of generally like-minded individuals, young professionals with elastic salaries that were now going a lot further.Those people were starting to demand on location, education for their kids, which I know for a lot of people a lot of my friends in the U.S. are paying through the nose for what they're increasingly finding out is substandard education or indeed indoctrination for their kids. And as with people who are starting to work remotely, people who are living remotely are quickly realizing that for a lot less pennies on the dollar, they're able to afford some help around the house, a nanny, a private tutor, piano lessons, all this kind of stuff that would've just been absolutely impossible had they stayed at home, but that creates a whole sort of sub economy that's very vibrant in places like Cabo. Would you agree there?Ronan McMahon:Absolutely. And I mean, this exists at every level. You take you as a father of a young child you're thinking about the various infrastructure that goes with that. Maybe you're an avid golfer and you realize that now you come here and you need golf lessons, or you're a tennis player, and you need tennis coaching followed by a massage and you like certain types of food. And all this is just people and ideas in a mobile virtual world, people and ideas are the resources that make an economy kick. So not only do you have, and do you develop that service infrastructure, nannies, kindergartens, accredited schools, universities, all this stuff, but you also find that ingenuity starts to get transferred.So for example my team is dotted around the world. And now I see for example some of my team is based in Medellin in Columbia. So now we need to get tech consulting services, close to that person and close to that little team. So now we're going out a level in the ring because it's more convenient to have our tech consultants close on hand to that person. It's easy for them to connect and collaborate on certain things. So now these little pods, so where I maybe had two team members, now maybe they have another four or six people supporting them and providing frequently very, very high level services. And those services are priced at a global market price because all those people are selling their time and selling their ideas and selling their brain power into a global market. So it's transformational what this brings to a lower wage economy when all of a sudden you've got this cohort that are earning at U.S. levels.Joel Bowman:Yeah, there's a huge opportunity there and having lived abroad myself in the middle and the far east and down, down here in south America, I think when we spend our childhoods in one country in, be that Europe or in the U.S., or in Australia, in my case, we get used to a certain type of market and forget that it's a big, big world out there. So speaking of which one of your mantras, I guess, or one of your sort of guiding principles when it comes to looking at places around the world to invest, and you've mentioned a few of them here is this idea, this path of progress idea. And I wonder if you could just take a second just to explain that what you mean by that, and then we can get into some places that potentially you're looking at presently.Ronan McMahon:Yeah. Exactly Joel. What I see as a path of progress event is something that makes a place and typically in my context, it's a place that's very beautiful, very attractive. Something happens that all of a sudden makes that accessible. So historically, that's been big infrastructure event. A new airport comes to a Caribbean island, a new bridge connects two areas. So big infrastructure projects that made beautiful places that were historically difficult to get to much much more accessible. So the big examples of this I like to use Mexico's Rivera Maya as the classic example, because this is the stretch of coast that starts out of Cancun and goes down to Tulum, those pristine white sand beaches. And there was nothing there, go back to the sixties, there was, I mean, literally nothing. A few Mayan villages in land, but nothing on the coast.And then the Mexican government through their tourism promotion body came up with the idea of creating a tourism destination. So they built Cancun airport and built the infrastructure for a hotel zone. So this was like a master planned tourism event. And then from there, they built roads. So first Cancun developed, it developed, thanks to that improved air accessibility, then they built a highway to Playa del Carmen, development followed, and then onto Tulum. So it's typically these big infrastructure events that improve accessibility. Now, that idea of this being infrastructure driven, I'm really broadening it out over the past couple of years to include things like technological developments that allow for remote work just these big changes that support and accelerate these trends.Joel Bowman:Yeah, that's very interesting. I was speaking with our mutual friend Will Bonner, Bill's son when he came to visit his dad up in Salta and we traveled around... And this is in the Northern reaches of Argentina for our listeners and where Bill has some property and he, and Will run a wine partnership up there. Very remote part of the world, really arid kind of Luna-esque landscape in many ways. And that's part of the reason that they have their wine partnership up there. This really extreme altitude vineyards and extreme conditions for growing grapes.But it's very interesting, he was mentioning that, or one of our co-travelers was mentioning that the Saltan government had some conversations or some inroads with setting up Starlink internet access up there, which is this decentralized very, very futuristic sounding private internet satellite connections. Which when I think about something like that it going back to the sixties, it was, you had to land an airplane on a strip somewhere to bring people and bring opportunities to a place like Cancun. Now we go to somewhere it's that this is about as remote as you can get up in, on the Bolivian, Chilean border in far Northern Argentina. And we walk around and we see kids in cafes on their laptops doing their business. It's this sort of progress. It almost feels like the whole world is opening up. In that scenario, how do you pinpoint one particular place over another when something like a tech expansion or liberation feels like it could be just super ubiquitous.Ronan McMahon:And just the other thing too, Joel, that's going on is that the governments right across the world are competing for us. There is just now this succession of golden visa programs, remote work visas. Governments right across the world are looking to attract in mobile people. So it comes down to, and so just, how do you pinpoint the next areas that are set to explode? For me, this is really, really easy right now, because what we're talking about is a mass acceleration. So there's this variety of places that have proven themselves free acceleration to be the most desirable places for remote workers, for mobile people, for retirees, for this whole cohort, which it's very interesting that can exist so seamlessly side by side, because you say digital nomads, people might have some preconception, but you go to a place like Playa del Carmen in Mexico, and you have young trendy, digital nomads, you have young families, you have older retirees. These places broadly have the same kind of basket of things that are appealing to everyone.So our strongest opportunity in terms of tapping into this is to go with places that have already proven themselves pre COVID, pre mass transformation, that's number one. And secondly, look to their hinterland and to see where the next places in proximity, where is the overflow going to go? So to give an example and I'm, again I've just been the past few months in Cabo, and that's where I've been doing a lot of research and scouting, but Cabo are the lost Cabos area of Mexico. Let's say Cabo San Lucas and San Jose del Cabo. That's had this massive explosion fueled by a range of things, including all this stuff we've been talking about, plus improved air accessibility.Now, on the margins of that, there's this whole bucket of new places, okay. So Cabo San Lucas has been this like, well established Uber luxury destination for decades. In the last couple of years, development has been moving along the coast to Pescadero and Todos Santos. I predicted transformation of both Pescadero and Todos Santos five years ago, now those two areas and Todos Santos is a Pueblo Magico, Pescadero is an area 10 minutes closer to Cabo San Lucas that's got an abundant supply of water. So it's attracted all these really cool foodie destinations. But those places you've got, let's call it the overflow. And I'm hesitant, it's quasi overflow, but it's also that the pioneers who came there 10, 20 years ago all of a sudden Cabo is too mainstream, too many big box stores, too many of all these things that are attracting maybe the more conventional, practical people. Next thing, the pioneers are going an hour down the road.So outside of Cabo, we're seeing this transformation of the Baja I've just come from La Paz, which is the state capital of Baja, California Sur. And that's this beautiful sleepy kind of seaside town with the lovely Malecon. And it is just exploding with new restaurants, just this vibrancy in the foodie scene, new boutique hotels, new niche developments popping up all around. So the Todos Santos and Pescadero are along the Pacific coast that runs north of Cabo San Lucas. You go east of Cabo and you hit the east Cape, and that's on the Sea of Cortez side. And again there, there's all this new funky stuff happening. Some of those beach towns to the east of Los Cabos like La Ventana, they feel like Tulum on the Caribbean side of 15, 20 years ago.So the way to play this is to back the horse, that one in a more challenging environment, that's step one, that's the most solid play. And then the more speculative play, if you want to get out ahead of the next trend, find the places that's one step removed, one step away from that proven place. And you can take wild speculative hunts on, let's say an Albania, for example, I could make a very compelling argument for why Albania might be very much worth looking as a speculative long term punt. But then I think to myself, why would I bother looking to Albania when I can look two hours north of Cabo San Lucas, where I literally can look two hours north of a market where the average nightly hotel rate is $455, where a significant portion of the tourist industry is the luxury segment with nightly rates starting at 1500 bucks a night, where you go in through the airport and you see everything from new budget airlines to the most congested, private jet parking lot I see everywhere.So that in my view, Joel, we can look to kind of very speculative upsides in a way that's very low risk by following that strategy.Joel Bowman:Yeah. So interesting that you mentioned Albania, my wife and I were there, what would've been maybe 10, well, eight years ago say, and we were at the very Southern tip there just right on the Greek border at a little place called Butrint. And my wife is an avid classist and has her own classics website, classicswisdom.com., if you want to head over and check it out. But we were there on a, just on a whim it's very difficult to get to. At least it was at the time. You had to go... You couldn't cross over the border from Montero, you had to sort of zigzag ferries up and down the Adriatic, and we ended up getting a taxi to take us over the Greek border. And went on a floating bridge, and there was a mule ride. At some point it was very, very off the beat track, but once we got to the beach, my goodness, it was just a little slice of paradise.And there was an old ancient ruin there that was said to have been Odysseus's first stop on his way home from the Trojan war. It was all very, very interesting. And we had the place practically to ourselves because there was literally, nobody had heard of it. And Albania of course, had been such a hermit kingdom for so long that it was... It very much felt that we were off the beaten path and maybe the opposite of Corfu or something where it was just a more regular open to practical travelers, shall we say. But it's interesting that you remark on Todos Santos and places like this.I've been thinking for many years that it's these little in the knowledge communities who are going a little further beyond who discover these things. And I'd heard about Todos Santos many years ago, having grown up as a surfer because of, as you, of course know, it's been and long been a big destination for big wave surfers off the west coast there. And it's interesting to see now these people coming in and putting tennis courts in and infinity pools and that's in the next wave of progress, but it does go to show that you really need to be amongst those circles, talking about these places, getting your boots dirty, doing the investigative and scouting work that you do, because it's oftentimes within those small communities, just word of mouth where you hear about the next thing that's taking off.I wanted to ask you about Tulum on the other coast, because I know you've been doing some workout there, and then maybe sort of get into exactly what kind of opportunities it is by way of construction and investment and pre-construction deals you're able to leverage for your readers and into a bit of the nuts and bolts. But I guess just selfishly I'm very intrigued by what I've heard about Tulum recently. Can you give us a bit of an insight there?Ronan McMahon:Yeah. And just when you mention surfers too, Joel, I think of Nicaragua and I think of how the first of international visitors were those avid surfers who crossed the border from Costa Rica. Costa Rica gets discovered, Northern Costa Rica becomes moderately busy. Again, those people on the frontier on the edge, they're looking for the next place. You just see this time and time again, the artists, the French and Italian cooks, you just follow these types around because they're only looking for the best. So they're mobile, they'll go wherever is best. And they, different groups unlock are they both find, and then they also create some of these transformations because a lot of these transformations come about when a certain community brings a certain design sense or something to a neighborhood and triggers a gentrification.And Tulum is just one of those places where you just have this like 13 kilometers of just absolute pristine beach. You have got an area of town around, along the beach that backs the beach, and then you've got Tulum town itself, which is vibrant and diverse. It's just incredible to just see the transformation within Tulum. Yeah, I remember it's probably just a few short years ago, popup restaurant. So Tulum was the place when Bill created international living, the very first issue of international living in 1979, I believe was about Tulum. And Bill rode about finding naked hippies frolicking in the beach. Now, there's still hippies and partially clad hippies, but there's a type of-Joel Bowman:Now there's highly paid models.Ronan McMahon:And there's the types of hippies who are paying $1,500 per night to stay in a beach house.Joel Bowman:Right. I'd take a piece.Ronan McMahon:Yeah. So like, I mean, I for a long time, every time I'd go, I'd send Bill a photo of a kind of line of hipsters queuing up to have dinner in one of these trendy restaurants. And Bill was blown away that this was Tulum. And then he came down there with me just before COVID became a thing for us. So I guess, February of 2020, but it is just this pristine, beautiful beach, for me, it's the nicest beach on earth or one of the nicest beaches on earth, certainly that top, top, top tier, and you just have this amazing experience of great food, great beach, people bike around the place.It's just very funky and very vibrant and just really, really beautiful. And then so much to do around because you've got ancient Mayan ruins on the cliff, you're a short drive to Coba, which is this Mayan ancient Mayan city. You've got Cenotes which are these kind of these sinkholes so the whole peninsula is built on limestone. So over the centuries, some of these have just collapsed into giant holds that just leave these beautiful, fresh water kind of sink holds or lakes with caves. And it's just really, really beautiful and a very, very special and vibrant and diverse place.And it's created a huge real estate opportunity just for all those reasons that we've talked about. And investors who've got in have, have done extremely well and will continue to do extremely well as those both long term and short term rental rates increase.Joel Bowman:Yeah. I bet I'm cognizant of the fact that I'm sure our listeners realize in both yourself, Ronan and myself, that we're wonder lost people. And we could rhapsodize about exotic places around the world, probably for a lot longer than we've got time for on this particular show. But I wanted to get to exactly how investors, whether or not they're people who want to spend a significant portion of their time, let's say, and actually physically be in one of these many places that we're talking about, or if perhaps they wanted to place sort of a, put some capital down and invest in something along the risk profile from steady high rental rate security to perhaps something more speculative at the other end, how your Real Estate Trend Alert can help identify opportunities for them and get them started on one of those paths.Ronan McMahon:Yeah. So I guess, Joel first of all, the research that I do along with my team, because again, it's a very, very big world. And since I've founded Real Estate Trend Alert way back in 2008, I've realized that it's a big patch of ground. We have to cover. So the more help I have the better, but we pan out across the globe and we find places that are set to be very, very strong beneficiaries from these big trends that we're seeing. So the first thing people can do is invest in those recommendations. So for example, five years ago was a, what I would call a macro recommendation, which was to buy land or homes in a certain neighborhood of Todos Santos. And that's a scenario where I've identified the place that's on the up. And I've explained to readers what I see as the best way to profit from it.The next step where it becomes, I guess, more easily actionable for readers is where I sit down with the developer and I use our group buying power to negotiate special members only pricing and terms on the deal. So for example, tomorrow in Cabo San Lucas, we have a new members only deal that's opening up. We get to buy ahead of this deal being announced to the general broader and local market. We get to pick the best inventory and we get a very, very significant discount on what the developer will charge to everyone else. So the benefit of that is we get the benefit of the group buying power, because I invest along with my fellow RETA members in many of those deals in fact, in this Cabo deal tomorrow, I plan on buying two condos.We get the benefit of our combined group buying power because when I sit down with the developer, I can get a pricing based on us taking a big number of condos. Maybe it's a hundred condos rather than just getting a price on one condo for myself. And then secondly, we also to get to leverage me and my teams research, identifying the best neighborhoods and very, very importantly, the best developers to work with. Individually, every RITA member should absolutely do their own due diligence, but we certainly do a lot of the grunt work and provide a lot of the filtering out of the people that you certainly don't want to be doing business with. So there's the macro research that you can just take and figure out your own land deal yourself, or we'll introduce you to brokers in many cases and you go figure out your pricing and do your own negotiation there, and then from time to time probably about eight times a year, we'll have a big member only deal. And that's what we have tomorrow in Cabo San Lucas.Joel Bowman:All right, mate. Fantastic. I'm looking forward to joining your group on one of these future joints, somewhere around the world, but I think before then, you and I might have a chance to catch up in Ireland. I'm going to be there for most of... Well, I'm going to be there for a short while at the end of June. I'm not sure what your movements are, but we might potentially be able to sneak in a pint of Guinness sometime along the way.Ronan McMahon:Would absolutely love to. And are you going to be circling back through Ireland as well?Joel Bowman:I'm not quite sure yet, where we've got a bit of a... It was interesting you were mentioning that so many retirees are now reentering the outside world again after the great interruption that was the past couple of years and my parents are among them. So they had a lifelong dream trip that they had planned to go to Scandinavia and check out the fjords in Norway. They had planned that trip for February of 2020, so obviously that got shelved and they were sort of waylaid in Australia for a couple of years. So anyway, they've now just embarked on that trip, long overdue. So my wife and daughter are I are going to go and meet them, check out the fjords and hang out with the grandparents for a little while.The reason that we're coming through Dublin just, and my readers are going to hear a bit more than they probably want to hear about this, but I'm going to go to the birthplace of your kin, Mr. James Joyce. Of course, he has his blooms day celebration on June 16th of every year. So this is the Centennial celebration a hundred years since the release and publication of Joyce's Ulysses. So geeks and literary freaks such as my own kind will be converging on your fair capital for June 16th celebrations and following in Leopold Bloom's footsteps. And again, my readers will hear way more than this, about this and than they want to, but that's the primary reason for going. We may circle back through depending on time constraints and some other things, but one way or another mate, let's make that Guinness happen either there or maybe well, we've got plenty of other places to catch up in the world too.Ronan McMahon:Absolutely. And my summer base is very close to you all. So I'm 33 minute drive from Bill and you all. So if you're taking a summer tea or a summer malbec under the big tree in front of his kitchen, which is a lovely spot to look down on the black water and the rolling Hills of East Cork and Waterford, that would be a lovely spot for us to connect and catch up there too.Joel Bowman:Oh, perfect. Mate, let's make that happen. Okay. I'm going to put a link to your Real Estate Trend Alert underneath, and Ronan as always. It's a real pleasure catching up, and I hope that our readers have enjoyed this virtual tour around the world and are looking forward to embarking on one of their own pretty soon. Please, to our readers checkout our Substack page once again, it's bonnnerprivateresearch.substack.com for many more conversations like this. Ronan, thanks you very much for your time. Catch you again soon.Ronan McMahon:Thanks, Joel. Take care.Thank you for reading Bonner Private Research. This post is public, so feel free to share it with homebodies and globetrotters alike... This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit bonnerprivateresearch.substack.com/subscribe

covid-19 america new york chicago australia europe mexico americans san francisco french european government italian ireland spain greek irish uber argentina middle east mexican portugal sea atlantic airbnb caribbean places columbia southern norway costa rica pacific dublin fantastic costa sol panama hills san jose northern substack arab mate nicaragua fatal californians guinness lagos new yorkers cape baja lisbon la paz north africa starlink cancun mcmahon scandinavia mayan cabo chilean playa albania cortez saludos trojan montero centennial hacienda james joyce tulum arab spring medellin prata praia individually odysseus coba waterford salta bolivian la ventana cabo san lucas los cabos riviera maya adriatic san lucas corfu cabos international living todos santos cenotes saltan leopold bloom baja peninsula malecon bill bonner

Fatal Conceits Podcast with Dan Denning

Play Episode Listen Later May 19, 2022 42:27

In this week's Fatal Conceits Podcast we are joined by Bonner Private Research's own macro man, Dan Denning... When we last touched base with Dan, back in late March, markets were enjoying (what hindsight now reveals was) something of a bear market bounce off their mid-month lows. But Dan was not convinced. He warned that “The Generals” (mega-cap S&P 500 stocks) were poised to beat a disorderly retreat… dragging the broader markets lower as investors “re-evaluated and repriced the future.”Fast-forward to this week and we see the Dow down 9%… the S&P off 13%… and the Nasdaq lower by almost 20%… just since that powwow. No surprise then that we were keen to get Dan's insights on the state of play today… from Mr. Powell's reappointment at the Fed to the greenback's relative strength against foreign fiat currencies over the past month… to his outlook on gold and the Bonner Private Research asset allocation strategy in general. We've got all that and more to get to today, in Episode #65 of your Fatal Conceits Podcast. Please enjoy…Cheers,Joel BowmanP.S. If you're not already receiving all of Dan's premium research - including his weekly Friday market notes, plus research reports like the BPR Asset Allocation Strategy and the upcoming Dollar Report - make sure you get access to it all here. Good for what ails ya.Thank you for listening to this episode of the Fatal Conceits Podcast - A show about money, markets mobs and manias. This one is public, so please feel free to share it, with market leaders and followers alike…TRANSCRIPT: Joel Bowman:Welcome to the Fatal Conceits Podcast, dear listeners, a show about money markets, mobs, and manias... not necessarily in that order. My name is Joel Bowman. I'm coming to you from the literal and geographical end of the world down here in Argentina. If this is your first time listening, please head over to our Substack page. That's at bonnerprivateresearch.substack.com where you can check out 100s of articles on everything from high finance to lowly politics, and also plenty of research reports and market notes many of which are penned by my guest today, Mr. Dan Denning. Dan, welcome from the high plains of Laramie. How are you doing?Dan Denning:Good. Thank you. It's nice to see you again.Joel Bowman:Well, I don't know if you know this, Dan, but just in preparation for our discussion today, the last time that you and I recorded a conversation for this show was at the very end of March, which now in retrospect looks a bit like a bear market trap for those of us who are following the money off the March lows. And I just went back and did the math since our last recorded discussion. The Dow is down 9%. The S&P is down 13%. The Nasdaq, almost 20%. And during that conversation, you were warning that "the generals" may be beating a disorderly retreat. That turns out to have been a very prescient call. What did you know then that others were not predicting... And where do we lay now?Dan Denning:Yeah. I remember that conversation. And I guess to be fair-minded, I probably didn't say anything different then than I haven't been saying for the last three to five years. So, I don't want to be one of those guys that say, See, I told you so, and people say, Yeah, but it's the whole stop clock thing. But I would say that the overall thesis for Bill and I, and Tom Dyson had bought in Bonner Private Research and it has been now for well for a while, is that if you looked at all the traditional metrics for valuation in the stock market, not at the company level, but at the market level, they all were historically massively overvalued.So, the price of sales ratio on the S&P500 was over three. The market cap to GDP ratio for US stocks was over, it may have been over 200 at one point on the Nasdaq, but it was certainly well over the historic average of 80 and was closer to 150. And on an earning basis, too, if you looked at Robert Schiller's specifically adjusted price, earnings ratio, stocks were expensive.And then, there were other indicators that we used and have used over the years like margin debt, that show that when liquidity is available and interest rates are low, stock prices are very high and risk or growth assets become, as they say on Wall Street, elevated. So, we've been saying that for a long time and they just kept going up. So, that didn't make them less risky though.So, I think what happened and what's happened since you and I last talked is, one, there's been a discussion of higher interest rates, which definitely affects the pricing of growth assets, but more broadly, people have been thinking about the future and saying, "Well, maybe the next 10 years are not going to be as great as the last 10." And that shift in sentiment has been coupled with changes in liquidity.And that's probably the big thing for investors to realize is that when liquidity starts to thin out or dry up in financial markets, then it generally means lower prices for everything. And that means not just growth stocks, but most stocks and also government bonds, and also, to some degree, gold. Oil seems to be the exception, which we can talk about later if you want. But yeah, I think at the top end, the generals were the best performing highest flying growth stocks of the last 10 years.Especially since, you could go all the way back to 2009, but really since March of 2020 when the S&P doubled and the fed got extremely accommodative. We said, those stocks, and by those generals, I mean Apple, Microsoft, Amazon, Google, Facebook had already fallen, Meta. Netflix had already fallen. Peloton. These other outlier stocks. They weren't very large, but they were the most overvalued.So, we think there's still more to go, but it doesn't go in a straight line, and our central bankers aren't powerless, so it's going to be an interesting summer for sure.Joel Bowman:Well, let's talk about our dear leaders in the central bank, Dan. Mr. Powell has been recently reappointed as fed head in chief. Is this just exercise in that old definition of insanity, just repeating the same thing and expecting a different result, or is there something more sinister at work here? It's a little bit of a toss-up it seems between some manufactured breakdown in the old monetary system if you want to get conspiratorial.Or is these just people who really down to their core belief that what they're doing is competent handling of the economy and that they can turn dials and pull levers and get it going in the way that they think that they can?Dan Denning:Yeah. It's funny you ask that question because I was just reviewing Tom Dyson's weekly update, which he publishes on Wednesdays. And he sends his draft to me and I just give him my reaction and some thoughts and observations. And it reminds me of an old, when I used to go to the barbershop in Estes Park, Colorado, it was run by an old friend, family friend. And I got to know him over many years, because I first went there when I was like five, and I kept going all the way through my adult life until he passed away. But he was a member of the John Birch Society. He carried a copy of the constitution in his front pocket, and we always talked about politics.And the one point I always made with him, which wasn't original to me was, it's hard to imagine a conspiracy of 3000 people being effective and efficient when it comes from the same organization that can't deliver the mail. How's the government capable of masterminding or faking a moon landing or doing this or that, or killing Kennedy, and at the same time, they're just ruthlessly incompetent at other stuff?But with respect to monetary policy, I think there's three different constituencies that Federal Reserve works for. One is political. One is financial, and one is institutional. So, if you look at all three, the institutional constituency are the 400 PhDs or economists that have only ever worked for the fed and whose livelihoods depend on providing research that justifies the government's policies or the central bank's policies.So, in this case, I think there's a group of people that actually believe they know what they're doing and that it's their job to provide the intellectual justification for zero interest rate policy for quantitative easing or for the latest moniker, which is the reverse wealth effect that if we engineer stock prices lower in a controlled, organized demolition, then people will feel less wealthy and that will moderate inflation. Sounds absurd.And I haven't read a lot of the research that purportedly justifies that policy. But I think in that case, they probably genuinely believe that lower stock prices will in some indirect way lower inflation in the United States, which is course, one of the mandates of the Federal Reserve is price stability. They're wrong. And probably, they're not stupid people but they just have existed in a bubble for a long time.They're completely divorced from the real world and they have no idea as Jim Cramer famously said in 2009 in his meltdown on CNBC, "They have no idea. These people have no idea." So, that's the one constituency.Joel Bowman:Quotable moment.Dan Denning:It was one of the great moments of all time.Joel Bowman:Teachable moment.Dan Denning:Actually, that's the second constituency, is the Fed's second constituency is the financial markets. It's bankers. Remember, it's a private institution that was given the license by Congress or the authority by Congress to manage the nation's money, and it's run and owned by banks. So, to that extent, their job is to run, manage the dollar, and manage financial markets so that banks don't blow up. And we could talk all day about what's been going on in the last 10 years.But that's part of what Powell's doing is saying, Look, unless there's a huge problem in the credit markets where a hedge fund blows up or a systemically important bank is in trouble because of assets that it holds, then we don't mind lower stock prices and high inflation because we don't work for the American people. We don't care about inflation. We work for the bankers. So, that's the second constituency. So, the second is Wall Street.The third is Washington DC. It's the elected officials. And I think that was interesting this week that President Biden in one of his press conferences mentioned that it was the fed's job to control inflation, and inflation makes all of the people running for reelection in Washington very nervous right now. Because in the real world where people are paying $4. 50 a gallon for gas, and that's just the national average. It's higher in California and other places.And where their food costs are going up, and where rent is expensive, and where the 30-year mortgage rate is now back over 5%, and house prices look like they've peaked. And a pocketbook issue is traditionally a much more motivating force for voter turnout than a social issue or even a foreign conflict.So, I think the political constituency that the fed serves endorsed J Powell overwhelmingly and said, "Please stay in charge because what we want you to do is we want you to hold interest rates below the rate of inflation so that we can continue to run these massive deficits without a real penalty on the dollar or without a sell-off in the US bond market."So, Powell answers to those people in the sense that the Fed is the central bank of the United States government, and the United States government has $30 trillion in debt, is supporting a war overseas, and everything but a declaration. And now realizes that from a demographic point of view, they're going to have to spend trillions more in the coming years on an older population that hasn't gotten back to work and that has learned to expect money from the federal government.So, that's a long-winded answer of saying, he serves three masters. He serves Wall Street, he serves Washington, and to a lesser extent, serves the people who have drunk the Kool-Aid at the fed and believe that you can turn the dials and pump the levers and manage the economy like a machine. And it's a giant mess for all of us, unfortunately.Joel Bowman:Well, just on that giant mess, anecdotally, and I know this is not a hard science measurement here, but I've been reading a lot of old essays from back in the '70s, Joan Didion, and just re-steeping myself in the zeitgeist of the '70s, which seems to be enjoying some dubious recrudescence right now, much to the chagrin of voters around America, many of whom don't want to relive those days, which we can get to in a little bit…But I'm wondering, just what appetite, maximum appetite, your average voter, who is suffering at the pump, at the grocery store, how much more can those people can be squeezed. How much more do you think the American people can take before they vote the bums out as they're constantly promising to do, but there never seems to be a shortage of bums in Washington on either side of the aisle, but before we see this massive revolt to the other side?Dan Denning:Yeah. I think it's a good question. If you look back, and also, I don't think it's so much that people are wondering if they can stand an era that's a lot like the 1970s because a lot of people just don't remember that. There's a whole generation of investors for sure that haven't lived in a period where interest rates rose, the dollar fell, golden oil rose at the same time, and there was persistent inflation in consumer prices. So, for a lot of Americans, this is an entirely new experience.And it connects in a visceral way that it's not inflation as an economic concept. It's a quality of life and a cost of living concept that my buck doesn't go as far as it used to. And therefore, my kids aren't eating as well, or we're not eating as often, or we're having to change our behavior because of things we don't entirely understand. So, that will translate into some political dissatisfaction, which I'll go through this really quick because I think it's interesting and it's also my job to think these things through.And ultimately, I don't think it'll matter, but what will happen is unless abortion becomes a massive issue in the midterm elections because of the Supreme Court ruling. And unless there's an escalation in the war in Ukraine, and unless China suddenly relaxes its lockdowns in these vaunted supply chain issues resolve themselves and you see lower inflation, then you should see a change in the control of both houses of Congress in November.So, the Republicans will take the Senate and they'll take the house, but you'll have a democratic president. So, you'll have two more years of Biden. So, typically that would immediately mean a lame duck presidency that you wouldn't expect to see any major legislative initiatives in that time. But then, you also see historically this brinksmanship between both parties about who's willing to do the least before the next presidential election so they can blame the other party for not doing anything?So, do they want to run the economy into a ditch and say, "Look what happened, the Republicans took over Congress and we had a recession, which it looks like we will have this year." So, those are all interesting speculations. And you can go back and look at the presidential cycles and the history of the stock market. And there's some interesting data which doesn't really yield any conclusive results.But I would say that's the main point for individual investors is going to the voting booth in November is not going to solve the problem with the dollar because whoever's in control, whether there's an R at the end of their name or a D at the end of their name, there's almost no willingness by anyone in Washington to be realistic about the fiscal mismanagement of the country and the long-term problem they've created with the value of the dollar.I'm working on a report right now for paid subscribers that we're just calling the dollar report, which says, "Well, where do we go from here?" The dollar's been actually quite strong against other paper currencies this year. Gold has held its own more or less. Okay, the Russian roubles done very well, which is in a whole another story. But we're trying to focus on the long-term, big picture of where we're at historically, and historically to bring it back to the '70s.This is the end of what we think monetary regime that began in the 1970s, which is a global dollar standard backed by nothing. People expected the United States government to be a good custodian of the value of the dollar. And therefore, people were willing to hold it as a central bank asset, or as a reserve, as an emergency safe-haven money for a crisis. Now we have a crisis and we learn that the US government is happy to tell people that money is no good.And they've told that to foreigners and especially the Russians. And we think that, that money is no good for anyone. But the trouble is, this is just a classic asset allocation problem. You'd rather own cash in a liquidity crisis, but when there's 8.5 % inflation and the central bank is willing to actively destabilize or devalue the currency, then cash is a difficult position to hold long term. So, that's a big problem that we're working on right now.But I think like you said, it's a once in a generation problem. And what we want people to realize is that problem is now. You need to be thinking about that stuff now.Joel Bowman:And it really is. This is a once in a half century problem. We're talking about the beginning of the '70s, and there are obviously so many transpositions that you could make, whether a change or at least a shock to the global monetary system as we saw with Bretton Woods and arguably are seeing some potential bifurcation of the international monetary system at present with banning the Russians from SWIFT, and there being all geopolitical murmurings between China, India, Russia. There's a whole lot on the table there that might go beyond the purview of this particular discussion.But what do you make of, and you alluded to this in your remarks, what do you make of the fact that the dollar, the greenback has over, probably since we've last spoken, certainly over the last month, has performed extremely well against not only paper currencies, foreign paper currencies, but in particular foreign paper, commodity backed currencies?I'm just planning a trip at the moment with my family where we're going to be in the eurozone. So, I'm looking at the exchange rates of Norwegian kroners, and euros, and British pounds, which have all, historically, performed pretty well against the US dollar. And I'm happy to report that my holiday is getting cheaper every week as the US dollar seems to hold up very well against those currencies.So, how do we make sense of that seeming disconnect? How do you purposefully inflate a currency away or devalue it, let's say by 8.5% a year, and still have it stack up strongly against these other fiat promissory notes?Dan Denning:Yeah, that's a great question. And because it seems counterintuitive when people look at it and say, "How could the dollar be getting stronger when all these horrible things are going at the ground level?" So, I think there are two answers. The first and obvious answer is interest rates or expectations for interest rates differential in those expectations. And that's a little bit, curious as well because the market, the future's market thinks that based on what the fed has said from its meeting notes and its public statements, that it will raise its benchmark interest rate to 2.5%, 3% by the end of the year.It hasn't done anything yet. It hasn't reduced the balance sheet. It hasn't begun running it off. It's just said that it's intending to combat inflation, and therefore monetary policy will be tighter and interest rates will be higher. So, that's part of the move in the currency markets is anticipating that there's going to be a yield on the dollar again and on a relative basis, it's more attractive.I guess there's three elements, but the second is less interesting to me because I don't think it's true, but it's a safe-haven bid that when people don't quite know what's going on. They run home to mama and the dollar is still mama for now. So, there's that element of behavior. I think the other, which probably is the most interesting and to me the most explanatory and predictive is it's a liquidity issue.So, one of the things people can look at if they haven't had a chance to is go back and look at this theory by a former federal bank, a Federal Reserve governor named John Exter called Exter's Pyramid. I like it because I'm a visual learner, and it reduces financial markets and asset class decisions to a triangle. It's an inverted triangle. And the idea is just liquidity pyramid is it's at the top end of the liquidity pyramid and financial markets.You have very large asset classes in terms of their nominal size but they're far removed from real value. So, their value is based on lots of variables. So, for example, in today's markets at the top of his pyramid would be the derivatives markets, interest rate, derivatives, currency, derivatives, those things. So, there's a huge liquid market in financial transactions, but the underlying value of those securities or instruments is related to something else that's far away.So, we saw that, for example, back in 2007 and '08 with the residential mortgage-backed securities, and that whole bundling of mortgages was an example of a derivative.Joel Bowman:It seems to be a good shape when talking about this.Dan Denning:It's a pyramid scheme. So, as you move down the pyramid, the type of asset becomes harder, maybe a little bit more liquid but it's smaller in size. So, you would get corporate, the corporate bond market, the government bond market, the equity market. And at the narrow end of the pyramid, you get cash, which actually in terms of the amount of cash that physically exists and circulates a small relative to the size of bank accounts and savings. And then, at the bottom of his pyramid, which is the whole point I'm going through all this is gold.So, it's the least liquid. It has the least utility in terms of its economic use, but it's the most stable and it's the hardest asset. Now, other people might claim that today, if you were redoing that pyramid, you'd have to add digital assets in there somewhere. But in terms of size, they're very small. They were 1.5 trillion or maybe 3 trillion at the peak. Maybe they're half that now. So, they're interesting but I wouldn't say material to this discussion unless we were going to just talk about money.So, the whole point is that in a liquidity crisis. So, we started with valuation crisis where valuations got reset from very high to somewhat more realistic. But the whole context of the thing is that as interest rates go up, the availability of credit and cash goes down, liquidity drains from the entire pyramid and money moves from the top to the bottom, and it gets destroyed at the top and it finds safety at the bottom. It doesn't mean it goes up.Like for example, gold and dollar terms is not going up right now, but my view is that gold isn't going anywhere. It's the dollar that's moving relative to gold. So, I think that the dollars apparent strength is only apparent if you understand it in that context, that there's a liquidity preference for US dollars for lots of reasons. And compared to other currencies on an interest rate basis, it looks like it might be more attractive, but we're not focused on any of that in the long term.We're trying to focus on how people can de-hedge or hedge their dollar risk, because I think ultimately anyway, that what you said is what's going on is that our financial authorities realize that one of two things has to happen. They can either allow inflation to go out of control to deflate the value of all this government debt and they have to pay a political price with high consumer price inflation, or they can allow the bond market to collapse. So, it's either the currency or the bond market.And our view is that it's probably going to be the currency. And so, for people who save in that currency, who invest in that currency, who are going to retire in that currency, then that becomes the number one issue to try and solve. So, that's why we're working right now on the dollar report, which is a big job, but that's our understanding.Joel Bowman:A big undertaking. Yeah. So, you mentioned gold there. And of course, in addition to the dollar report, which you're working on, Tom has his Dow-Gold report up on our Substack, which again, if you haven't visited is bonnnerprivateresearch.substack.com. So, head on over there for all the research that Dan's underscoring here. A lot of people have thought that in times of great uncertainty, and it would be difficult to imagine, I guess, a time of more uncertainty coming out of a global pandemic and in particular, various governmental responses to that pandemic.And now we have the threat, maybe again, a once in a generation threat where people are talking about nukes and something that may have seemed unimaginable just a few years ago. It's hard to imagine more uncertainty. Most people think that when that happens, okay, there may be a flight to mama dollar as you've described, or many people think daddy gold is the other parental safety instrument.Obviously, as we speak here, gold has underperformed relative to the dollar in the past month or two. Are you looking for there to be some point at which dollars start cycling into gold as the safe-haven asset?Dan Denning:Yeah, I think so. I think that discussion is whether investors, a lot of investors, including retail investors will again see gold as an investment rather than as a method of saving or a vehicle of saving or capital preservation. Obviously, that has and does happen in precious metals bull markets is that the price action in the underlying commodity, gold or silver in this case, attracts retail investors who then bid up prices of mining stocks and you see the cash for gold phenomena on TV, where people are encouraged to bring in their grandmother's jewelry and trade it in for cash. Excuse me.I think there's an interesting analog with this, with what's happened in the crypto space, which I am not an expert on and I should qualify my statement, but I have noticed that there are two types of people that I've noticed. There's the people who expect to get rich in crypto by buying low and selling high. So, they were never really enthusiasts or even understood or cared about the idea that this was different money or a different saving or a different asset.They just wanted to get rich in dollar terms so they could buy Lamborghini or a new house or leverage a house, any of that stuff. So, this was just a speculative vehicle for them.Joel Bowman:When it was going out, they wanted to get on board. As simple as that. That's the whole funny thing.Dan Denning:Yeah. And I think that is the case typically in bubbles, which we may get again in mining stocks related to gold and silvers. You'll get a huge attraction of people who are not interested in the monetary discussion. They just want to get rich, or they need to get rich because they're retiring soon or they lost a bunch of money in the stock market. So, that'll be really interesting, and it's a good thing that we have a lot of friends who focus on mining stocks, companies that are currently generating great cash flow. They're returning it to shareholders.And if the price goes higher for gold or silver, they'll do really well. But that's really not our focus at Bonner Private Research right now. So, Tom and I probably have slightly different view on this, but I would say I don't know when I would sell my gold, but I wouldn't really care about the dollar price on a short-term basis. In fact, I don't care about the dollar price. I view it as a form of saving, as a way of getting money out of one type of financial asset and into anotherTom's view is slightly different in the sense that he thinks, and I think history shows that there are these major rotations out of asset classes. So, out of gold and into stocks, into stocks, out of gold. So, that's the whole point of the Dow gold ratio is to save in gold until stocks are cheap. And then, when stocks are cheap, to move out of gold and back into stocks. And I think as an investment strategy, that'll work because it has in the past. So, that's one of the major research reports that we publish.But for me, I think at some level, I don't think the retail investors, I think they disappear in bear markets because they're by definition the marginal investor. They end up getting wiped out because they buy high and they sell low. They didn't have a lot of money, to begin with. The transaction costs eat them up, and the lack of quality information tends to blow them up really quickly as well. And that's what's happening right now.So, that money's not going to be left. It's not going to be around to drive precious metals prices higher. So, that's not the reason for owning gold bullion. The reason is on a long-term basis, the dollar is being systematically devalued by the central bank. And we think gold, whether coins are bullion is the best store of value during a transition like that. So, there's a couple of different angles on it, but I think that's where we're at right now with it.Joel Bowman:Right. You mentioned energy before, just to flip between the commodity sectors and just by way of segueing into your trade of the decade, which you, Bill, and Tom have concocted, essentially long energy without giving too much away. And I guess the de facto, even though it's not strictly a pair-trade, it would necessarily in some way, I guess be short the dollar just because of the fact that you got out of the dollar and into energy.But do you want to give us a quick update on how that's going and speaking about these cycles you mentioned a chart depicting energy, having recently overtaken tech as a sector in the market, has now just started to outperform as oil has risen and the big tech generals have beat a disorderly retreat.Where are we in that cycle? I know we're only a couple of years into it, but it seems like it's been a roaring trade even at this early read?Dan Denning:Yeah. And I guess I'm obeying the rule of three today or some Trinitarian principle because everything has three aspects to it. But when we first researched that and published it in January of last year, it was really a cyclical argument that said that the energy sector, especially on the S&P500 had underperformed for 10 years, and the technology sector was the best performing sector for 10 years. So, just mean reversion and market cycles would show that was unlikely to be the case for the next 10 years.So, if you drilled down to it into a little bit deeper, you saw there was other evidence of that. One example was that I think in the early '80s, when the oil price peaked or when the oil price was high, energy sector companies, percentage of the S&P market cap were much larger. I don't think they were 30%, but they were somewhere between 13 and 23 if I recall correctly. But the point was, they were a bigger part of the real economy and they were a bigger part of the stock market because oil was a bigger part of the world.A lot changed over the next 30 years. So, by the end of 2020, tech companies, I think there were just five of them that made up 25% of the market cap of the S&P500. And, of course, at the peak in March, or it was really earlier in January, Apple became a $3 trillion company briefly. You had the race to 2 trillion with Amazon and Microsoft, and then you had, before it fell, you had Meta or Facebook knocking on the door.Just on that basis, we just said, "Wow, energy is way under invested in and technology is way over invested in." And that actually translated into capital investment. And by that, I mean the energy companies after the oil price peaked in 2014 and then crashed for 2011 in that whole period, they were just starved of capital. They didn't invest in new projects. They didn't invest in new supply. And there was a lot of reasons for that.One was, there was a lot of oil. The oil price was going down. The amount of regulation to explore for and bring new oil and gas into production was going up. So, it was discouraged from a political point of view, a regulatory point of view. And then, you had clowns like Larry Fink and Michael Bloomberg who were saying, and even Jim Cramer in 2020 saying, "These things are uninvestable, for moral reasons, for climate reasons, and for economic reasons that we should just stop investing in oil and gas companies."And some public pensions have done that too. They said, "Well, they're not carbon-friendly, so we're not going to give these industries capital." So, all that meant is that these industries, the supply of oil is not growing and the demand for it reached pre-pandemic levels and then went past it. So, look at the oil price right now, despite the prospect of a recession in the United States, and despite a lockdown in China's biggest cities and despite a war from one of the world's largest oil exporters, I say despite, I mean, that contributes to it. Its price action has stood out.So, that confirmed our thesis that this whole idea that the world was going to suddenly run on electric cars and that we weren't going to use oil, gas, and coal anymore was a marketing slogan. It was a political idea. There were other objectives going on. So, there was a lot of reasons that we thought that trade was going to be a good one. The question right now is, as you pointed out, we think that easy money has been made that they were really, really undervalued or mispriced last yearThey're less mispriced than they are now, but we think that because it's a long-term trend, in other words, it's going to take years to reallocate capital to the sector, to go out and find more oil and gas, to build pipelines, to build refineries. We think there's more money to be made. It just means you have to do more research and find out where. So, is it upstream? Is it downstream? Is it pipeline companies? Is it refineries? That's something Tom's been looking at quite closely.And so, we're going to continue to look at it, but the trade itself is really simple and just based on that basis that… and maybe that's probably the broader point is that we think something changed in the last year to where this idea of soft power or growth being the most valuable thing in the market has changed that real assets like coal, oil, gas, and gold. Those are more valuable now. And they're the source of both political power and real earnings for companies. So, that's a change in leadership in the market from the companies that produce real assets are in the ascendant and the companies that produce future revenue growth like Amazon, Apple, Microsoft are in the decline.Joel Bowman:Yeah. And it seems that, that delineation between the real world delivering real assets to real customers with real companies that produce real profits, as opposed to companies with just unimaginable, and as it turns out, very unprofitable growth projections, yield the opportunities that Tom's looking for with his tactical trades, special niche situations in the market, in particular pockets of the market, where people haven't been looking for a little while.And he sent around just an update on the performance of the stocks that are on the watch list. And they're doing handsomely, especially given the fact that the broader market has been more or less bleeding red for the year. So, that's all good stuff.Dan, I'm going to be up in the US in June. We've definitely got to get together, or rather July, actually, I'll be in Europe in June, spending my very powerful green backs while they've still got some staying power. And then, in July in the US. So, we'll have to get together up your way to record another one of these in person if we can.Dan Denning:Yeah, that would be great. And I would just close by saying, I think for us right now, Tom's getting ready to publish his next monthly issue. He does one a month, which is a fuller investigation of where we're at. And we discussed those things. And we think two things, these recent evaluations has further to go. So, things will get cheaper on evaluation basis. But now based on the recent earnings reports of companies like Walmart and Amazon, what people have to factor in is the prospect that companies are just going to be earning less money in a recession. They have higher energy costs. They have higher transportation costs, and they have a consumer who's facing these higher costs at the retail level, who has some disposable income but is spending more money through their credit card. And so, we think there's that factor of has the market priced in a recession. And in that case, when you have deflation in financial assets and a recession at the same time, it does change a little bit your tactical strategy of where the money's going to be made.So, it's a month-to-month thing. We have a long-term focus, but in some ways, it's a really fascinating environment to be trying to connect the dots, which is what we do, and then try to avoid the big loss, which we think we're in the middle of, and then try to get to the other side of the crisis, which we think is a long-term crisis. So, very busy times, but we'll have time for lunch and a bottle of wine, for sure.Joel Bowman:All right, Dan. As you say, we're early on, potentially in this cycle. There's a lot more work to do. So, finally do head over to our Substack. This is my third repetition of this, sticking with your rule of three today, Dan. It's bonnerprivateresearch.substack.com. Check out all of Dan and Tom's excellent research, and of course, Bill Bonner's daily missives. And we hope to see you there, Dan. We'll catch up again soon. Thanks for taking the time, I really appreciate it.Dan Denning:Thanks, Joel.Joel Bowman:Cheers.Thank you for reading Bonner Private Research. This post is public, so feel free to share it with generals and foot soldiers alike... This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit bonnerprivateresearch.substack.com/subscribe

Rob Marstrand on Inflation and Capital Controls

Play Episode Listen Later May 1, 2022 37:08

“So there are a lot of lessons to be learned here about how governments can really clamp down. So when their policies and their central bank policies are failing, they'll try all sorts of tricks to stop people protecting themselves. You've got to essentially try and get ahead of them.”~ Robert Marstrand, Investment Director for UK Independent WealthEd. Note: Learn more about Rob's work at Fortune and Freedom, right hereTRANSCRIPT:Joel Bowman:All right. Welcome back to the Fatal Conceits podcast. A show about money, markets, mobs, and manias. Not necessarily in that order. If you haven't done so already, and you're just tuning in for the first time, please head over to our Substack page, that's at bonnerprivateresearch.substack.com, where you'll find plenty more articles on everything from high finance to lowly politics. And of course, many more conversations just like this. I'm joined in the studio, actually here in Buenos Aires today, with my good friend and long term Argentine expat, I guess, Robert Marstrand. Welcome Rob.Robert Marstrand:Hi Joel. Well, great to see you, as always. Joel and I, usually when we're sharing time, tends to be over a fat steak and a glass or two of the local Malbec, but here we are in a studio.Joel Bowman:Yeah, indeed. We might have to take a rain check on that meal until later in the day. Mate, first of all, you were telling me just before we got on air here about your trip in a kind of a lunatic taxi. And it struck me that was somewhat metaphorical for some of the topics we're going to talk on today. So give us a little bit of your backstory with regards to arriving here. What would it have been 15 years ago or something like that?Robert Marstrand:Yeah. Well, I actually immigrated here in 2008. As your listeners can probably guess, I hail from the UK originally. I'm English from South East England place called Sussex. My first time in Argentina was in 2002, which was an interesting time because it was just after, or almost actually in the middle of a massive financial crisis. So Argentina defaulted on its debt and had a massive two thirds currency devaluation around that time, so the peso collapsed against the dollar. I still have a pair of boots by the way, I bought it back then, August 2002. I bought a pair of ankle boots. They cost me the grand total of $20. And it's still going strong.Joel Bowman:How much was that in pesos at the time? Because that's obviously collapsed.Robert Marstrand:Well, I suppose by that point it would've been about 60 pesos.Joel Bowman:Right. And how much did you pay for your taxi ride in this morning? Just so readers can get an idea of how much the peso has collapsed.Robert Marstrand:Well, my what should have been a 10 minute taxi ride that took five minutes because I was being driven by a maniac, and that I believe probably had a rigged meter that bumped up the price, cost me about 300 pesos, which is about $1.50.Joel Bowman:Right.Robert Marstrand:It should have been about a buck.Joel Bowman:Right. So you've got completely ripped off and had to throw in an extra couple of quarters. Mate, you and I share a lot of articles, just regarding what's happening in current affairs, both down here in Argentina and in your home country, mine, and in the US. An article, a wall street journal article came across our collective desk within the past couple of weeks describing what I think may turn out to be the kind of inflationary ghost of America's future, or maybe even the future of many Western nations, that are just now seeing inflation tick up to once in a generation highs, depending on how you measure it. But for the Argentines, where we currently have an official inflation rate of over 50% right now, it strikes me that the people here have been dealing with this for... Goodness knows how long they have adapted, they've anti-fragelized themselves to some extent. How do you see having lived here for the past 15 years, the people of Argentina adapting to this... what for many people would be a completely foreign and very, very out of whack economy?Robert Marstrand:Yeah. Well, I'd say when I arrived here in 2008, inflation was about 15% a year, one, five. And it's just gone up and up and up since then. So it's never had low inflation since I've been here. I forget the long term average, but it's some monstrous number, because they had high pre-inflation back in the 80s and so forth. Look, all the stuff that happens here, borrowing money you can't afford to pay back, printing money like crazy from the central bank, it's happening in the US and across Europe, for that matter. It's something I write about and look at quite a lot, if you look at US bank deposits, since just before the pandemic started, so let's say February 2020, US bank deposits are up about 35%, 40%. So in just over two years, the economy is more or less the same in size, in terms of volume.It went down during the pandemic and came back. Guess what? You get inflation. Well, guess what? We have inflation in Argentina too, because they keep printing masses of money. And you know what? Politicians, central bankers here will often say dumb things like, "Inflation is not created by the emission of money, or money printing."Joel Bowman:It's greedy capitalists or price gouging.Robert Marstrand:... it's whatever, it's speculators, it's whatever it happens to be, whatever they happen to claim. I remember a few years ago, there was a head of the central bank here who said exactly that "inflation wasn't created by money printing." And there was a finance minister, or maybe he was vice president by then, who said that "inflation only affects the rich." It's the poor that get affected most. Now here in Argentina, frankly, who gets affected most depends on where they fit into the social structure. So the very wealthy who have overseas assets and foreign currency assets and so forth, don't get affected that badly. The people at the very bottom who just have a bad life, whatever happens, they're struggling badly. They rely on handouts from the government, they tend to be adjusted for inflation, so they struggle along, I think at the same level by and large.So the people in the middle, they get squeezed, it's the middle class, the people that have salaried jobs, and maybe their salaries don't keep up with the inflation and pay, so in terms they're paid in local currency. So those are ones that get squeezed. But it's brutal, 50% inflation a year, you're talking about prices doubling in less than two years, a year and a bit.Joel Bowman:And this is something that I think to your point about a lot of purchasing power for real wages, that is real wages going down when adjusted for inflation, this is something that I think people in the United States... And I'm not sure about the UK, but I imagine that many countries in the Euro zone and Australia, Japan and elsewhere are now just experiencing for the first time. So some of the strategies that people in that article down here in Argentina were using were things like, going to the store when there were discounts, coupon, clipping, this kind of thing, but also delaying payments, taking out loans and then paying in installments, which sounds counterintuitive, but if you think that your money is going to be worth... Or rather, you know that your money is going to be worth 50% less, 12 months from now, then it does make a certain amount of sense to take out a loan and pay it back with deflated currency sometime in the future.But it doesn't say a lot about planning for the future when you're trying to get rid of your money as quickly as possible, or diversify into other assets. Is this something that people in the US and across the West, broadly, are going to have to learn to deal with in the future?Robert Marstrand:I think they are. If you've got dollars sitting in the bank and inflation's running at 10% a year, you're losing a lot of buying power, because you certainly aren't getting a lot of interest from the bank at the moment, right?Joel Bowman:Right.Robert Marstrand:I've seen people here, if you've got a few extra pesos at the end of the month, you stockpile whatever you might need in the future. So I've seen people loading up their storage units with things as simple as toilet paper. You might buy some wine, you might buy some canned foods, you might buy anything that's not going to degrade. People here also, I've heard about people who maybe wants to build an extension on their home, but they don't have all the money up front, so they'll buy a few bricks at a time. At least the brick is still a brick, when it comes to sticking it together into a wall. Whereas a pesos is going to be worth a lot less. Will people get to that, or learn, relearn to do that in the US and the UK and other places? Well, they may have to, if it carries on like this.Joel Bowman:Right.Robert Marstrand:People also tend to have... If you have a pension fund, if you follow standard advice, you probably have huge investments in US treasury bonds, or gilts, as they are in the UK or whatever in other countries, these are dreadful places to be. If they're paying you like 2% a year and inflation's at 10%. So people got to think how to get out of some of the stuff they're used to, their local currency, their bonds, their whatever. Of course, people here are very clued up about that. The trouble is the government is very aggressive about blocking the exits. Well, yeah. People here, if you have spare pesos in your bank account, if you've got anything left at the end of the month, I think you're limited to something like $200 a month that you can buy in a-Joel Bowman:In foreign exchange, in foreign currency.Robert Marstrand:Yes, for the official markets, which gets you the better rate. So there are a lot of lessons to be learned here about how governments can really clamp down. So when their policies and their central bank policies are failing, they'll try all sorts of tricks to stop people protecting themselves. You've got to essentially try and get ahead of them.Joel Bowman:So unpack that a little bit, because this is something that you and I talk about, and people down here who save, invest, earn in another currency like dollars or British pounds, this is something that we bandy about pretty regularly, this idea of parallel rates. But I think that's something of a novelty to people in the US or Australia or the UK where we have an exchange rate for, let's say Australian dollars to US dollars, and that's the exchange rate. Why is there a parallel exchange rate? Explain that for our listeners, let them know why there's such a huge spread between the official and the unofficial, or rather blue rate.Robert Marstrand:Well, that's quite a rabbit hole to go down, because I think there's something like five, six or seven different exchange rates, so depending on which one you want to pick.Joel Bowman:Right. So let's go with the blue.Robert Marstrand:Yeah. So there's the official exchange rate, which everyone would be familiar with, which is, you go your bank and you want to buy some foreign currency to go on holiday or whatever, and they'll do it at the exchange rate plus their commission or whatever. But over here, there's also the other extreme, it's called dollar blue. I don't know why it's called dollar blue, but it is. It's the black market, but it's called the blue market here. And it's officially illegal market, it's backstreet dealers that you go and you take your pile of cash to, and they'll convert it, either from pesos into dollars or dollars into pesos. And that exchange rate is roughly twice the official rate. So I forget what the official rate is exactly now, but let's say it's 110 pesos per dollar...Joel Bowman:Something like that.Robert Marstrand:... you go to your backstreet guy and they'll probably give you 210, 220, something like that, the other way around. And then in between, you've got these other rates, so there's a legal market through the bond market for getting money in and out of the country, which trades bonds between New York and Buenos Aires, which is close to that black market rate. As far as I'm concerned, that's the market rate, that's the real market rate, it's legal and it's much higher than official. Then in between, the government imposes taxes on foreign purchases. So if I go on holiday, let's say from here and buy something with my Argentine credit card, they automatically add an income tax on that if you like. So that puts it somewhere nearer.Joel Bowman:How does that...?Robert Marstrand:... disincentivize me spending money overseas basically, they want me to spend my pesos here.Joel Bowman:Right. They want to keep you captive as it were and not let any of that peso leakage. So explain how that happens. It's something like 30% or something, I think that tax on foreign credit card purchases.Robert Marstrand:Yeah. And it's got some name, it's the solidarity tax or something. So there's that if you buy stuff, and there's another one, I think if you buy flights to go overseas, there's another tax added. Something odd goes on. Anyway, I-Joel Bowman:Does that get deducted just directly from your account?Robert Marstrand:Oh yeah, it's done through your bank. So your bank is instructed by the government to automatically add to that to any purchases you make overseas, and then it gets taken out of your account, and then goes to the government. So people-Joel Bowman:Is it really your money? Who says it's your money?Robert Marstrand:Governments have all sorts of tricks that they can come up with to control the gates, to control capital. And of course, the US already has capital controls in the sense that if you're a US citizen and you move overseas, you still pay tax to the US on your foreign income. And if you wanted to give up your... As I understand it, if you want to give up your citizenship, you'll pay a massive exit fee. Because I had a neighbor in London years ago, he was actually a German. His wife was English, lived upstairs. And he'd lived in Washington for a couple of decades, and he left the US. And to his shock horror, discovered he had to pay some massive exit tax on the notional value of his pension, which wasn't even funds he had, it was just a notional value of money he might get in future. And he got whacked with this massive bill. And he wasn't even American, just lived there for 20 years.Joel Bowman:It's extraordinary.Robert Marstrand:There are capital controls already.Joel Bowman:Right. And I guess some of these controls and taxes are more conspicuous than others and certainly people don't tend to think of inflation as a tax. But as we mentioned, if you're watching the purchasing power of your dollars or pesos or pounds or pengős or złoties or whatever, depreciate by 10%, 20%, or in Argentina's case, 50% per year, that's certainly a tax on your quality of life. I remember you did a little bit of work when you were, I think, maybe when you were riding with our mutual friend, Bill Bonner, some years ago in unpacking all of the business taxes here in Argentina, if you were to operate what they call [foreign language 00:15:10], if you were to operate a business strictly above board, you were to cross all your Ts and dot all your Is with the tax agency here. And it was some extraordinary amount, something like 130, it was above a 100%, I remember.Robert Marstrand:Yeah, it was a study done by one of the big global accounting firms. I think it was covering about 40, 45 countries, something like that. And they looked at all the taxes levied on companies. It was sort of mid-cap, small mid-cap companies, it wasn't big multinational, just the small stuff. They looked at all the taxes levied in these countries, and their conclusion, and Argentina was the only one that achieved this, was that if a normal business paid all the taxes that it was supposed to, it was guaranteed to make a loss, which is obviously insane. I would hate to try to be a local entrepreneur here, I think it's a phenomenally hard place, it ranks very low in the world. It's not quite as bad as say, Eritrea or North Korea or somewhere, but it's not that far.So effectively, you reach the conclusion when you read stuff like that, and talking to people. If somebody's running a business here, they have to break the rules to stay above water. And not just that, if they don't, the guy next door will be, and so how do you keep up? So it's an insane situation.Joel Bowman:And if they're running a profitable business here, there must be incredibly nimble and entrepreneurial and anti-fragile and it's quite a testament to their business acumenRobert Marstrand:I know some very successful entrepreneurs here, and I think they're probably some of the best business people in the world, given what they have to put up with.Joel Bowman:Right, right. Hardened in the crucible of Argentine politics.Robert Marstrand:If they were gifted, the kind of environment that people enjoy in the US, let's say, say in certain states, this place would rocket. It would be an absolute overnight success within not that many years.Joel Bowman:Right. Well, the natural resources here-Robert Marstrand:Yeah. You get this place 10 years of a decent, stable set of rules that were sensible, and a tax system, and employment law that was sensible, I think this place would absolutely be boom.Joel Bowman:So let's talk about that then, because I know you headed back to the UK in a month or so with family. When you go back to the UK, when I go back to Australia or we visit the US, and I'm sure you hear this as well, I oftentimes hear people pining after... with a romantic tear in their eye or advocating for these very, very progressive taxation, let's say, or broadly socialist policies that... Of the Stripe, which have led Argentina to exactly the lamentable position that it finds itself in today, where it has an abundance of human capital and abundance of natural resources, and can't seem to get it together, where other countries like the UK, like the US or Australia, how do you address the dinner table conversation where somebody who's telling you with a straight face and without any hint of irony that "what we need more of in the UK is some Argentine-like policies."Robert Marstrand:Well, God, where to start with that? I have to say, as you know well, I'm about to go over the big barrier of my age, beginning with a five, rather than a four.Joel Bowman:The half ton.Robert Marstrand:I have to say that as I get older, my appetite for having arguments with people over dinner tables or otherwise is diminishing because you lose patience with it. But that said, I do observe a lot of the views and the actions, and I find it exasperating. In fact, one of the reasons I immigrated, despite all I've said about Argentina's problems, Buenos Aires is a lovely city and I do love this part of the world. But when you don't live in your country of origin, it's easier to put mental distance between yourself and the nonsense that's going on. When I go back to the UK, I'm instantly thinking, "Why on earth are they doing this nonsense?" And just this week, just in the last couple of days that in theory, they have a conservative government, which is, I suppose, broadly a bit like the Republicans, it's different, but it's slightly to the right, in theory.Joel Bowman:Small city conservative type of-Robert Marstrand:Supposed to be in favor of business and all the rest of it. I think they're left of center personally, but that's my view. The chancellor of [Vecheko 00:19:49], which is like the... What do you call it? The sector of the treasury.Joel Bowman:Right.Robert Marstrand:It's talking about putting windfall taxes on oil and gas companies. This is madness. This is in the middle of a global energy and commodity crisis. And they're talking about slapping extra taxes. These are companies, which by the way, are investing billions of dollars every year into renewables as they move away, they don't have a choice, moving away from oil and gas over time, but it's going to take a lot of years.Joel Bowman:And a lot of money.Robert Marstrand:Slapping taxes on them slows that down. So it would be idiotic. So that's just one example of what exasperates me. It's not just taxes, it's just lots of petty rules. And it really took off in the 90s, when Tony Blair came in with what's called New Labour.Joel Bowman:Well, he had the hand of history and shoulder.Robert Marstrand:Yeah. He had the hand of history, and the God, he had hand of something on him, I don't know... They just started bringing in lots and lots of petty rules. It was sort of a effectively job creation, all these non jobs in all the bureaucracies of the state. And they wrapped up. I think I once calculated in the UK during the Blair government, that adjusted for inflation and population, that government spending per person in real terms, so just for inflation, went up something like 40%.Joel Bowman:It's incredible. Incredible!Robert Marstrand:That's talking about big state. And they've never dialed it back. In theory, we had a conservative government since what, 2010?Joel Bowman:Right.Robert Marstrand:And it's never gone down again.Joel Bowman:Well, that's the way, isn't it? It tends to be rules are easily put on the books, but it's very, very difficult to appeal.Robert Marstrand:But also if you give lots and lots of bureaucrats, lots of jobs, they're going to be busy bodies and they're going to bug you and get into your life. And I find it, just drives me out the wall personally.Bonner Private Research is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.Joel Bowman:And also I find a perverse incentive structure, where in the marketplace for all, its rough and tumbled turbulence or what have you. If you're a losing business, you tend to go out of business. If you're not satisfying your customers or you're not meeting payroll or you're not growing earnings or you're not producing value for your shareholders, et cetera, then you don't stick around for very long, or you become an acquisition target or whatever happens to you, but that capital becomes eventually liberated. It seems to be the opposite when it comes to conversations about the state, where any program you happen to point your finger to, whether it's the war on drugs, or the war on poverty, or the war on terror, or the war on COVID, or any of the above and plenty more, it seems the more inept the agency is, the more money it gets. And as you say, that just kind of the Leviton growth.Robert Marstrand:Well, being the finance nerd I am, I dig into things like, what's the real tax burden on people? Because we think we pay a certain amount of tax, but what's it really? Now, I can't give you the numbers for the US, and also it varies by states and all that kind of thing. I was looking at the numbers in the UK and I reckon, rich or poor, high income or low income, if you add in, so all the direct taxes, income taxes and whatever, but then you look at the taxes embedded in the prices of things you buy. So all the taxes that corporations pay. So the income tax for their employees, their local taxes on their property, their corporate taxes and et cetera, et cetera, in UK, we have value added tax, which is a sales tax as well. You add all of that together, I reckon that just on average, across all the stuff you buy, probably about 40%, maybe more, it's just tax in the price of everything. It's probably even more or in Argentina by the way.But I reckon that people roughly speaking were paying about 60% tax across the board. And most people probably think they pay about 20%.Joel Bowman:Right.Robert Marstrand:It is insane. And it just goes up and up and up. The UK recently that the tax burden is the highest relative to GDP. I think it's been since the second world war or something, or maybe it was the 60s, I can't remember, but it's high anyway, that's the point.Joel Bowman:Right. So whether it's this inflate or die or tax and spend mentality, it does seem that-Robert Marstrand:Well, sorry. Just a crucial point is here...Joel Bowman:No, go ahead.Robert Marstrand:... obviously, we have this cost of living crisis going on, and price of energy and food and everything is rocketing. And I think it could go on for a while. No one ever talks about the fact that so much of that cost is tax.Joel Bowman:Right.Robert Marstrand:Could the government not scale back and cut some taxes and reduce our cost of purchases? Hey, not even talked about.Joel Bowman:Not in the nature of the beast. So going back to what you said before about this, the proposed windfall tax for oil and gas companies, which have just been the whipping industry [foreign language 00:24:43] of the last decade let's say, a similar windfall tax proposals have been tabled in the US, and it just strikes me as perverse that at precisely the time when we are experiencing... Let's be generous and diplomatic and say, tensions in the global energy markets, we've had under-capitalization in this particular industry. I think the high watermark for dollar spending for global exploration was around 2014, something like $800 billion. That was not coincidentally the high watermark for the last high in oil prices itself.And whether it's being squeezed by environmentally sustainable governance and all this kind of stuff, it seems like it's very difficult for entrepreneurs and businessmen to invest in critical energy if they're being beaten around, boxed around the ears by governments. What's your outlook... I know I've already had a huge run up in energy prices, and we talk about this a lot in our newsletter upon a private research, but what's your general outlook for global energy prices in next short to medium term?Robert Marstrand:Well, I think it's likely that oil and gas prices stay pretty high, especially in Europe. Of course, there's a big disparity right now between North American natural gas prices and European natural gas prices, because it's cheaper to deliver gas through pipelines than turn it into a liquid, stick it on a ship, sail it across the ocean, turn it back into gas, which is the liquid natural gas, liquified natural gas. I'd say the prices are likely to stay high. Because even if this whole thing is wrapped up in Ukraine tomorrow, is everyone going to rush back to buy Russian commodities? And Russia being such a massive producer of both oil and natural gas. I suspect they'll be sanctioned for years, maybe decades, until there's a change of leadership. And by the way, people talk about removing Putin. Well, who knows if the next guy isn't worse. So don't get too excited about that idea.But just a bigger picture... So I'd say prices probably stay high. Bigger picture for all the hoser about the shift to renewables and getting to net zero by X year, depending on which government saying what's on, what day of the week, people forget... There's a great piece of work done every year by an oil company called BP, it's big oil company, you've probably heard of it. Where they do a world energy review, although they're an oil gas company, they look at coal, they look at nuclear, they look at wind and solar and the whole bit. And the stark reality is that 84% roughly of the world's energy comes from hydrocarbons. So that's coal, oil, and natural gas. Then you've got a chunk that goes to, I think it's something like 10% goes to nuclear, comes from nuclear.Another chunk similar comes from hydro electricity, so damning up rivers to create lakes and then running the water through turbines. And then there's only a little bit left. That's the renewables, in quotes, the solar and wind piece mainly, and few other bits, biofuels maybe. How are we going to get that tiny piece to replace the 84%? Well, it's going to take a damn long time. So the fact is, whatever people say, oil, coal, natural gas are here to stay probably for decades, especially in poorer countries that can't afford the new technologies straight away. They can barely keep the lights on as it is in many cases. And don't forget, everyone talks about... Everyone, well in Europe, we can cut ourselves off from Russian oil and gas, and let's all build lots more nuclear power stations.Well, great. But guess what? Nuclear technology is subject to restriction some proliferation because of fears about weapons. Right?Joel Bowman:Right.Robert Marstrand:So all those poor countries, what are they going to do? They can't build nuclears, they're not allowed to, no one lets them. So I don't think this thing is going to evolve anywhere near the way that the politicians claim they want it to evolve. I think poor countries, big places like India or parts of Africa or wherever, they're just going to say, "Look, we need energy to keep the lights on. We need to keep our populations heated or lit or fed. We need tractors, we need..." Whatever. I don't think they're going to shift to massive, great solar and wind farms anytime soon. There'll be a bit of noise around the edges to keep people happy, but it won't happen, simply won't happen.Joel Bowman:Right. And it does strike me that in many of these... you mentioned India or Sri Lanka or nations that are decidedly not energy independent. And we've spoken a little bit about Sri Lanka before, but there are a lot of places where a large and meaningful portion of the population live at or around the breadline level wearing, as you mentioned before, inflation herding, not the richest people, contrary to what the Argentine government would have you believe. But inflation actually hitting the poorest people, we see 10%, 15%, 20% rises in the cost of energy, combined with the inflationary pressures that these people are feeling. It does strike me that this... Much like the Arab Spring in 2009 or 2010 or whenever it was, it does strike me that we might be a lot closer to civil unrest in volatile pockets of the world than we might necessarily be factoring into the geopolitical equation.Robert Marstrand:Yeah. There's no question. People complain about rising gasoline prices or food prices or whatever in wealthy countries, but in poor countries, poor populous countries, this is life or death stuff, if you can't feed yourself. And throughout history, revolutions have always been caused basically by populations becoming hungry, that's the final trigger point. It doesn't matter how authoritarian the government is. If people are starving, they hit the streets, and they will throw their lives on the line because they're going to die anyway. Now the people that really struggle, so the rural poor usually just about scraped by because they've got some plot of land, they can plant some food, they might have a goat or sheep or whatever. It's the urban poor that really struggle because they can't grow their own food and they're scraping a living.And so that you think about some of those big cities in India or wherever. I haven't actually been to Africa yet. I know you have, but I imagine some of those big African cities are pretty grim. And those are the people that are likely to riot. And you mentioned Sri Lanka, Sri Lanka's economy relies on tourism to a large degree. And of course they got slammed during COVID because people weren't traveling. And I have a brother-in-law who has a business there as it happens. He lives in England, but he has a business in Sri Lanka. And they're going through rolling 5-10 hour power cuts at the moment, there are food shortages, they've just defaulted on their debt, they've had riots, so the place is going into meltdown. Indonesia, biggest producer of cooking oil in the world has recently started restricting exports of Palm oil, which is controversial for some people because of they have habitats where the trees are, orangutans and things.But throughout Asia, it's a very important cooking oil. This also goes into the filling in Oreo cookies by the way, and shampoo and all sorts other things. But that's another sign, a big country, 200 million people and they're restricting their exports of an important food stuff. So I think we're going to see a lot more of this through those poorer countries. And of course, Argentina also has restrictions on some of its food exports, particularly meat, beef here is produced in great quantities, because it's all about suppressing the price in the domestic market. If all these big food producers start cutting off exports or restricting them in some way, obviously it has knock on effects to the importers, the Sri Lankans of the world.Joel Bowman:I know a lot has been made of these so-called supply chain disruptions and I've heard it said before that, well actually supply of chains are the economy. Supply chains aren't a part of the economy. Supply chains are the capillaries and the arteries and the veins getting necessary nutrients to different parts of the marketplace. We've seen, I think in the UK, certainly in the US and in Australia, I've noticed there have been... people are starting to notice empty shelves. This seems unthinkable after a generation of more or less uninterrupted growth and this cornucopia of goods and services that are ever being made easier, and at our fingertips with the advent of various technologies and such, but it is interesting to note that, now, for the first time in decades, people are looking at shortages, they're looking at long lines at the gas station. Just how fragile are these supply chains. And given what's happening in Eastern Europe and the energy markets in general, how likely are we to see more of those kind of empty shelf syndrome in markets around the world?Robert Marstrand:Well, I think the whole two years of the COVID pandemic was a great wake up call to a lot of companies who were operating these just in-time supply chains from right around the world. One simple example would be the car manufacturers who... I quite like cars, I don't like modern cars that have so much computer technology loaded into them. Of course they're completely reliant on all this computer technology now. And the shortage of chips has created... Basically meant they had to shut down factories. And that's why secondhand cars' prices have gone through the roof, because people can't buy new ones, it is absurd. China is still locking down its cities. So Shanghai recently, and this week there's been fears about them locking down Beijing. That clearly creates supply eye chain issues, if you shut down all the big cities in China.Joel Bowman:I think Foxconn was the-Robert Marstrand:Oh yeah. They supply Apple, right.Joel Bowman:But yeah, when you locked down 25 million people in Shanghai, 25 million more people in Beijing, these people go to factories, they make products, those products get shipped to America and the UK or not as the case may be, so yeah. Mate, it's a little bit of a grim outlook. We're just bumping up on the end of our time here. But before we get going, I want you mention where readers or listeners rather can find your work. I know you're with Southbank Investment Research in the UK, give us the details on your work.Robert Marstrand:Yeah. Southbank Investment Research, it is a branch of the same outfit that you are involved with. It's mainly for a UK audience, but we talk about the investment world in general as well, the products called UK independent wealth, and I'm sure I can provide you a link or something that people can come and find us if they want to.Joel Bowman:Right. All right, well, we'll have to organize a little bit more time for our next podcast or maybe we'll be lucky enough to do it over a steak at Don's and a big fat glass of Malbec. But Rob mate, thank you very much for joining me in the studio today. And for our listeners, please don't forget to head over to bonnerprivateresearch.substack.com, where you can find plenty more conversations like this and many, many irreverent articles about high finance and lowly politics besides. That's all for this week, and I'll catch you again next Sunday.Thank you for reading Bonner Private Research. This post is public so feel free to share it. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit bonnerprivateresearch.substack.com/subscribe

Joel Bowman and Dominic Frisby on Liberty vs. Authority

Play Episode Listen Later Mar 20, 2022

“I don't actually see the world through the prism of left and right, I see it more as authoritarian versus libertarian.” ~ Dominic FrisbyTRANSCRIPTJoel Bowman:Welcome to the Bonner Private Research podcast. I'm your host, Joel Bowman. Each week we bring you exclusive conversations with members of Bill Bonner's Private Research team, as well as some special guests we'll meet along the way. We're trying to connect the dots from high finance to lowly politics, private investments to public follies, from Wall Street to main street, at home, and on the road. We're into sound money, personal freedom, classical books, and great wines. Not always in that order. So join me and the rest of the Bonner Private Research team, as we pack our bags and follow the money. We're welcoming today to the Fatal Conceits podcast, Mr. Dominic Frisby, who is a British author, comedian, and investor. He is also, as he and I have just been discussing, a fellow Substacker. So, make sure that you check out his Flying Frisby articles over on Substack. Right out the gate Dominic, for those of our readers/listeners who are perhaps not yet familiar with your work, but soon will be, you occupy a double life as both an investor and comedian, which it's not unusual certainly, uncommon for the average listener. I've always thought of markets as a bit of a tragic comic projection of the human condition with all our hubris and folly and fear, greed, envy, and whatnot, projected up onto the markets. I'm wondering if you feel that those twin hats that you wear are maybe not so delineated as maybe most people might think.Dominic Frisby:Well, it's a bizarre situation that I find myself in, it's completely accidental. It's not something I planned. And, I think, I am the world's only finance writer stroke comedian. I was once doing a show up in Edinburg at the Edinburg Festival. And, some chap came up to me and said, "I am your German rival. I am a German financial writer comedian." So there might be a German guy who does it. But, I don't know who he is, but he did come up and say, "Hello." But, I think I might be the only one who does it in the English language, put it that way.And yeah, it is funny because while a lot of comedians tend to veer slightly to the left in their world view, they would've been anti-Trump and anti-Brexit and all that stuff. They might say that, but if you look at what they actually do, being a standup comedian is probably the single most libertarian existence that there is, because you don't get any government support. You're only as good as your act. You troll your act around the country and hopefully eventually around the world and get better. And as you get better, you get better paid gigs. And you are acting entirely out of your own self interest. But, it is in your interest at the same time to get on with everyone else. But, the more you work at your act, the better your jokes get the more people laugh. And the more pleasure they derive from watching you, and as a result of the pleasure they derive from watching you, the better gigs you get and the more money you earn.And, certainly at the grassroots level, there's no government intervention in live comedy. There's no subsidy, there's nothing. It's the only art form that survives without government subsidy, all things like opera and ballet require loads of subsidy. So yeah, it's a libertarian, Adam Smith existence. And then, you actually talk to comics and they go, "You're a financial writer." And, loads of them are speculating in Bitcoin and cryptocurrencies. And if you go, "Oh, I've got the really sexy junior mining company I'm looking at here." They all want to know what it is.Joel Bowman:Right.Dominic Frisby:And I think it's because they've all got a speculative mindset. And so, there's definitely... And, the famous thing with traders, Jesse Livermore and famous traders is that, they're often prone to depression, bouts of elation and bouts of depression. And Jesse Livermore, of course eventually killed himself. And, that's the same existence of the comic. They're famously happy one minute and sad the next. And so, I do think there is a lot of crossover between the two worlds, albeit accidental.Joel Bowman:Yeah. It does seem that it's a extreme expression, as you mentioned, of those highs and lows, those vicissitudes of life. And, just on the point of government subsidies, I honestly can't imagine anything less funny than a government subsidized comic. That's got to be just the bottom of the barrel, surely.Dominic Frisby:Well, I'll show you a government subsidized comic. It's someone who's on the BBC.Joel Bowman:Yeah.Dominic Frisby:And you just look at the state of BBC comedy and it's dire, and it used to be brilliant.Joel Bowman:So, what's going on there? Because, we all grew up with comedians, and yeah, many of them had left wing tendencies, but they were funny. And, I'm just wondering what... It's like what happened to the anti-war left, what happened to the funny left? Now it seems that comedians on the left are telling jokes more for applause than they are for laughter.Dominic Frisby:Well, yeah. And, I tell you what that is, is I think to be a good comic, you've got to be counterculture. You've got to be irreverent, you've got to be against the status quo, you've got to mock the status quo. Zero Mostel used to say, "Comedy's about exposing pomposity." And by the way, I don't actually see the world through the prism of left and right, I see it more authoritarian versus libertarian. But, I think when we use the term left, we all know what we're talking about. And that slightly authoritarian, "We know better than you" left, that technocratic mindset that dominates state planning, and government, and regulation, and the federal reserve bank, and the Bank of England, and the civil service, and it just dominates the entire establishment. It dominates the cultural establishment as well.And so, by adopting that world view of, "Trump stupid. Trump orange hair. Ho, ho, ho." You are not doing anything counter-cultural. They think they are, because Trump is the president and they're attacking the most powerful man in the country. And there is an argument for that, but really, Trump himself was counter-cultural in that he was so anti-establishment or anti the conventional way of doing things. And so, yeah. So, the irreverent really funny anti-establishment voices are coming more from the right, they're coming from the libertarian angle, than they are from the establishment state planning world.Joel Bowman:Yeah. And just to speak to that establishment mindset, it does seem that on both sides of the pond, two countries separated by a common language as Mr. Wild observed, that there is this surging sensorial impulse that is cracking down on culture across the board. And it seems like there's a very one size fits all mentality to what you're allowed to think. And it doesn't matter what the subject is, whether it's a pandemic, or a mandate, or a war, there's just this very monotone mentality that we're allowed to express. And that seems to be really the antithesis of comedy. Would you agree?Dominic Frisby:Yeah. A 100%. The standard reaction to any worldview that you don't like is to try and get it canceled.Joel Bowman:Yeah, yeah. Right. It's a very childish reaction.Dominic Frisby:It is. It's like, "Why is the BBC giving so and so a platform?Joel Bowman:Right.Dominic Frisby:And it's got so stupid, it's like anyone who's to the left of Bernie Sanders, he's a far right racist. And you're like, "It's insane." And it's some mental illness, it's obviously been propagated by the Russians, who are trying to spread dissent and disorder. I'm joking when I say that, but I do think at one stage they were trying to divide the right. And, whether by accident, or whether it's just by social media, or it was going to happen anyway. But yeah, the world is so divided, but the standard libertarian thing is live and let live. But, that doesn't apply to the left, and there's no live and let live there it's "Either agree with me or have your livelihood cut off."Joel Bowman:Yeah. You only have to go back a generation or so, and that seems to me just utterly anathema to that late-60s, happy-go-lucky Berkeley Free Speech Movement, the hippies getting their groove on whatever they happen to be into. I mean, they seem to be demanding their own civil liberties, as far as obviously freedom of speech, freedom of what they wanted to put in their body. Goodness knows that has come full circle now. And, they were very much anti-war, anti-establishment, anti-big corporation, anti-big government, and now down the line, it's the total opposite.Dominic Frisby:Well, I just think there are loads of people who are libertarian and they do not realize it. And so yeah, that whole movement of peace, anti-war, live and let live, flowers, get back to nature, local rule, all that stuff that they stood for. And it was a brilliantly creative time artistically, and especially musically, it's just ended with more government. And, they all find themselves now supporting the NHS, state welfare, state mandates on climate change, all this big state stuff. And you're like, "How did that happen?" And, I think there's this weird thing that they cannot understand that with less state and more individual responsibility, the result would be better welfare, better healthcare, better all these things, but they can't that emotional leap to the point of trusting human beings to do the right thing. They're unable to do that. And so, they think, "All right, well, government must provide it." So, it's bizarre. So, all that movement has just ended effectively in light socialism, or rather heavy socialism.Joel Bowman:Yeah. It is bizarre, isn't it? That they've quashed competition and that they're so allergic to, I think, it was Hike who called it spontaneous order, which is where you take a leap of faith and you rely on the market to find nuanced and work around solutions to of things like central banks destroying our money, and universal healthcare providers diminishing our level of care, and on and on down the line, look at education, et cetera, et cetera. But, I wanted to ask you, just segueing from comedy to the go government's version of it. I did see a couple of your posts, which I found pretty amusing. And, we've seen just in the past couple of weeks, both the permanently startled Nancy Pelosi and Joe Biden saying that government spending... I'll have to paraphrase them both here. But it's something like, government spending is absolutely not to blame for inflation. Presumably, they're laying that at the feet of the evil capitalists. Does that line make you laugh? Does it make you cry or wince? All of the above? It's its own peculiar brand of comedy, I think.Dominic Frisby:Well, I mean, it makes me do all of the above. And, this is why I absolutely adore Bitcoin. I just think it's the most fantastic movement. I think I discovered gold in 2005, 2006. And, it was one of those clarity moments that one has in one's life, when soon as I discovered gold, you uncover all the Austrian economic worldview, the libertarian, the small state, all the arguments for having an independent system of money. And it keeps governments not being able to print money, keeps them in check. And, it's using independent money as a way by which the citizen can hold his government to account, and all that stuff. And just suddenly so much about the world came clear to me. Fundamentally, why houses are so ludicrously expensive in London.And, I spent many years trying to educate people. I wrote a film called Four Horseman, which was an incredibly popular film. It had something like 9 million views on YouTube, something like that. And, I wrote it with a guy called Ross Ashcroft, but all the stuff in there about gold and fiat money and all that was all me. And I wrote a book called Life After the State, and I wrote my weekly column, and time and time again, I just saw it as my mission to educate the people about the evils of fiat money. And every time you wrote the word fiat, you'd go, fiat money (money which is money by decree, or money which governments can print) or whatever. You'd have to define what fiat money meant.And then, along comes Bitcoin and as well as being the most fantastically glorious speculative vehicle, if you are long, particularly, if you were long early on. It's also been the most brilliant educative tool. And, it's just educated anyone... I mean, I'm 52, and I suppose I first discovered Bitcoin, it would've been maybe 2012. So, when I was in my early-40s. And, I'd go to a Bitcoin conference, and in my early-40s, I'd be the oldest person there. And then, I'd go to a gold conference and I'd be the youngest person there.Joel Bowman:The changing of the guard.Dominic Frisby:Yeah. And so, I was straddling, and I'm in my early-50s now. So, anyone born in 1969, 1970, around about that time is on the cusp of the two worlds. And, I'm younger than a boomer, obviously. And so, the old guys all knew about gold and all that, but the young, they're all speculating in Bitcoin, and then they're creating the memes, and then they're all laughing at the memes, and so on and so forth. And, it's just been the most wonderful educative tool about the natures of fiat money, inflation, all these things. And it's just brought these arguments into the mainstream while earning a lot of people, a lot of money. And so, everyone celebrates the glory of Bitcoin, "Bitcoin fixes this." But one of the many things it fixes is financial literacy.Joel Bowman:Yeah, absolutely. I have a somewhat similar experience to you with both gold and Bitcoin. I'm down here in Argentina, as I mentioned to you before the show, but I recall going to an Austrian economics conference with some friends, Jeffrey Tucker, and a few others who were speaking there back in... Oh, it would've been 2012 or something. And-Dominic Frisby:Was that the one in Acapulco, or was that the one in Germany?Joel Bowman:... No, this was in South Paulo in Brazil.Dominic Frisby:Oh, okay.Joel Bowman:Some years ago. But yeah, the same experience, where I had been used to going to these gold shows around the U.S., where my publisher at the time was holding conferences. And you would get people who were very, very well versed in Aristotle's five characteristics of sound money, and they knew all the ins and outs of gold, and they knew enough Latin to understand what by decree came from, and what fiat meant, and all the rest of it. But they were having a bit of a mental blockage with regards to Bitcoin.Joel Bowman:And then, I went to this conference in South Paulo. And, it was full of young kids. I was around maybe young-30s at the time, but it was full of kids in their early-30s and even in their 20s, who were just talking up this new currency, and really actually just asking the questions that I don't think people had really asked about the nature of money for... Maybe going back to Keynes's "Barbarous Relic" comment, but certainly even some time before then, where we just took for granted that it was up to the state to manage our money for us, and that the private market had no business entering that realm.Joel Bowman:And then all of a sudden, Bitcoin exploded in 2008. And yeah, we were invited to really question the foundational role of the state in producing money, and maybe even address the question that had been addressed around maybe when the Gutenberg Printing Press came along originally, which is, can we separate the church from the state? Now, all of a sudden we were confronted with the proposition of potentially separating the money from the state. Is that something similar to the way that you grappled with it in the early days?Dominic Frisby:Yeah, exactly. And, that's the mission, separate money and state. And, there are people who still think the pound and the dollar are backed by gold. They actually think it. They can only print as much as they've got gold and silver. And you're like, "Oh, please. Do me a favor..." But anyway.Joel Bowman:I noticed just incidentally that there's not a whole lot of Bitcoin and crypto money being used to purchase tanks and jet fighters. And, just while we're on the roll of what the state uses its tax dollars and its untethered money to fund.Dominic Frisby:They will.Joel Bowman:Yeah.Dominic Frisby:When we get our little Bitcoin citadels and we need to defend them, we will have to buy some tanks, and we'll use Bitcoin to do it.Joel Bowman:Right. Right. Well-Dominic Frisby:And, they'll be sound tanks. They won't get caught in 40-mile traffic jams in Ukraine or whatever it is.Joel Bowman:... Right. Oh, well, so moving on there. I've read a couple of your recent articles, and again, that's the Flying Frisby on Substack, for people who want to check out Dominic's work. You and some others around the space have been observing, of course, that inflation is something that had been ticking up to, at least in the U.S., 40-year highs before Mr. Putin even circles invade Ukraine day on his calendar. But it seems that in the past couple of weeks, since the conflict in Eastern-Europe has erupted, that everything that has been going wrong with Western economies is now being blamed on the conflict in Ukraine, including, not least of which, some pretty extreme price action in the commodities markets. What's been your take on, for example, nickel going limit up across in the $100,000 a ton mark, and doing us all an Al Gore shaped hockey stick just last week, I think, and some other really crazy price action in the commodities markets.Dominic Frisby:Well, that nickel chart was extraordinary. It's like nothing I've ever seen. I think it went up from 25,000 to a $100,000 in two days, which for a-Joel Bowman:It's insane.Dominic Frisby:... I mean, it's not a cryptocurrency, it's a nickel, it's an essential basic metal. And for it to quadruple in a day is nuts. And I also happen to think the London Metal Exchanges decision not to honor the contracts signals the end of the London Metals Exchange. To close the markets and not force the dude in China to cough up, even if he hasn't got the money, they have to do that if they're to maintain the integrity of the LME. But anyway, that's their own business. And, yeah, I mean, commodities have basically been in a bull market since the big corona panic sell off in March, 2020, oil went to minus 30. And so, it went from minus 30 to 130. That's a $160 move. That's one heck of a trade, if you bought the lows and sold the highs.Joel Bowman:Yep.Dominic Frisby:And, this always happens with commodities is that, you get 5 or 10 years of under investment. So there's a shortage of supply. There's a few cranks on the internet like me, you, and Bill who go, "There's a shortage of supply in this metal, it should be trading much higher." We quietly inform our readers. We take positions in mining companies and in metals, and so on. And, I've been banging the drum about oil for goodness knows how long. And then, we just watch it go up.Dominic Frisby:And so, commodities were all in a massive bull market. And, what this war has done is given us the speculative blow off top. And, now I'm looking at this, and as we speak today, oil's gone from 130 to about 95 bucks. It's had a $35 sell off in what... Three, four days. Gold has gone from testing its old highs, 2070 around about there, that's sold off and it's gone back to its previous old highs, 1920. So that's $150 sell off. But all the metals, platinum, palladium... Palladium's lost about a third of its value. And, they're just so speculative. And, I'm not suggesting you got speculative bubbles under a gold standard, but you did, but there were nothing like they are now, because everyone's losing leverage, and leverage is a fiat money thing, all leverage is, is debt. And so, you just got these mad speculative markets where everyone's speculating, wanting to get rich quick. It's all part of that fiat money mindset. But I'm look looking at commodities now and I'm going, "Was that the top?"I think, there's a really good chance... I put out two pieces last week and both said the excess here feels like a top. That excess marks a top. But then you look at the fundamentals and you go, "Well, Russia supplies something like 17% of global commodities, and 40% of European gas, and I think it's 10% of world oil." And, I can't remember what the number is for nickel, but it might be something like 20 or 30% of world nickel. Palladium, I think it supplies more than 50%. And, you can substitute palladium to a certain extent with platinum, but not totally. And it's nuts that palladium should be more expense of them platinum in the first place. But anyway, and with all these sanctions coming, we haven't solved the lack of investment in commodities in a few weeks, there is still this fundamental problem of lack of investment, lack of exploration, and all this.So, all that makes me think, "Hmm, we're not going to go that low at least."Joel Bowman:Yeah.Dominic Frisby:But I think, the bubble blow off top that we've had, and now the unwinding, this is all going to take a while to digest and unwind. So I'm not rushing to take new commodities positions, but I do notice that in all of the insanity gold miners didn't have the run up that gold had. They had a bit of a run up, but gold led the miners, and ideally you want miners to lead the metal. Although, I think those days might be gone, because of all the various ways there are to own gold, ETFs, and gold money, and Bullionvault fault, and gold core, and futures, and spread bets, and there's so many different ways to own gold. You just think, "Why take on individual company risk and own a minor?"And nevertheless, even with that disclaimer aside, I'm still quietly bullish about gold mining. Now there's so much dross in the sector of gold mining, so many bad companies, but I've got two or three companies that I like that can survive gold going back to 1250 an ounce, if it ever goes there. They were set up during a bear market with a bear market mentality, that awful bear market of 2013 to 2016. So, if you can find the right gold miners, I think you can do well. And in fact, I recommended two, one in February, one in March for my paid subscribers on Substack. And they're both higher than when they were even with this massive correction.Joel Bowman:Wow. Okay.Dominic Frisby:So, I'm like, "Oh, look at me. I know what I'm doing." I mean, of course you make tips and they don't always work out that well. But I am quietly British about gold miners, as long as they're well run ones and not run by crooks or bozos. And I'm afraid there's a lot of crooks and bozos. By bozos I mean, stupid people. And there are quite a few of them in gold mining. That's one of the things I admire about Bitcoin by the way, is there are just so many geniuses in the sector, young, enthusiastic, energetic geniuses at the height of their career building years. And just by owning Bitcoin or owning five coins, or one of those funds that you can buy that gives the 10 best DeFi coins or the 10 best metaverse coins, whatever it is. You're just getting exposure to that colossal intellect. And with gold mining, there is just not the same intellect. I'm not saying there are not clever people in gold mining, there are. But, there's not genius, after genius, after genius, in the way that there is with all that computer stuff and Bitcoin.Thank you for reading Bonner Private Research. This post is public so feel free to share it with goldbugs and Bitcoiners alike...Joel Bowman:Yeah. And it does seem, I mean, for those of us who have been around the Bitcoin ecosystem for a little while now, and it really is only a little while, it's only 14 odd years old. But, even just during that short period of time, the amount of wealth that's been created for individuals... I've witnessed a little bit of this myself and the people that I've seen who held on for dear life, who hodl-ed early on and made some pretty sizable fortunes. I can't think of a single one of those people that I know who just tooled off to a Caribbean island and put their feet up and did nothing for the next however many years and dropped off the map. All of those people that I know have gone into other entrepreneurial pursuits, they've started up clinics, or they've branched out into computronics, or some other disruptive industry where...This is a generation of people who are often derided for slacking off on the couch and taking their gender studies degrees and just living in mom's basement. But there is a portion of those people, I think, who are attracted to all that the Bitcoin world offers, part of what you were saying before about live and let live perhaps. And those people, they seem to be the ones that are building the parallel economies of tomorrow.Dominic Frisby:Well, agreed. I mean, you see it, I know loads of Bitcoiners. I started up a privacy tech company in Canada listed on the CSE, called Cypherpunk Holding. And, I was having lunch with Jon Matonis. He's been around for a long time. He's a formidable intellect, and he really doesn't need to work if he doesn't want to. And, I just showed him this privacy tech company that we were setting up and he said, "Oh, I'd really like to get involved." And so, John became a director. And that's just an example of, people don't want to stop just because they've made a lot of money, Richard Branson didn't stop.But, I've just bought one of the gold companies I recommended, the guy who's the CEO... Or actually the president, not the CEO, has just sold another company, and he's made something like 2000 times his money, he doesn't need to work again if he doesn't want to, but people like working, and even into your retirement... My dad was a writer, he died at the age of 87, but two weeks before he died, he was still hustling and still trying sell his place. So, we don't stop, just because government says you can stop when you're 60, individuals don't necessarily do that.Joel Bowman:Well, yeah, it's almost a permissive off ramp, isn't it? That "Work up until this high water mark and then just kick back for a little." While I find that the people who are more self-reliant and yeah, self-starting entrepreneurials, aren't looking for that permission to stop. They're quite the contrary. They're looking for people to get off their backs so they can get going. So, let me ask you then, Dominic, because we've been through a few episodes with Bitcoin now with regards to it being... To quote one of my favorite philosophers of the 20th century, "Born in a crossfire hurricane." As Mrs. Jagger Richards would have it.In 2008, it came onto the scene during the big bailouts. And then, obviously it kicked on higher in that catalyzing moment of the Cyprus Bail-Ins. And we've seen a few geopolitical events that have set off or sparked new rallies. I was curious this time around, with all that's going on with Russia and the Ukraine, it seemed like gold was performed in its traditional role of risk off safe Haven. Bitcoin, not so much, perhaps because of just regulatory uncertainty, or... I haven't checked the price today, but what do you make of its near-term response to that geopolitical uncertainty, and where do you see it going perhaps over the medium-term from here?Dominic Frisby:Well, firstly on the subject of gold. Gold did what it was supposed to, but now it's stopped doing what it's supposed to, it just sold off $150 and it's done a massive double top. It's also done an island reversal. The chartists must be looking at gold and just shaking their head and crying. But, I love gold and you can make an argument about an asset. So, I'm making this argument, I'm using the disclaimer first, I love gold, I own loads of gold. If the world went back to some day factor gold standard, I wouldn't be an unhappy man. But you can look at gold and you can make two arguments. You can go, "Well in 1980, the value of America's gold holdings could have paid off its debt." And, the Jim Sinclair argument, "The role of gold is to balance the books of the United States." And so, if the United States now were to pay off its debt with its gold, then the gold price would have to be whatever. I don't even know what the number is, $50,000 an ounce or something stupid, and probably more.Or you can look at gold and you can go, "Well actually, it might have been money since..." Gold was the very first metal that human beings used. We used it long before we used copper and we discovered smelting in the bronze age. Gold was the first metal we used. We discovered it in river beds when we were hunter gatherers, stone-age people, and we decorated ourselves with it, and we gave it to other people, and used it as reward, and we used it in barter.So, it was the very, very first money. It was the first metal we used and we used it as money. Obviously a less sophisticated form of money than what we have today, but its role was money. We used it to store wealth, display status, all that stuff. And, probably 20,000 years before we discovered smelting. So, it's the oldest metal we've ever used. It's probably the oldest substance on earth, when it came in at its supernovae collisions. And you can make all those arguments, it's been money for 20, 30,000 years, longer. Why would it stop being money now? Well, the horse was transport for 20,000 years and the horse no longer is transport because we invented cars. So, you could say about gold, "It's as irrelevant to modern finance as the horse is to transport." And, I see that argument. I don't entirely agree with it, but I can see it.And on the other hand, like I say, you could say, "Well, gold has to balance the United States... The balance sheet of the United States." So, it's up to you what argument you want to make at any given time. And in a bear market, you'll find yourself making its irrelevant argument. And in a bull market, you'll find yourself making, "It's going to balance the books of the United States." But anyway, we do seem to be... I'm following all this Luke Gromen stuff, and I'm quite interested about how the east, the Euro-Asian countries, Asian countries are trying to go back to some independent money system.And by the way, I've spent a long time auditing China's gold, and working out how much they've got, how much they've mind over the last 15 years, how much they've imported, and how much falls into private hands, and how much falls into state hands. And, China's gold holdings are bigger than the United States. They're not declared as bigger. They're declared at 1,600 odd tons, to United States 8,000 tons. But in reality, China's gold holdings are somewhere between 15,000 and 30,000 tons, in my opinion. So, at least twice what the U.S. has. And that's an astonishing fact when you think about the implications. Anyway, so that's gold, and in all probability, my theory is it'll go up a bit, and it'll go down a bit, and it'll go up a bit, and it'll go down a bit, and it'll probably end up in the mid to high 2000s by the time this is all over. So, that's a bit of sensible rational view of gold.Bitcoin on the other hand is tech. And as you probably know, it's been tracking the NASDAQ and it behaves like a tech stock. Now, I have over the mind that everyone should own some Bitcoin, everyone should have some exposure to it. It's the money of the future. It's the cash system for the internet, but it is not the opportunity that it once was. And every double gets harder than the last. And so, to double from Bitcoin from 50 cents to a dollar, it would've be a 100 million dollars in market cap or something. But, for Bitcoin to go from $40,000 to $80,000, it's at 40,000 now, to go to 80,000 or a $100,000 dollars, we're talking about trillions of dollars of market cap. That's a really difficult double to make.But at the same time, you look at the Bitcoin chart, it's made a double triple bottom around the $30,000 area. And there four phases to a Bitcoin cycle. There's the quiet accumulation phase, there's the noisy bull market and blow off top, there's the unruly, horrendous, noisy correction. And then, there's the frustrating consolidation. And I would argue that at the moment in Bitcoin, we're probably in that frustrating consolidation phase, which... It has corrections in it, it's frustrating, but it looks like $30,000 is the low. And, if Russia can start World War III and Bitcoin still holds up about above $30,000, I'd say, that's a pretty good sign. But it's so frustrating, and we're probably without even knowing it in one of those quite accumulation phases.But it does trade like the NASDAQ. It seems to have got itself with the NASDAQ in risk on and risk off. Is the correction in the NASDAQ over? It was one almighty bubble. A lot of those stocks are down 50, 60, 70% now, is that enough? It probably is. But, I don't think we're set for another massive bull market just yet. I think we're still in for a bit of so-called frustrating consolidation, but frustration consolidation is a good time for quite accumulation.Joel Bowman:Yeah, very well said. Well said. And, I'm just thinking back to that... You got me scratching my head on China's gold holdings, just as far as the implications for what a... People like to talk about a new monetary world order or something of that nature. What that looks like if you have... As we have seen now, just in the past couple of weeks, I don't think people made lot of noise about this, but I found it just extraordinary that, we had sanctions that were essentially canceling the foreign reserve currency assets of other sovereign nations, central banks. I mean, it was almost as if the United States declared that all of the dollars outside of its national borders are now currency by permission and liable to be canceled if anybody misbehaves. I'm wondering just what the follow-ons of that "permission-based money" might be. And, whether not there might be a risk premium that other large holders like China of U.S. dollars might be now factoring into their future purposes, or their appetite for future purchases.Dominic Frisby:Yeah. Well, I'm sure China will be looking at what's happened to Russia, and going, "Wow, we do not want that to happened to us." So, China's got a bit more than $3 trillion, I think. And, it's official gold holdings are 2% of its Forex reserves. Whereas, America's gold holdings are 70%. Now, if China came out and said, "Actually, we've got 15,000 tons of gold, 16,000 tons of gold. We've got twice as much gold as America has." It would be almost a declaration of war. And, it would, A, cause a massive spike in the gold price, because people would go, "Oh actually, gold isn't an irrelevant antiquated asset, it's the money of the future. And China's going to back its one with it." And secondly, it would cause a huge sell off in the United States dollar. And China doesn't want that, the way it's building its economy, it wants to keep its currency cheap, and it doesn't want to destroy the value of its gold holdings. So, as far as declaring its gold, it's declaring the minimum that it can declare and look credible.Joel Bowman:Right.Dominic Frisby:It's only my theory, but until somebody comes up with a better one, I'm sticking with it. And-Joel Bowman:Yeah, no. We're all for we're all for unsubstantiated theories and scuttlebutt here. That's fantastic. I'm thinking that also in the context with their last year, putting the kibosh on crypto mining in China, and there's certainly a chronology to all this that if we were conspiratorially inclined we could build some completely unsupportable scuttlebutt here.Dominic Frisby:... Well, yeah. But anyway, I completely agree. Sorry, somebody is WhatsApping me as you talk, and it's making a noise, and I'm apologizing if my mic picks it up, I'm just turning my WhatsApp off now. But yeah, yeah. Anyway, that's my theory on China's thing and it sounds like you're indulging. So, good stuff.Joel Bowman:Good stuff.Dominic Frisby:But, if I was putting myself in China's thing, it's going to go, "Wow, look at how they've weaponized the dollar. We don't want that to happen to us, at least not just yet." And nor is it, I don't think, going to invade Taiwan because it's just going to see how America's weaponized the dollar against Russia and go, "Well, they'll do that to us. And we'll be screwed, and Apple won't build all its tech here, and it won't build its this and that. And, we're just not ready for that." So, I think China will just quietly stay out of it and continue as much as it possibly can to de-dollarize itself, until it is ready. And, the weaponization of the U.S. dollar, I would argue, has probably worked, because all the oligarchs, surely they're going to have be really hacked off with Putin and they're going to want their money back.And so, there's going to be so much internal pressure on Putin. I mean, the likelihood is, he's going to drag on, this whole thing's just going to drag on. But, I imagine China will just stay out of it for the time being, and we're going to have this 5, 10 year war in Ukraine, which will be not unlike the war in Afghanistan, which eventually brought down the Soviet Union. It'll probably do the same to Putin eventually. But it will happen quicker, because everything happens quicker now. So, I doubt it'll take 10 years, but it could take three, or four, or five. But yeah, so China is going to do all this stuff, but it's not going to do it yet. But it will have watched what America did, how it weaponized the dollar and thought we're not going to allow that to happen to us.Joel Bowman:Yeah. Not-Dominic Frisby:And they will be preparing and taking the right precautions. And, part of those precautions will involve gold.Joel Bowman:... Yeah, I can't imagine them risking three plus trillion dollars of foreign currency reserves and however much gold they've got-Dominic Frisby:It's 20 years of savings.Joel Bowman:... Yep. There you go.Dominic Frisby:20 years of savings and investments. They're not going to throw away tomorrow.Joel Bowman:That's a big piggy bank. A big piggy bank. I really appreciate just looking at the clock here, and I know we're ticking up on an hour here. I really appreciate you taking the time. I wanted just move on real quick before we end it for this particular... And hopefully, we get to you back in the future. But I'm planning at some point this year to hopefully take my young family up to the UK. So, I wanted to just touch on a little bit about how travel is going and whether things are getting back to normal. It's interesting that when you and I first started emailing to schedule this podcast a few weeks ago, COVID would've been pretty much front and center, I would suspect of our conversation. And yet, here we are two or three weeks later. What happened to COVID? Where did it go? And, are we able to travel to the UK yet? Am I going to be able to get a pint of your famously warm beer or what?Dominic Frisby:I think it was Milton Friedman said that, "The art of politics is getting the wrong people to do the right things." And we had a situation in December where we were about to lock down again, when this a Omicron, however you pronounce it. Omicron is actually the correct pronunciation, but everyone says, "Omicron." But anyway, when this Omicron variant broke in, I guess, it was early December, late November, there was a huge pressure to lock down again. And Boris Johnson was about to lock down, under the advice of all... They're actually called Sage, but his wise government medical advisors. And all the back benches from the conservative parties said, "No, if you lock down the economy again, we're going to do a vote of no confidence in you."Joel Bowman:Yeah.Dominic Frisby:So, he massively backpedaled, and didn't lock down when the rest of Europe pretty much did lock down. And then, our COVID rates... Omicron was pretty much the best thing that could have happened, in terms of COVID, because it was massively infectious and very, very mild. So, in terms of building up natural antibodies and all the rest of it, it was literally the best thing that could happen. And so, that happened and we let it run, right? And our infection rate was no higher or lower than anywhere else, not significantly so, and nor was our death rate, nor was anything else. And yet, we had a relatively normal Christmas. And then we opened up.And governments have got no imagination, they're not bold, they're all thinking about career risk. So if somebody else does it, then it's okay to do it. But if you are the pioneer, then they don't want to do it. That's the technocratic mindset, it's the opposite of being an entrepreneur. And, the rest of Europe started to look at England, which didn't lock down. And then, they gradually started copying us. And I think sweet Switzerland a couple of weeks ago decided, "Screw this. We're opening up." And so, I went to Switzerland skiing. Well, I actually went to France skiing, but I went via Geneva, last week. And, I think in one restaurant in France, I got asked for a COVID pass. And I had COVID a few months ago, so I had the COVID pass on my phone. But apart from that, I don't think I got asked once. And then, the only time I did get asked bizarrely was getting on the plane in Geneva, coming back to England, and they want you to do this passenger locator form or something.And so, I just filled that in, and it was a bit of a palaver in the airport. But anyway, the short of it is, I was able to go to Geneva, and then from Geneva to drive across the border into France, and then have a week skiing in two different resorts in France, and then come back to Geneva. It wasn't quite as relaxed as it was before COVID, but it was significantly less relaxed than it was... You had to wear your mask on the plane and stuff like that.But, compared to what it was six months or something ago, we're in a much better place. And, you just assume everywhere else will follow. I just think we've got COVID fatigue now. And, everyone's just like, "Well, we're going to have to live with it." And I'm hoping gradually, quietly, while everyone's eyes are on Ukraine, all the laws will be largely relaxed. And, all the various hypocrisies will be quietly brushed under the carpet and we can just move on and get vaguely back to normal. It's never going to be quite what it was, but there's always going to be this unfortunate precedent that's been set. And, every crisis government intervention increases, and it never quite goes, and taxation, and everything increases. And it never goes back to where it was before the crisis started. But hopefully, we're stumbling back to some freedom. And I use that word, relative freedom, let's put it that way.Joel Bowman:Yeah. A big asterisk, but yeah, it does seem hopefully that the dominoes are falling. And as you say, they're back-paddling on this as politicians, which is to say quietly and while hopefully attention is distracted elsewhere. But mate, look, thank you very much for your time. Do let our readers and listeners know what you've got coming up. I mentioned the Flying Frisby on Substack where they can check out your articles. I know you're often performing in... Is it Comedy Unleashed? Is that the...Dominic Frisby:Yeah, I do a lot of stuff with them. Yeah.Joel Bowman:Okay.Dominic Frisby:And, I am nothing if not prolific. And, I have a large output, and some people prefer me wearing my financial hat, and some people prefer me wearing my comic songwriter hat. And if you want the financial stuff, I would urge you to go to the Flying Frisby, which is just frisby.substack.com, and sign up for my newsletter there. I've only been doing it for two weeks, but it's been going great. I can't believe how quickly it's become so popular. Substack is just fantastic. Literally, within two weeks, if I want to, I can go and become a digital nomad, and I don't need to be in the UK anymore. Just from two weeks on Substack.Joel Bowman:It's a highly recommended lifestyle, by the way.Dominic Frisby:Oh my... Yeah, well, I mean, I've just got to do it. Maybe I've been on it a month now, I might be slightly exaggerating. But, Hey, it's the media, we're allowed to.Joel Bowman:Exactly.Dominic Frisby:But if you want me wearing my comedy songs, go to dominicfrisby.com and you can sign up for a newsletter there. But if you're in the UK, I'm doing a gig on March the 30th, this month at Comedy Unleashed in Bethnal Green, two hours of unacceptable songs and among other things. We'll be singing the libertarian national anthem. And if you like, Joel, you can download the libertarian national anthem off YouTube, and you could end this podcast with it. I can think of no better way to end the podcast than with the National Anthem of Libertaria.Joel Bowman:That's fantastic. You've come with your own plug, mate. That's fantastic. You're doing my work for me. Wonderful, mate. Thank you so much again for taking the time. Yeah, listeners tune in for some imminently cancelable comedy with Dominic Frisby and check out his Substack. And, tune in again next week for your next episode of the Fatal Conceits podcast. I'm Joel Bowman, your host. Talk to you again next week.Dominic Frisby:Arise libertarians above totalitarians. Our guide is the mighty invisible hand. Reject state controls, collectors and patrollers. Our choices are better than government plans. Taxation is a form of theft. Free markets and free tree are best. Free speech, free movement, free minds, and free choice. Our actions are all voluntary. Not coerced or compulsory. War we abhor, socialism does not work. No debt or inflation, no stealth confiscation. No pigs in the trough at the gravy to drink. No state education to brainwash our nation. No experts dictate what to do, what to think. We scorn your fiat currency. Gold and bitcoin is our money. We own ourselves and we live and let live. We take responsibility. Life, love and liberty. Leave us alone, let a thousand flowers bloom.Joel Bowman:Thanks for listening to this episode of the Bonner Private Research podcast. You can find more conversations like this in the members only section of our website at bonnerprivateresearch.com. If you would like to contact us, please address drop your comments in the section below. We look forward to hearing from you either way. Until next week. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit bonnerprivateresearch.substack.com/subscribe

covid-19 christmas united states america ceo canada english europe donald trump china uk apple france england talk state british comedy germany war russia joe biden ukraine gold european wild russian german western brazil afghanistan bank bbc argentina authority asian bitcoin wall street vladimir putin whatsapp caribbean brexit switzerland bernie sanders latin taiwan goodness nancy pelosi omicron soviet union freedom of speech nhs substack hike richard branson eastern europe screw nasdaq national anthem austrian aristotle reject etfs bowman defi world war iii al gore taxation adam smith forex fundamentally acapulco milton friedman palladium life after keynes bitcoiners cse four horseman edinburg jeffrey tucker bethnal green lme dominic frisby zero mostel jesse livermore luke gromen libertaria substacker bill bonner as mrs jim sinclair bullionvault

The #1 Key to Breakthrough Online Growth – with Rich Schefren

Marketing The Invisible

Play Episode Listen Later Mar 16, 2022 38:47

Discover how to get that awesome online marketing breakthrough through the power of observing and adapting Learn what platform suits you and your business that will keep your clients hooked and splurge on your products Find out how to effectively and organically increase your online sales by letting your clients feel cared for Resources/Links: Wanting to Find Out How to Up Your Online Marketing Game and Keep Your Products Booming and On the Trend? Learn how you can organically and effectively be everyone's go-to business online: www.strategicprofits.com/jay Summary Have you been struggling with the fast-pacing changes brought by the online world that it makes online marketing just so hard? Do you want to know the nits and grits of online marketing so that you can maximize your business and product's potential? Are you ready to breakthrough online growth with the right marketing strategy that will last you a lifetime and organically attract high-paying clients? Rich Schefren is widely recognized as an Internet marketing pioneer and one of the world's top experts on online business strategy. He has coached the world's top online business gurus, increased client revenues by BILLIONS of dollars, and grew 3 of his businesses to 7-figures a year. Agora publishing a billion-dollar testimonial. In this episode, Rich talks about the different online marketing tactics and strategies that you can apply to your business that can organically get you traction and clients. He also shares the importance of being aware of anything online— from trends to hashtags and whatnot, which you can adapt and help you market online. Check out these episode highlights: 02:21 – Rich's ideal client: “Anyone that uses online marketing to either make money, grow a business, etc., is ultimately a client of ours or a potential client of ours based on some of the products that we recently released, like in the last few years, really, it's so wide open.” 03:18 – Problem Rich helps solve: “Well, I would say that, you know, if they are not satisfied with the performance of their marketing, at the end of the day, like, that's the problem I would solve. So, that's the starting point, really.” 23:58 – Rich's Valuable Free Action (VFA): “I would say that they should pay more close attention to the people that they buy from, the places that they shop from, and notice anything that is new to them when they first noticed that. Like, you know, all of these things are hidden in plain sight, you know.” 29:05 – Rich's Valuable Free Resource (VFR): Check out Rich's Website: www.strategicprofits.com/jay 32:15 – Q: You wouldn't know to ask me this question, but since I'm asking myself the question and delivering the answer, let me tell you. A: I want to share what I did to watch my coaching. It's something I've taught to numerous people and the people who have done it have done very well and done the same. Tweetable Takeaways from this Episode: “The one competitive advantage that cannot be copied is timing.” -Rich SchefrenClick To TweetTranscript (Note, this was transcribed using a transcription software and may not reflect the exact words used in the podcast) Tom Poland 00:10 Welcome everyone to another edition of Marketing The Invisible. My name is Tom Poland, beaming out to you there from little Castaways Beach from Queensland, Australia, joined today by Rich Schefren. Rich, good day, Sir. Very warm welcome. Where are you hanging out? Rich Schefren 0:23 I am in Delray Beach, Florida. Tom Poland 0:26 Sounds like a nice spot to be. For those of you who don't know Rich, you must have been living in a cave, because he is one of the founding fathers of online marketing. He's literally one of the world's top experts on online business strategy. He's coached a Rolodex of who's who in the world of internet marketing. Most of the internet, the people that I respect and I hold in high esteem based on their integrity in the results in the internet marketing world have been mentored by Rich. He's come out of retirement. He's got- If I read his whole bio, it's kind of, it would rival war and peaceful credentials and lengths, he said. For example, just plucking one thing out of the air, he's got a testimony from Agora about how he helped them get to $1 billion of extra revenue. I mean, you can't live on a billion dollars, right, Rich? But it's a good start, yeah? Rich Schefren 01:19 Yes, a good start. I wish I would have negotiated a piece of that, but unfortunately, not. Tom Poland 1:25 I want to add, as well, that Rich is just an extraordinarily generous person. I remember getting something from you for free and it was about strategic alliances. It was a giveaway, but it was something that had been previously sold for a lot of money, and rightly so because it was chock full of value. And everyone I speak to, the usually inestimable Bob Bly, who introduced us Rich, speaks so highly of not only your integrity but your generosity. So, delighted to have you on the show. I think without further ado, we will announce the title, which is “The #1 Key to Breakthrough Online Growth”, and we're going to kick off. Folks, today, I so wanted to have Rich on the show. I'm throwing away our seven-minute timer. We'll go through the same questions, but we might take a little deviation here and there with his act of smells and gold. So Rich, let's kick off with question number one, though. Who's your ideal client? Rich Schefren 2:15 Yeah, it's very wide open these days, which is always generally a bad answer for marketers, right? Tom Poland 2:20 Right. Rich Schefren 2:21 Anyone that uses online marketing to either make money, grow a business, etc., is ultimately a client of ours or a potential client of ours based on some of the products that we recently released, like in the last few years, really, it's so wide open. So, you know, the same product that became our flagship is great for agency owners, it's great for coaches and consultants, as well as people who are trying to scale a business online. So, which will make sense, I think, as we go on. Tom Poland 2:52 As we go on. So, common denominator – people wanting to get growth online. Would that be fair? Rich Schefren 2:57 Yeah. Tom Poland 2:58 So, question number two is what's the problem you solve? We were talking before the interview. It sounded very much like, if I could paraphrase it, the problem you solve is people feel like they're a voice in a crowd of screaming people. How would you define the problem you solve? We know it's about growth, but what is the problem or the potential people are looking for when they become a client to yours? Rich Schefren 3:18 Well, I would say that, you know, if they are not satisfied with the performance of their marketing, at the end of the day, like, that's the problem I would solve. So, that's the starting point, really. That if the marketing is not performing as well as it should or as they hoped or etc., not powering the growth that they want, then that's what we solve. And the- I don't know if I should go further with that. Tom Poland 3:44 Yeah, please. Let's do. Anything you think about, your own? Rich Schefren 3:48 Yeah. So, what most people don't realize is that there are strategies, tactics, channels, etc., that can, at one moment in time, be insanely powerful, but that over time, it degrade. Tom Poland 4:07 Right. Rich Schefren 4:08 And that's pretty much consistent with everything, as far as marketing online. And so, the only exception to that can be tremendously great creative, like an amazing copy or something like that, but that's outside the reach of most people. Tom Poland 4:23 Right. Rich Schefren 4:24 So, you know, I'll give you an example. So, when I brought the VSL to Agora, it was back in 2007. Tom Poland 4:33 Just let me explain to folks. VSL is the Video Sales Letter. Rich Schefren 4:37 Yeah, Video Sales Letter. It was invented by John Benson. He's the creator of it. He invented it at the end of 2005. He first did it for a client in 2006. I saw that and brought it to Agora, like soon thereafter, early 2007. When Agora used that, that's what the testimonial from them, from Bill Bonner and Mark Ford says, when I brought it over to them, immediately, conversion rates went up 400% in the US, 300% in France, 250% in Germany, and all they did was take the sales letters that they had and copy and paste it into a PowerPoint. You know, white background, black text. That's it. And just to give a full arc of that story, right? So, John Benson invented it at the end of 2005. The very first course on video sales letters didn't come out until 2010. And that was the 3X VSL method by John Benson. And the Agora got those benefits in 2007, 2008, 2009, 2010, right? By 2017, there was absolutely zero difference between a regular sales letter and a VSL the way that Agora had been doing it. So, zero, right? And so, what most people don't realize is that you're either there for the beginning or you don't get the benefit that, like, you could get. And you know, a year later, when I invented automated webinars, like, we had the same thing. Like, the show up rates were 80%. The registration rates were high, like you know, because there wasn't- it wasn't the way it is now, right? Tom Poland 6:18 Yep. Rich Schefren 6:18 And so, every marketing, or if you were early on in AdWords or early on in Facebook, like there was a time when it was very easy. Tom Poland 6:27 Yeah. Rich Schefren 6:28 The time is over now, right? Like, now, it's easier to make something work on YouTube than it is on Facebook, and if you don't know that, you could be pounding your head against the wall to try and make Facebook work. So, there are these levers, but what's more important than the lever itself is also the timing. And because not only this performance degrade on any channel, any tactic, any strategy, but the effort that's involved to get the result increases over time. So, you have one graph, which is results, they're going down, right? Like, if I can- Tom Poland 7:01 Yeah, I got it here. Rich Schefren 7:02 Like going down, right? But then, the effort to get the result is going up. So, you have this like, moment in time right over here where it's high results, low effort, right? And then it goes down and up, and so now all of a sudden, on this side, it's high effort, not great results, right? And if someone looks at their marketing arsenal, their marketing mix, you know, the assets that they're using, and none of them are anything that is new, like not anything that has been introduced in the last 12 months or 18 months, then probably, everything in their mix is stuff that everybody knows. And if you're using stuff that everybody knows, there's not really the advantage to propel you forward. And what I think most people miss these days, is that that's the primary way of growth online. And so, whether people realize that or not, they should take a step back and look at the businesses that they know that are successful online; I'm not talking about, you know, VC-funded, but entrepreneurial driven, and how they grew and what was their primary way of growth, and generally, it can be reduced down to a channel, a strategy, or a tactic that they got on before the rest of their industry did – the other people, right? And so, I got known because back in 2006, I wrote a free report. And back when I wrote that free report, you know, my problem was is that I got great results for clients like Ryan Deiss and Russell Brunson and those guys, but nobody wanted business coaching back in 2006 and nobody knew who I was. And so, I wrote a free report, like hoping to get a dozen clients. Just put it on my blog. It's called the “Internet Business Manifesto”. And then, that ended up going viral. And so, been downloaded millions of times, and totally took me from unknown to known, and built the West, built the business, etc. And for the next year and a half, from, you know, that first report, Internet Business Manifesto I wrote in June of 2006, till 2008, I wrote six more free reports. And that's how I built my whole business, just like writing free reports, putting them on my blog, and having affiliates mail for it. And that was a very effective strategy in 2006, 2007, 2008. In 2009, the book “Free”, written by Chris Anderson, the editor of Wired Magazine, was talking about this new concept about giving stuff away for free to sell your product, but by that time, that's when everybody knows. And there's no doubt, right? That if someone were to start today, like if they thought they could put a free report on their blog, and that somehow, they'd have millions of dollars, like a month or two later, that's not going to happen, because the window has already closed. So, that's what I'm talking about, as far as this idea that there are asymmetric kind of rewards for stuff that is new online because they grab attention and it's not clear yet as obvious that I'm trying to sell you something, right? It's like stealth, camouflage kind of selling. Tom Poland 10:23 Right. And so, what I'm hearing is that once the thing becomes common place, it becomes- it doesn't get the cut through that I need to get in order to get noticed. It doesn't get noticed. It doesn't get acted on. So, there's two things. There's the lever or the platform or the tactic or whatever it is, the VSL or the free report, but it's also the timing. Rich Schefren 10:42 Right. Tom Poland 10:43 I almost had to use the analogy, but it sounds a bit like multi-level marketing. If you don't get in at the top, it's going to be too late. And, you know, it's kind of like, when I got to the share market, everyone was in there, and so, yeah. You know, if the taxi driver is telling me about the best stock to buy, it's probably time to get out. Rich Schefren 10:58 Right. But the good news is that there's always something. Tom Poland 11:00 Right. Rich Schefren 11:01 So, it's just a question of like, figuring out what it is now? Or, what's next, right? It shouldn't be shocking, right? That there might be an opportunity right now on TikTok, right? Like, it should not be shocking to anyone. Tom Poland 11:16 No. Yeah. Rich Schefren 11:17 Now, finding out like what it is and what's working. Like, you either can come to a service like mine, or you can just, you know, keep your ears open and eyes open, rather, and pay attention to anything that gets you to pay. Anything that you notice that's different and new. And I can give you a ton of different examples of like what's working now, but yeah. I mean, that's the gist. Anytime someone sees something and stops and says, “what is that?” There's something to it. Tom Poland 11:45 And so, we need to pick up areas. So, we don't necessarily have to be the innovator, the one person that comes up with one idea at the right time. We might be able to kind of hang on to this shit tiles and go on for the ride, if I'm mixing my metaphors up. Maybe just three or four examples of what you think is hot right now. Rich Schefren 12:01 Sure. Yeah. So, something that, like, we talked to our group about recently, a couple months ago, was one that is called Interactive Sales Letters. It's like a video sales letter, but they're interactive. And this was shared with me by Daniel Levis. He's a copywriter. Tom Poland 12:19 Yeah. Rich Schefren 12:20 And he changed his application funnel for his coaching program from the standard model, which is, you know, ad, opt in, VSL, application, right? Like, that's the process. So, there are two different companies that you can do this with. One is VideoAsk. The other is Go Tolstoy, like the writer, Tolstoy, Leo Tolstoy. Both of them are platforms where you can do interactive video. And so, Daniel Levis has it where, you know, you get to this one. The difference is that instead of people going through multi pages, they stay on one page. It's a seamless experience. And the number of people that he was able to get into his coaching program grew from like about 200 to 300%, like the conversion rates were that much higher, the show up rate was higher, everything was higher, and it makes sense, when I explain why. Tom Poland 13:13 Right. Rich Schefren 13:14 So, it's an interactive video, and Daniel does three different questions throughout. And the first question is, are you B2B or B2C? And then, you know, they click a button on it, and then it keeps talking. Tom Poland 13:28 Yup. Rich Schefren 13:29 And the next question is, which niche are you most closely aligned with – health, wealth, or relationships? And they answer, and then it keeps talking. And then the last one is like, are you a small, medium, or large business? And he attaches numbers to those three different, you know, categories. Tom Poland 13:46 Right. Rich Schefren 13:47 And so, with those three questions, there's two answers to the first one, three answers to the second, three for the third, so it's two times three, it's six, times another three is 18. There's 18 buckets that someone could fall into. Tom Poland 14:01 Gotcha. Rich Schefren 14:02 And as soon as they finish that third question, Daniel then goes into a case study about someone very similar to them. Who's in B2B or B2C like them? Who's in the same niche as them? Who has a similar business than they had, and that's now at the next level, right? And then invites them to apply and set up a call, but like, while he's talking them through it, right on the video, because they never have to leave that video, it's all seen. Tom Poland 14:28 Right, it's clever. Rich Schefren 14:29 And that has a higher engagement rate right out of the gate, right? Because it's new and novel. Tom Poland 14:34 Right. Rich Schefren 14:35 And then, in addition, the message is more catered to them and they're being kind of pre-sold before they get on, even on the call, right? And so, that would be an example of something that's working really well now, but I'll give you another one that's in the same field, because this one is very much working like right now and it will be something that, in a year and a half from now, will be a problem. Tom Poland 14:59 Right. Rich Schefren 15:01 And it's funny because a friend of mine, Rudy Mawer, who runs a lot of the brands for Tai Lopez, like he sits on top of Pure1 and RadioShack and all the brands that they bought, and he called me because he has a coaching program. And he was like, “I heard that there's been a change in the way they're being sold, and I heard that, like, I should talk to you about those.” So, I was like, “Yeah, I'll send you the thing that we did on the segment.” And so, this one came from a gentleman by the name of Cole Gordon. Cole is the guy that has set up the phone rooms for a lot of gurus that want to have phone sales but want to keep it totally in house. Like, they don't trust, and there's a lot of good reasons not to trust other people because they can damage your reputation so fast, right? Tom Poland 15:45 Yeah. Rich Schefren 15:46 So anyway, he's done it with like Traffic and Funnels, and Aaron Fletcher, and a bunch of bigger companies, too, he's also worked with before. And so, I did a call. I did a, you know, a segment with him, and he started that by telling me that outbound is the new inbound. And so, that was the premise of the segment. And what he was talking about was that the standard process, the way I was explaining it, the way Daniel used to do it, right? Opt in page, video, right application. Instead, it's opt in, but it also has optional phone number, and then as soon as the person – this is just one of seven different funnels that you went over, right? But when they're watching the video, there's an outbound call to that person while they're engaged, right? That's an extra call that's being added to the sequence, right? And that extra call is taking a very, like, leadership concierge role. It's just like, what brought you to the site, seeing if they can give them something right now for free as a gift that like kind of fits where they're at, and setting up the future call, etc. so there's already that first touch point. And so, very interesting segment. And actually, I've done a segment with the guys from Traffic and Funnels and Chris Evans. And he was telling me that they had started sending out more content to their list and sending them to the blog, and then people could opt in for content expansion, you know, and that they were making an extra, you know, mid six figures a month, because they were doing that. I was like, “I don't understand how you're making an extra six figures just by that.” But it's because when they're on the site, getting their content expansion, that's when all sorts of phone calls are happening out, right? Tom Poland 17:38 Right. Rich Schefren 17:39 So, I asked the guys from Traffic and Funnels about it, and they said, “Oh, yeah. We switched to outbound and that's now responsible for about 90% of our sales.” Tom Poland 17:48 Wow! Rich Schefren 17:49 It starts like the first contact starts outbound. So, like, that's a strategy right now. It's very effective, right? You can bet, you know, dollars to donuts, right? That as more people start doing that, at some point in time, whether it's eight months from now, whether it's a year and a half from now, two years from now, people are not going to appreciate that call. Tom Poland 18:09 Right. Rich Schefren 18:10 Right now, they do. They feel like this business really cares. Tom Poland 18:12 It's novel. Rich Schefren 18:13 But when they start getting calls from every website they got into, it's going to be a different story. So, very effective now. Tom Poland 18:21 Interesting. Okay. Rich Schefren 18:23 The next one, this one was shared by also two different people kind of overlapping. It's about discovery ads for YouTube. So, Aleric Heck was talking about how, you know, it's a great opportunity right now to grow your channel if you have an organic YouTube channel by using discovery ad, and that they're very inexpensive. And discovery ads, just for people who don't know, when you're watching a YouTube video, some of the suggested videos on the right hand side are discovery ads. Tom Poland 18:57 Okay. Rich Schefren 18:58 And then also, if you search by keyword, sometimes, a few of the top ones will also be discovery ad. And generally, you're advertising your organic content, right? And so, our work just was talking about it as a, like right now, it's very useful to use, it's very inexpensive, and it can reduce your overall advertising rates for several reasons. I, then, also did one with Ian Stanley. And Ian Stanley teaches people. It's one of the best actual biz ops out there, because I'm generally not a fan of biz op at all because they don't work. But it needs to just, people have to be email copywriters. And there's a million businesses out there that don't manage them as well that you can actually have a career. I mean, you're not going to get rich but you can make, you know, six figures as an email copywriter relatively easily. Anyway, so he uses discovery ads as well. And if you have an organic channel on YouTube, you have to link it to your Google account. Until you link it to your Google account, you can't, you know, you don't get the benefit of having an organic account because you can retarget anyone that watches your organic videos once your organic YouTube account is linked to your advertising account. Tom Poland 20:18 Right. Rich Schefren 20:18 You can't go back. And you can only go to the point where your link those up. And so, what Ian is doing is he's spending five bucks a day on Discovery ads to get his videos, and then he- retargeting on YouTube is relatively cheap as well, very cheap, actually. So, once he retargets anyone who watches any of his videos, so the people that come to his videos through discovery ads are the same as people that can do it organically. And on just $5 a day, he is selling high-end coaching to clients through this whole process of moving people through the discovery ad to channel, prevent seeing other ads, and then ultimately being taken off site. And other ones are a little bit more complicated, but those are examples, I would say, of different strategies that are currently working right now. Tom Poland 21:14 It's interesting. Rich Schefren 21:15 And you know, another thing I can just quite share is that whereas I don't know of any marketer who has gotten any ads to work from YouTube, or Facebook, or Instagram on TikTok. I know lots of marketers who have ads that work on TikTok, that work on Instagram, Facebook, and YouTube. Like, that format works on all channels, right? Which is interesting. They don't know yet how to apply that, but it's something to think about. Tom Poland 21:47 Well, certainly test on TikTok, and if you don't get it working, go to the other channels, maybe. But yeah, this is interesting. So, the key point, I think, folks, is that there are innovations. You don't necessarily have to be the innovator, but you have to keep your eyes and ears open and notice what you are noticing, because there might be an opportunity to jump on that particular bandwagon before it rides off the cliff. One day it will. Rich Schefren 22:09 And what I would say is, is that you don't need- not every element of your business needs to be this, but you need one. Like, you know, like when I released my free reports, like I was using regular email, a regular blog, like what was the thing at that moment was free content that was valuable, that made a sale. Tom Poland 22:29 Yes. Rich Schefren 22:30 You know. When I did the webinars, like it was the same thing, like everything else was normal, like the standard stuff everyone else was using. So, my point is that you don't need 100 of these things, but there should be one element in part of your marketing arsenal that is relatively new, that your competitors are not using. And you should spend some time looking for that and recognize. And it could be in any other industry, but it's not yet been in your industry so your prospects are not like familiar with it. Your competitors aren't using it. Tom Poland 23:03 And the process of innovation, it's necessary that people are going to fail, people are going to trip over, that if you can hang off, if you can notice what is working somewhere, you know, perhaps, you could avoid a lot of those a lot of that downtime and wasted money. But it's either way. It's fascinating stuff. And essentially, what you're saying is that, really, the only competitive advantage of sustainable is innovation. You've got to have something that's timing Rich Schefren 23:25 The one competitive advantage that cannot be copied is timing. Tom Poland 23:31 Perfect. Alright. So, terrific stuff. Strategic, but also lots of examples to flesh out those concepts. Let me give you question five. I've skipped a couple because I think we've covered them adequately and lots of value has gone out, anyway. What would you say would be one valuable free action? Where could someone go from here to start the process of exploration or innovation or timing? What's one step in the right direction you'd recommend people take? Rich Schefren 23:58 I would say that they should pay more close attention to the people that they buy from, the places that they shop from, and notice anything that is new to them when they first noticed that. Like, you know, all of these things are hidden in plain sight, you know. They're out there. It's just a question of whether you can spot them or not. And you're not going to spot all of them, that's for sure, but you only need to spot one, you know, at any given point. So, I would say that, you know, recognize that some percentage of your time – and I'm not necessarily saying a lot of it; maybe 5%, maybe 10% – put some amount of your time recognizing that if you look at what your marketing arsenal is right now and you don't have anything that you would say is cutting edge or something that's relatively new, then you should spend 5-10% of your time to be on the lookout for those things. Go to different marketers sites. Opt into their stuff. See what they're doing. See if it's anything different than what you're doing, right? Most of the time, it's not going to be found in a course, because generally, it takes a few years or at least a year or two for something to get out in a course. So generally, you know, there might be a few in a course, but that's not the amount of time to invest it. Courses are great for what they are. They're just not great for the latest and greatest, usually. Tom Poland 25:19 Yep. Yeah. Rich Schefren 25:20 So, I would say that, and be willing to test, but recognize that, when I speak to most people, if they get honest about it, they've never spent any time looking for this. And so, the first thing is to recognize one that there is this kind of time element that is involved with marketing, and that, you know, looking at what the people that you look up to, that you know are doing well, what they're doing is a start, ideally not in your industry, so that you have the opportunity to be first in your industry, and experiment. You know, at the end of the day, putting your own spin on things. Like, the reason I wrote a free report was that I was listening to a Dan Kennedy program for coaches and consultants. And at that moment in time, I had my coaching program. Nobody knew me, right? And so, I'm listening, like very eagerly, and I will always remember the question and answer because, like, I can't believe that I thought this way once, but I did, so, you know. But I had this great coaching program getting people great results, but I felt like I needed new front-end products, new low-priced products to acquire new customers. And then I would need, you know, mid-tier products. Like, I needed this whole built-out business in order to do well. And I didn't know what to put in these front-end products, these low-priced products, because I had all this great stuff in my coaching program, but I was afraid to take anything from my coaching program because I was afraid I cannibalize my coaching program. Tom Poland 26:52 Right. Rich Schefren 26:52 So, I'm listening to this Q&A session that is at the end of what Dan presented, and this coach asked the exact question that I was thinking, which is, I have like this coaching program but I don't know what to put in these lower-priced products to acquire customers because I'm afraid I'll cannibalize. And Dan just laughed at him. Like literally started, like chuckling, and he said – these are his exact words. He's like, “Baba? Baba? You don't get it. You put your best ideas in those products because that's what's going to get people to want to join your coaching program.” Tom Poland 27:24 Right. Rich Schefren 27:25 And I was like, that was news to me, back in like, you know, 2005-ish, or whenever I was listening to it. I was like, that was news to me. And the more I thought about it, I was like, well, if that's true, then what if I just gave it all the way from like, put not all my good ideas, but what if I gave a bunch of good ideas away for absolutely free? Tom Poland 27:44 Yep. Rich Schefren 27:45 And what if I gave people, gave affiliates, you know, 25% of the coaching, like, just for giving away a free valuable report? And so that's what I tried, right? Like that. It was just an experiment, but it was based on Dan's saying, what he said, and based on like, what I know about online marketing, and maybe like, asking affiliates to just give away something highly valuable and we'll take care of all the selling and do everything from there. Maybe that's enough. And it was enough. And so, didn't have to build a lot of front-end products and I didn't have to do all these things. But it was because like, I was willing to experiment. Tom Poland 28:20 Yes. And we all want this thing that's going to stay true and sit and deliver results for ad infinitum, for eternity, but unfortunately, it just doesn't exist. So, someone's going to move the cheese, right? Rich Schefren 28:33 Yeah. I mean, people are always shocked. Like, I wrote a report on automated webinars in early 2008, weighing out how to work, like the whole model. That's still used today. And people were shocked, like, “why would you do that?” And I'm like, if I thought I could actually do it forever and no one would know about it, I would certainly- Tom Poland 28:52 Keep it to yourself. Rich Schefren 28:53 That's not on the table. Yet anyway, so I credit the guy that invented Tom Poland 29:00 Right. It's going to have a “use by” date, so he has to get it out before that expires. Rich Schefren 29:05 Yeah. Tom Poland 29:05 So Rich, let's go to your website. You're going to set up a special page – www.strategicprofits.com/jay. What are people going to find when they go there? Rich Schefren 29:17 Yeah. So, they're going to find, this was a book that Jay Abraham used at the most recent Anthony Robbins, like super high-end Mastermind. Jay called me because he was giving away one of his books, and none of his books have really the internet component in it and he felt that that was necessary. And so, we took seven of the segments that I'm talking about, like the examples I was giving you, and Jay titled it “Getting Everything You Can Out of All That's Hot Online” which is like a take-off of his book, getting everything you can from all that you've got. Tom Poland 29:55 Right. Rich Schefren 29:55 And this has strategies in here from Tim Burd, who has Ads Secrets, which is one of the best Facebook groups out there for media buyers people, like he's got several 1000 in there that pay him 97 bucks a month; Fernando Cruz, who's the Head Marketer for Legacy, which is one of the best divisions of grow wise until it was just sold for $3 billion; Jordan Menard, who is the top media buyer. I'll give you an example of another one just with Jordan. It's not the one that's in the book. The one in the book is about how to produce new angles. But Jordan shared a strategy with me. This was like about 18 months ago so its effectiveness is a little less than where it was, but it still works. And he showed me in split tests. He had three split tests. He had one for Bob Proctor who's a client of his, one for the Morrison Brothers who's also a client of his, and one, Agora property. And he did a split test with Facebook ads, and all he changed was two words – the first two words of the Facebook post. And the two words that he added were “It's true…” And “it's true…” boosted the click through rate by about 50-70%. Tom Poland 31:10 Wow! Rich Schefren 31:11 Kind of shocking. But anyway, so Jordan Russell Brunson has his favorite funnel, the funnel that actually has built more click funnels than any other funnel, and one that he spends over a million dollars a month on, that's cashflow positive. And then Aleric Heck talking about YouTube retargeting, and why it's so effective and how to do it, and Growth Secrets, Molly Mahoney. So, it's seven different strategies that people can have, and we are planning on selling it on Amazon, but for your listeners, they can get a free by just going to www.strategicprofits.com/jay. j-a-y. All lowercase. Tom Poland 31:49 Rich Schefren, it's been an absolute pleasure having you on the show. I'm so glad we throw away the seven-minute timer. Folks, hope you enjoyed that. Go get that book for free. www.strategicprofits.com/jay. Rich, your score on the gentlemen. Thanks very much. Rich Schefren 32:04 My pleasure. I do want to answer that last question. Tom Poland 32:08 Oh, I'm sorry. That's my bad. Question seven, kind of our trademark question – what's the one question I should have asked you but didn't? Rich Schefren 32:15 Yeah. You wouldn't know to ask me this question, but since I'm asking myself the question and delivering the answer, let me tell you. I want to share what I did to watch my coaching. It's something I've taught to numerous people and the people who have done it have done very well and done the same. So, you know, it's very first time I got a chance to speak where I was going to sell something, and I'm not a really- I'm a great marketer, because I'm a bad salesperson. Tom Poland 32:43 You've to be good at one or the other. Rich Schefren 32:45 Yeah. I was quite concerned about selling from stage, especially with other sharks speaking, right? Because that's not me. And so instead, I decided that to avoid the possibility of there not being anyone getting up and buying, better to like, kind of make sure that that's not even an option, so I'll make an application only. So, there's no reason to rush. You could just fill out the application, and you know, etc. And then well, what could I do to get people to want to fill out the application? And I could put a really strong guarantee. And so, my original guarantee when I started my coaching program, and it was the first group of people that I coached, and those were nice, those guys, you know, it was a year-long program, you will double the amount that you're currently making and you will be working half as much by the time we're done. Like 4x your return on your like, on your own. And there were several hundred people in the room. And that guarantee got, you know, especially when I reinforced it, got quite a few people to apply. Tom Poland 34:00 Right. Rich Schefren 34:01 So, you're basically guaranteeing that I'm going to be at 4x and a year from now, or all the money I pay you is going to, you know, be returned to me, and I'm doing private coaching at this point. It's not like a group program. Like, there's some group components, but I'm talking to everyone individually, too. Tom Poland 34:18 Yes. Rich Schefren 34:19 And so, I had about 40 some on, like 47, 48. I don't remember how many, but 40 some on apply. Tom Poland 34:26 Yeah. Rich Schefren 34:27 But I then spoke to every single person for 15 minutes, because I only accepted the people who I felt I could actually deliver that for, right? So, put a big guarantee out there if you have the opportunity to talk to a good, you know, some amount of your prospect. Put a strong guarantee out there. Make it by application only, but then, only accept that people into the program you actually could deliver on, right? You know, I never worked harder than that year, because like, I didn't have a program. I didn't know. But I knew that these people were winners I felt, and I felt like I could help them, right? Tom Poland 35:09 Yeah. Rich Schefren 35:09 But it was that, and then it was my delivering that result for those people, so that I didn't have to refund anyone's money, that their results went into the Internet Business Manifesto. So the Internet Business Manifesto, like, reek of proof, and it was the proof of those people who I had built the program on. And so, I was talking to them individually, like twice a month, I was doing group, like lessons for the group. Those group lessons were based on the individual calls that I had, so they were based on what I felt they needed. That's what I was teaching. So, my entire program was built out by delivering, so that one group. Then, that was what I ended up selling, automated for the next 10 years, right? Like, that exact program. I had A studies. I had everything from that initial group, and that initial group was gotten by an over-the-top guarantee application where I would only accept the people that I could help around. Tom Poland 36:17 A careful selection. So, there was actually a heck of a lot of integrity around that. And last question, bonus question, then we'll wrap up in another 30 seconds. You think that the marketplace responds a lot better when they sense you have skin in the game. You're offering all money back after you work for people for 12 months. People are going, “Wow, Rich must really believe in this.” Rich Schefren 36:36 I think there's a part of that. I also think that, you know, on the one hand, people think that that's a tremendous investment, and it certainly is, right? Like, I'm willing to risk a lot. But also, the likelihood of someone being this honest with you after you've been personally talking to them as a coach, where people have opened up to you like, you know, they're on your side. They want the outcome. But, you know, if you're a good coach, odds are that they've also grown to like trust and bond with you, right? And so, I think, partly that. And then the other thing I would say, which like, just as an added bonus tip, there is no excuse, like zero, for a coach not to be a great marketer. Because the questions that marketers, like we'd love to know the real answers to, are the questions that coaches get answered, like at the beginning of a conversation, right? Tom Poland 37:43 Yeah. Rich Schefren 37:43 So, a lot of times, in all the free reports I wrote, one of the most common feedback I got was, “It felt like you were just standing right over my shoulder, like you were describing quite me.” Tom Poland 37:53 Music. Music to my ears. Yeah. Rich Schefren 37:57 You know, if you coach a lot of people, you don't have to hear the stories that many times to see the commonalities that are in all of them, but people generally won't open up to anybody like that. They are opening up to you because you're here to help them, and that is the exact information that is like the gold when it comes to marketing. Tom Poland 38:18 Isn't it? Yeah. Rich, thanks so much for your time. Rich Schefren 38:20 My pleasure. Tom Poland 38:21 Thanks for checking out our Marketing The Invisible podcast. If you like what we're doing here please head over to iTunes to subscribe, rate us, and leave us a review. It's very much appreciated. And if you want to generate five fresh leads in just five hours then check out www.fivehourchallenge.com.

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Joel Bowman and Adam Sharp on Censorship and the Parallel Economy

Play Episode Listen Later Feb 26, 2022 45:40

“I actually find myself pretty optimistic just to see people out in the streets because realistically, this stuff has been going on for a while, like financial censorship, speech censorship. So just seeing people out in the streets is encouraging because ultimately, I don't think the people's will will be denied for too long.”~ Adam Sharp, Start-up Investor and Editor at HIVE Blockchain Technologies TRANSCRIPTJoel Bowman:Welcome to the Bonner Private Research Podcast. I'm your host, Joel Bowman. Each week, we bring you exclusive conversations with members of Bill Bonner's private research team, as well as some special guests will meet along the way. We're trying to connect the dots from high finance to lowly politics, private investments to public follies, from Wall Street to main street, at home and on the road. We're into sound money, personal freedom, classical books, and great wines, not always in that order. So join me and the rest of the Bonner Private Research team as we pack our bags and follow the money. Mate, so let me welcome you officially to the show because it's been a little while since you and I got together in person. But I've known you for what, 10 years now I feel like?Adam Sharp:Yeah.Joel Bowman:Right around there.Adam Sharp:It's been about that long, yeah.Joel Bowman:So you're an early investor, a crypto enthusiast. I know you're doing a lot of work with the gents over at HIVE Blockchain Technologies and early investing as well. But one of the, and we can get into all that, but one of the conversations I wanted to start off with you is something that's just been rattling around my head in the past few weeks, and that is what is going on with your friendly, mild-mannered neighbors to the North. This is instructive in multiple ways for an antipodean who's been watching what's happening in Australia over the past couple of years. But just for people who are catching up with this story or maybe they've had it just peripherally on their news feeds, but maybe they're paying attention to, I don't know, what's going on in the Ukraine or whatever else, do you want to just catch us up to speed with what's been going on in Canada, what the latest is?Adam Sharp:So most people are familiar with the basics of what's going on with the trucker convoys. But it is interesting, like I talked to my parents about it this weekend and they really didn't know what was going on because it's not really being reported in the mainstream. So you have to go to some social media platforms to get up on it. But basically lot of Canadians are really sick of the vaccine mandates and the mask mandates and the quarantine rules. So it's set off really a large protest in Ottawa, which then spread to become a blockade at several of the US-Canadian borders. And now there's been much protest in all major Canadian cities. So they really cracked down hard on the one in Ottawa, batons and mace and cracked some skulls and trampled some people with horses.And it's surreal to watch because these people were totally peaceful protesters, they were cleaning up after themselves, crime actually went down in the city during this occupation. And Trudeau invoked these emergency powers that basically give him unlimited ability to freeze people's financial accounts, which they are doing. So anybody that is associated with the protest that they can identify, either they donated to the protest or they were on video, it's very Orwellian. They are using video to identify people, facial recognition, and then blocking their bank accounts. Then we've heard multiple stories of people who just went to the grocery store and all of a sudden they donated to the convoy, so their credit cards aren't working, their bank accounts are frozen. They're going to try to now take a bunch of the trucks that they towed away from downtown and sell them and keep the money.Joel Bowman:That just seems vindictive at that point. This isn't just an impounding and come along next week, pay a fine, and get your rig out. This is, I would guess for the vast majority of people who have their being taken from them, this is probably their main source of income, this is-Adam Sharp:Oh yeah. And probably most of them have a big loan out-Joel Bowman:And livelihood.Adam Sharp:Right?Joel Bowman:Right.Adam Sharp:And they probably owe a million dollars on a loan a lot of them. I don't know how much of big rig costs, but I'm guess it's not cheap. So I just keep being reminded of this great George Orwell quote, and he says, "All tyrannies rule through fraud and force. But once the fraud is exposed, they must rely exclusively on force." So I feel like that's where we are, at least, in Canada.Joel Bowman:It's like the veneer has been pulled back and now this is just the naked state just ruling through power and brute force.Adam Sharp:Yeah, exactly. Like that old Frank Zappa quote about the brick wall.Joel Bowman:Some Frank Zappa.Adam Sharp:Yeah, exactly. So it's interesting, I think it's been inevitable for a while. But I think it's going to be a hard period that we're going to have to go through. But I actually find myself pretty optimistic just to see people out in the streets because realistically, this stuff has been going on for a while, like financial censorship, speech censorship. So just seeing people out in the streets is encouraging because ultimately, I don't think the people's will will be denied for too long. We have the internet still, hopefully we will going forward. But it's nice to see people getting a little angry and a little upset because this stuff has been going on for a while, it just didn't affect us as directly.Joel Bowman:So I feel like we can, you touched on this from multiple angles there, but I feel like broadly we could break it up into a couple of main themes here. And for our American listeners/viewers/readers, however you're consuming this, it almost feels like there's a first amendment component of this and then something we, I don't know, we maybe call it a fourth amendment component. Where there's the censorship of free speech and very importantly, in the case of these demonstrations, the ability or the right to peaceably assemble and petition the government for redress. So this would be our first amendment point of attack there. And then it gets into something entirely different when you're talking about asset seizure. You sent me the story originally, but I think this started with the government leaning on a private company, this was GoFundMe I believe. It gets a little muddy for me after that, so what happened? They lent on GoFundMe, they backtracked after a little bit and said, "Actually, we're not just going to take the money, we're going to automatically refund it to you." But then things escalated.Adam Sharp:So there was over $10 million raised for the leaders of this trucker convoy. And it was going to pay for their gas and some other expenses, but mostly for of gas. GoFundMe basically shut down the raise after it had reached $10 million and they said, "We're not going to give it back." Or no, "You can ask for a refund. But if you don't ask for a refund, we're going to take that money and donate it to charities of our choosing." Now, they got a lot of pushback on that. So they reversed, they automatically refunded everybody. So a new fundraiser started on a Christian crowdfunding site called GiveSendGo. And GiveSendGo is basically only around because GoFundMe shuts down so many dissident and conservative type of fundraising events. They're basically very political in who they allow to fundraise on the site.So GiveSendGo all of a sudden turns into a big, big business. They raised about I think over $8 million for the truckers. And they did get some of that money to them. Then the Canadian government stepped in, a lot of that money is frozen now in a US bank. They got some of it to the protestors, but a lot of it is still in limbo, so it's been frozen. But this is leading to a bigger thing that we've been talking about a little bit, where there's a potential here that we're going to see parallel economies develop. Like GiveSendGo is the fundraising platform for conservatives and dissidents and GoFundMe is the one for normies and whatever. So are we going to see that for social media? We're already starting to see it for social media. Are we going to see it for banking? Are we going to see it for payment processing? It's a big, big thing.If you guys aren't aware of what's happening on social media with censorship, this has been going on for a long time. The first time I remember seeing blatant political censorship on Facebook was in 2007, it was during the GOP primaries. I saw Ron Paul talk and I was impressed. So I went to Facebook and I'm like, "Oh, let's join a Ron Paul group." And there were no Ron Paul groups. So I was like, "Well, that's strange." I guess I didn't think much more about it, but I never joined one. I could have been involved in the movement, I could have been spreading the word. But they had intentionally hidden them it turns out. And if you look it up, TechCrunch did some reporting on this. So this was 2007 and they were disabling the ability for people to create Ron Paul groups on social media. So this stuff has big, big impacts. The ability for a company like Google or Facebook or Twitter to control someone's thought process through little nudges and through censorship is tremendous, it's just really, really powerful.Joel Bowman:And we're not talking about tiny, little corner of the web type outfits here, we're talking about the main choke points of information, the main filters through which, I don't know what the percentage would be, but it would be upwards of 90% of internet traffic is driven through Google, through Twitter, through Facebook. These are the feeds that allow people the reality that we just take for granted when we go online. And as more and more of our life is played out online, whether it be the news you get or the commerce that you interact in, your brokerage account, your online banking, where you travel, where you stay, and probably in future at some credit score.But let's go back to the truckers for just a second because I want to play the other side for a little bit. And this will circle around to what I've experienced just watching, from down here in Argentina, watching what's been happening in my birth country of Australia. And that's that there'll be a narrative that will say, "Hey, actually, these people they were out protesting, they were disturbing locals, and they were hampering trade across the border." I've seen a bit of that. I wanted just to get your take on this idea that these things have become so politicized now that rather than it being a case of, hey, it's the people the state and their oppressive, be it mandates or it could be a taxation policy, it could be some kind of draconian law, it's been turned into a divide and conquer situation, where you get all this mud slinging back and forth between people on the so-called right and people on the so-called left, whatever that even means today.Such to the extent that looking at the diametrically opposed coverage of what's going on in Canada, I'm just reminded of that old poem which starts out, "First they came for the communists and I didn't speak up because I wasn't a communist. And then they came or this other socialist and what have you." I think that people who are defending the encroachment of the state onto any civil liberties are going to maybe be unceremoniously reminded that actually they're going to guard their civil liberties at some point in the future, and maybe there won't be anyone left to stand up for them.Adam Sharp:Right, exactly. It's interesting how things have basically become... There's basically two or three or four separate realities and people believe in them steadfastly. And there's not a lot of... I don't think a lot of people are being convinced one way or the other on a lot of these issue. So it is interesting, it's disturbing, but it just appears to be where we're at.Joel Bowman:It seems, perhaps even to have been exacerbated this divide during the past couple of years. And I think part of maybe, and you can speak to this, your experience in the US would have been different to what we had down here in Argentina, but the atomization of society in general during these lockdowns and isolations and social distancing. I feel like a lot of the checks and balance that usually hold polite society together, when you gather around the water cooler at the workplace and maybe you flesh out a couple of ideas or Tony from accounting says something a bit wayward, but then his friends pull him into line and say, "Hey, that's a bit of a crackpot theory." Or whatever.I feel like a lot of those checks and little social balances and etiquette have just completely been done away with. And now we congregate on Twitter where we just scream at each other. Everything has to be as divisive as it can possibly be and as incendiary as it can possibly be. So I feel like, even more so in the past couple of years we've had this, people have been digging their heels on both sides. It seems like we're farther from the center perhaps than we've been in a long time.Adam Sharp:It is interesting. One thing that I've noticed is that I look a lot of political and social polling, and Rasmussen Reports does some of the most interesting stuff. What their latest polls are showing is that independents are about 70% in line with conservatives and Democrats are becoming more on an island by themselves. So it is interesting to watch. I'm convinced that it's 99% based on the media that you consume, for most people. It's just like if they watch Rachel Maddow, they're angry about certain things if they watch Sean Hannity, they're mad about other things. But social media, despite all its flaws, despite all the censorship, it's priceless.Just to be able to follow what's going on around the world and maintaining that place where people can share ideas freely, I think that's going to be an increasingly important thing going forward. With Twitter, Facebook, all these companies, they're all towing the same line, they all are follow orders basically from the government to sensor certain things. Like I sent you that article where Facebook had this algorithm, that was exposed, where it gave users a vaccine hesitancy score. So if you had a certain score that showed that you were vaccine hesitant, your comments would be hidden or downgraded or put below the fold. So my view is that stuff like this is happening really widely on most of the social networks, and people can sense it, right?Joel Bowman:Yeah.Adam Sharp:Back to polls for a second, I think something like 55% of Americans now believe that big tax sensor is based on political views. It's become widely accepted I think. Obviously some people don't accept it, but it's pretty clear to me that they are using their own personal political views to censor and steer the discussion. Ultimately, I think that's a really bad strategy. If you think about a company like Google or Facebook or Twitter, they've basically... I still use Twitter because it's just a great learning tool, right?Joel Bowman:Yeah.Adam Sharp:But something like 40% of their audience hates them now and is desperate for alternatives. They want places where they can speak freely and not be banned or shadow banned or whatever. It's just creating this huge opportunity for these alternative platforms. And that's an area that I've been focused on for a while. But right now it's just more relevant than ever, right?Joel Bowman:Mm-hmm (affirmative).Adam Sharp:People want truly, well, a lot of people, some people don't want free speech platforms, but a lot of people do.Joel Bowman:Free speech that they agree with is fine, it's just free speech that they don't agree with that they're unhappy about.Adam Sharp:Exactly. So I don't think that trend of big tech censoring stuff is going to reverse anytime soon. But it's created a really unique actually investment opportunity because these alternative platforms have an unfair advantage right now. They can really have free speech and people want that. So I think if Google and Facebook and Twitter and everybody hadn't started censoring people, it would have been really hard for any of these platforms to gain traction. But because they are cracking down on certain political views, it just hands these guys a huge gift. It's like, "Hey, Rumble..." So Rumble is a YouTube alternative. And I think they had 63 million monthly active users in Q3. And they never would have gotten that if YouTube hadn't started banning all this stuff. Because YouTube has banned basically anything that goes against the establishment in terms of COVID, even the war on terror to some extent. So people are finding these alternative outlets and the growth on them is really exploding.Joel Bowman:It does feel like if you build that they will come moment for a lot of these companies that are waiting in the wings and they're watching, you would have had to be really avoiding the news cycle to not hear Joe Rogan's name in the past month, let's say. So here's a guy who inks $100 million contract with Spotify. Wherever you fall on whether or not he should be able to say what he has to say or whether his guests should be able to say what they have to say, what is undeniable is that a large amount of people want to hear that. And he has an incredibly large audience, the kind that would make your average CNN anchor weep into his teacup.So that audience are craving long-form interviews, they're craving a curious mind, investigative, even interrogative journalism, really getting into the weeds on certainly unpopular mainstream opinions. And it just demonstrates that there is a huge demand for that. So go through a couple or a few of the companies that you're looking at. Because I know you're a startup investor. I may have mentioned at the top of the show here, but since you and I have known one another, you've invested in over 125 startups, a dozen or so have grown to unicorn status at this point, which is pretty. So when you see this, as you say, potentially even a gift being handed to companies that are positioning themselves as free speech alternatives or maybe even existing in a parallel economy, what are the standouts, outfits that you think are doing a pretty good job or that are keeping an eye on?Adam Sharp:So in terms of public companies, there's really two that I consider credible, the first one is Rumble. So Rumble is a YouTube alternative. If you guys aren't aware, YouTube bands a lot of content, pretty much anything that's anti-establishment. If it catches on and gets too many views, YouTube will quickly delete it. So YouTube, also if you don't know, is one of the most lucrative businesses in the world, they apparently get over $63 a user per year. So that's pretty good, considering a lot of those people don't use the platform very often.Joel Bowman:They have a subscription model, is that through... I guess that would average out between advertisement and subscription, right?Adam Sharp:I think that's just free, that's just ad based content.Joel Bowman:Oh, wow. So that'll go even to another point where advertiser's are going to go after this. If we get a lot of eyeballs on Rumble, that can take off quickly. Anyway, I'm jumping in there.Adam Sharp:No, it's fine. So Rumble's an interesting one. It is a SPAC, and SPACs are weird for a few reasons. It's a fancy reverse merger kind of. So all SPACs start off trading at around $10, CFDI is $14 right now. It is a little expensive, I believe the market cap... It's tricky with these SPACs because if you look at Yahoo Finance or something, it'll tell you $400 million, but it hasn't merged with Rumble yet. So until it does, we won't know the full valuation. So it's more expensive than it looks. But I think they had, let's see, 63 no. So they grew monthly active users from Q3 2020 to Q3 2021 from 2 million to 36 million. So that's pretty explosive growth, 18 times in a year.So they do have serious growth, they have a lot of good content. I watch stuff on Rumble, a lot of stuff that just isn't available on YouTube. And like I said, the company hasn't merged yet. It's worth watching, I might buy a little of it. So the big risk to Rumble is right now, they pretty much allow almost any controversial content. They allow stuff that's controversial that YouTube would never allow about COVID or about conspiratorial stuff. So right now, they are in the app store, they're in the Google and the Apple app stores. But the question is if they're going to get banned if they don't start censoring. Because the whole reason people use Rumble is because they don't censor like YouTube does, but that also puts Rumble at risk of being deplatformed from the app stores.Joel Bowman:And you would imagine that, especially if these are indeed the early days for Rumble, that they would be attracting, I would imagine, some of the more conspiratorial out there stuff that people would want to more easily point their finger to. So that may even give the app stores a little bit of cover to say, "Well this is exactly the speech we don't want. And so let's clamp down on that before it gets out of hand."Adam Sharp:Yeah, that's exactly it. So the people that get kicked off other platforms, they go to these new platforms. And sometimes they do have views that are offensive, it's going to happen. Sometimes they're going to be neo-Nazis, something like that. But just ignore them, you don't have to paint a whole platform because of the content that is on it. If it's a free speech platform, there's going to be some offensive stuff on it. I feel like we're adults and we can deal with that.Joel Bowman:One would hope.Adam Sharp:But some people don't agree. So Rumble is an interesting one. The other big one is Trump's social media platform, so this is called Truth Social. And it is publicly traded, but there's some warnings here. So the ticker is DWAC, and it's another SPAC company. So right now, it does have about a $20 billion market cap, and they just launched the app last night. So last night they launched the app just for Apple users. Apparently they have a huge wait list. I'm pretty sure if they can get a platform that works and is scalable and is fast, they're going to get some traction for sure. Because, like we said, people are really craving free speech, but there...So right now, it does have about a $20 billion market cap, so that's pretty steep for a company with no revenue. It's also up from... So like all SPACs, it started off trading at about 10 bucks. And last I looked this morning, it was $90. And there's a lot of potential dilution there too because with SPACs, people who invest at that in the private round, they get warrants at $10. So there are a lot of warrants at $10. So there's more dilution in this thing than it looks like. But I do own some DWAC, I think it has potential to become the mother of all meme stocks.Joel Bowman:Mother of all meme stocks?Adam Sharp:Yeah. Think about how obsessed people were with GameStop just because it was fun. I don't know why exactly they were obsessed with GameStop. But I think that this thing could become... If people start using it and people like it, it could really run. I don't know that fundamentally it's a great buy, it's probably not. But it's interesting nonetheless just to watch.Joel Bowman:It seems also maybe this is, well, I would bet that this was something that was driving the GameStop, AMC type buyer, was a bit of a finger to the man in some way. This is like, "Hey, this is how we can swarm and leverage asymmetrically our..." It's a flash mob in some sense.Adam Sharp:That's exactly it. And what sticks it to the man more than supporting Trump's social media network?Joel Bowman:Very unpopular for the man.Adam Sharp:So you summed it up really well there, I think that's the reason that it could run, is just it's almost like Bitcoin a little bit. People buy Bitcoin because we think the current system is flawed, we don't love it. And a lot of people think that social media and big tech is super flawed. So I think people could use it. If it catches on with users, I think it could certainly run. But it is already expensive, so just be aware of that. It's up a lot and there's a lot of dilution that's not baked in yet. So just be aware of that. Really the more interesting opportunities though are private. Most of the up and incoming free speech platforms are still private. One of the ones that I invested in a while ago is gab.com. So Gab is a very free speech platform, it's controversial, of course, because it is a free speech platform. And it does attract people that have been banned from other sites.But there's a lot of good people on Gab too and a lot of funny people and a lot of good news for conservatives and stuff. But that's an interesting one. I think they had about 90 million visits in January. So the interesting thing about Gab is how much censorship they've had to deal with. So in 2017, I believe their app was banned from the Google and Apple play stores simultaneously because of hate speech. And specifically it's because Gab doesn't believe that you can say, "We don't allow hate speech." Because it's always subjective. So they don't have a policy in there and basically they won't ban people that Google and Apple don't like. So Google and Apple, to play on their play stores, want it's like editorial control of these platforms. So that's the reason they got banned from the app stores basically. They were also banned from AWS and all the other major web hosts payment. They even got their domain banned from GoDaddy, which is crazy.Joel Bowman:Wow, that's too heavy...Adam Sharp:So a domain name banned. But you know what, the founder and CEO, Andrew Torba, is really an impressive guy. He's a Christian, he's a family guy, and he just keeps building. No matter what they throw at him, he built his own infrastructure to host, they built their own email system, they built their own marketplace now, and they're also building their own payment system now, which is interesting. And by the way, I think this whole concept of the parallel economy, I think it's Andrew the CEO of Gab who coined that term. So I do want to give him credit for that. But the other interesting thing about these private market investments is that a lot of them... No mainstream VC would probably touch Gab with a 10 foot pole. So there's this artificially cheap aspect to some of these plays too because they're a little bit too icky for mainstream investors or they're a little bit too-Joel Bowman:It's like a risk discount.Adam Sharp:Yeah, exactly. Yeah, a risk discount, exactly. So Substack is the other interesting one, and you guys are on Substack.Joel Bowman:Indeed, yeah.Adam Sharp:And I just started the Substack, it's great. It's a really good service, they don't seem to censor stuff yet, and they're growing like crazy. I think this was a while ago, but they've just passed a million paying subscribers. So if you guys aren't familiar, well, everybody that's watching this is familiar with Substack, so I don't have to go into it, but it's another free speech platform. Interesting-Joel Bowman:And the founders have come out and been pretty... There was some rumbling, I think a couple of articles and maybe the Guardian and the usual suspects pointing fingers that, was it Chelsea Clinton retweeted something complaining of antivax or misinformation grifter. Of course, misinformation is anything that the establishment disagrees with, just by definition there. But I was very encouraged to see the founders of Substack basically come out and say, "Look, sunlight is the best disinfectant. So we're going to have ideas out there, if you don't like the idea, come up with a better idea, counter it, put up some information, and let's get to the truth of the matter as best as we can. But we're not going to get there by telling people that they just have to sit down and that it's not their turn to talk."Adam Sharp:Yeah, exactly.Joel Bowman:You mentioned Bitcoin before. And that being a similar kind of... I guess it had its genesis as a bit of a workaround to what many of us saw as a flawed central bank system. The whole end the Fed or audit the Fed crowd found a lot of appeal in a currency that didn't depend on the fiat whims of an elite central banker class. So I was thinking about this just before when we had... This was born in 2008 during the Cypress bailout. Then we had the whole Cypress bail in, which was a catalyzing event for Bitcoin to take another bull run.I'm wondering, now we have this G7 country, which is essentially, and this is to take a full circle back to Canada, we have a G7 country which is confiscating the financial assets of its own citizens. But we've seen gold respond this time, we haven't seen Bitcoin responding. And there's still a lot of downward pressure in the market on cryptos in general. What do you make of that in light of Bitcoin's historical role as responding positively to these financially sensorial market conditions and why perhaps it hasn't done that so far this time?Adam Sharp:That's a great question. It almost reminds me of March of 2020 when every everything in the world was selling off. I was sitting there saying like, "Well, they're just going to print unbelievable amounts of money. Why is Bitcoin selling off?" But the market just hadn't come to that realization yet. And when you do get these forced sell offs, a lot of these leverage trade and hedge funds, they're just forced to sell their Bitcoin no matter what. So I think long term, it's going to be great for Bitcoin. I wrote an article about that in February of 2020. But it takes the market a little while to catch onto things that might seem obvious to you and me, I think. I think there also is concern because in Canada, they are forcing centralized crypto exchanges too to freeze people's accounts, freeze people's Bitcoin. So people are like, "Whoa. Oh, you can just freeze the Bitcoin too?" Which it is a problem.Joel Bowman:For sure.Adam Sharp:People can pull their Bitcoin off exchanges, they can trade with it amongst themselves. But in order to cash out, you do need that government approved exchange. So it's certainly a hiccup for Bitcoin. If Biden comes out and says something similar, there certainly are some near term risks to Bitcoin. But I can't imagine a more bullish overall fundamental environment. Money printing as far as the eye can see, I don't think they're going to be able to raise rates and normalize, that just seems like a fantasy to me. But I don't know, I'm just still incredibly bullish on Bitcoin. But yeah, it might get Rocky for a bit. We could go lower. What do you think?Joel Bowman:I'm more or less in agreement. I think that there are scenarios where I can see short term pain. I recall the situation during some pretty hectic selloffs in the past. And I don't think that we're necessarily there yet, just with regards to general market sentiment. A lot of people got in during that run up to 60 plus K. And for them, a 40% draw down isn't really gut wrenching by historical standards. So it does look like there are a few catalysts that could potentially send it a little lower.But this goes back to the general theme, where I think all of these governmental tightening, whether it's with regards to free speech or assembly or seizure of financial assets or any restrictive behavior that the government engages in, which I can only imagine is going to get more intense, is going to be beneficial long term for any of these kinds of workarounds, provided that there are enough people who still value all of those things like free speech and people who want the right to be offended, the people who want to go on social media platforms or listen to videos or interviews or transact with people that might not necessarily be to everybody's liking. As long as people value that to some extent there'll be a huge demand for it. And I think in the long term, I'm hoping that demand for freedom is going to win out and pay off. So we'll have to see.Adam Sharp:Yeah, I agree.Joel Bowman:Well, Adam, we've probably gone a little over time already, and I'm very grateful for your time. But I did want to get to what you guys are doing over at HIVE. Give us an update on what's been happening there. I know it's been a pretty busy Q1 so far for you guys, so what's in the pipes?Adam Sharp:So if you guys don't know HIVE, HIVE is a leading cryptocurrency miner, we mine Bitcoin and Ethereum. And we do it, I think, in a really clever way. We basically locate our facilities right next to cheap and clean hydro power, so Canada, Iceland, Sweden. And we mine a lot of Ethereum in Bitcoin. I just started at the company last June. So it's been fascinating to learn more about the mining industry just because I've been around Bitcoin and I've been an owner for a while. But learning about how the sausage is made it's fascinating, it takes a lot of capital investment. Like all these... There's a bunch of big publicly traded miners now, and some of them are spending up to a billion dollars I think.There's some serious capital being invested into the Bitcoin ecosystem. Like we're building a big campus or expanding a big campus up in new Brunwick, Canada. And it's so cool to see these purpose-built Bitcoin miners going up. And the timing of the China ban last year was really interesting because it was great for North American and other miners because all of us a sudden we have all these data centers and people want to get their equipment in there. The hash rate went down, mining became a lot more profitable. I think that the decentralization out of China, because what percentage of Bitcoin mining was in China? It was like 60% or something.Joel Bowman:A worrying percentage of eggs to have in one basket for sure.Adam Sharp:So it's spread out throughout the world, and I think that's a great thing. It's going to be interesting to see what happens. Like we're saying, both of us have been in Bitcoin for a long time and we don't know what's going to happen in the short term. But long term, I really don't think... I think this is the world that Bitcoin was created for. This is why Satoshi did it, inflation, bailouts, all these different things.Joel Bowman:Well, it's the world of chaos and uncertainty, where you don't know the future and you can't centrally plan everything from the top down. So you will have organic moves, whether they're geopolitically responsive to something like the China ban. Or whatever happens in the future with regards to, I don't know, you throw on some climate and energy restrictions in one particular jurisdiction and then all of a sudden crypto miners who were, I don't know, position next to a hydrotech all of a sudden become much more attractive. So these are market responses that we can't predict down the road. But that's what makes it fascinating and interesting and rewards the front row tickets to it, I think.Yeah, absolutely. It's going to be fascinating to watch. Like you said, it's probably going to get worse before it gets better, but I am convinced that it is going to get better. People are, I know this is very cliche, but there is an awakening going on about overreach of government power and overreach of central bank power and all these different things. So that's not to be overlooked. Once the people... The first step towards change is recognition, and I think we're at the recognition stage right now. So hopefully change follows, and I think it will.Joel Bowman:All right. Adam, let's wrap it up there but get you back on shortly for some more chat. There's certainly no shortage of things going on in the world to hold our attention. Okay, Adam Sharp, thanks a lot, mate. Appreciate itAdam Sharp:Thanks, Joel. Bye.Joel Bowman:Cheers. Thanks for listening to this episode of the Bonner Private Research Podcast. You can find more conversations like this in the members only section of our website at bonnerprivateresearch.com. If you would like to contact us, please address compliments and complaints alike to podcast@bonnerprivateresearch.com. We look to hearing from you either way. Until next week. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit bonnerprivateresearch.substack.com/subscribe

Understanding the world of IT with Bill Bonner

The Job Shop Show

Play Episode Listen Later Feb 24, 2022 70:52

Bill Bonner is here today to talk about the unique challenges of supporting IT in small organizations, especially those going through rapid growth. He has experience dealing with cyber threats and building better systems to combat them. We will be discussing that as well as some of the latest trends in information technology. Bill is a Business/Technology Systems leader with a proven ability to lead teams to design systems that support profitable business growth. Wide-ranging experience in scaling/leading IT teams, change management, key stakeholder collaboration, enterprise-wide on-premises and cloud infrastructure solutions, cyber security, crisis/recovery/strategic planning, M&A, and managing budgets of $1MM+. Known for business acumen, integrity, transparency, respect for others, and a sense of urgency in promoting frictionless business.

wide 1mm bill bonner

Joel Bowman and Byron King: If we only knew what we know

Play Episode Listen Later Feb 13, 2022 63:50

“Much of the world's oil doesn't go to people just driving their cars to the mall. I mean, a big part of it goes to the trucks that pull everything around, to the ships that sail everything around, to the airplanes that fly everything around, to the plastics and to the precursor materials that go into everything that you wear. I mean, the buttons on your shirt, the soles on your shoes. It's… everything.” ~ Byron W. KingTRANSCRIPT:Joel Bowman:Before we get started, Byron, I was just looking at the time zone differences here. I know you're in Pittsburgh. I didn't realize that Pennsylvania was a commonwealth or designated as a Commonwealth. I thought that was a yolk only we once and former colonists labored under. I didn't know that it extended to Pennsylvanians, too.Byron King:It's one of those things that goes back to colonial days, Commonwealth of Massachusetts, Commonwealth of Pennsylvania, Commonwealth of Virginia, and the Commonwealth of Kentucky. Then there are 46 states and four commonwealths. Although Puerto Rico is considered a commonwealth as well. It has colonial roots. I used to know the answer to that or I used to have an explanation for it, but I actually don't recall why that is. Ben Franklin-ish kind of things or something.Joel Bowman:One of those historical anachronisms. Byron, you and I have known each other for a little while now, longer than I've care to mention. I don't want to date our young dapper looking selves, but you are a man who wears many hats. A historian, an energy investor, a international geopolitical commentator, Well, for listeners who perhaps recognize your name and probably they've seen you around the traps for the last couple of decades, I'd say, writing alongside Bill and some other well-known cast of characters throughout the newsletter publishing world, do you want to just fill us in a little bit by way of a bio to get started? And maybe talk us through up and until how you got to meet Bill and came to working with and writing alongside him?Byron King:Thanks very much, Joel. It's really a pleasure to speak with you and certainly to be on your podcast. I have been part of the Agora Familia since, I believe, around 2002 in one way or another. I've been on the payroll. I was on the payroll at Agora from about 2007, and so the next 15 years. I met Bill Bonner as a subscriber. I was just a reader of The Daily Reckoning. One day I was reading my Reckonings and he made some comment. This is about 2002 or so, he made a comment about the war in Afghanistan. I was just a reader. I was Joe reader out there, and I was a free reader. In fact, I wasn't even ... I thought, "I have a bunch of friends just got back from Afghanistan and I know a few things about what's going on over this." So I send him a little email, "Dear Bill Bonner, we've never met. You don't know me. But I have a bunch of friends just got back from Afghanistan. Here's what's really going on." Next thing you know, we had this discussion going on. Next thing I know, he's printing my emails to him in The Daily Reckoning and I was his friend. Then eventually I became his friend in Pittsburgh. I was a dear friend. Like, "Oh my goodness. This is starting to warm up."Joel Bowman:You're moving up the ladder here.Byron King:Next thing you know we started having this very nice correspondence. Then one day I went to one of the Agora conferences, The Vancouver Investment Conference. And I talked to Addison Wiggin, an old name from the past. Very still around, doing well. And I said, "Addison, hi, I'm Byron King. I'm your unpaid correspondent in Pittsburgh." And he says ...Joel Bowman:That's right. Unpaid correspondent. I remember that.Byron King:He said, "Would you be interested in starting in writing for us and we'll pay you?" I'm like, "Yeah, sure." "Just freelance." "Yeah. Okay." So I started writing Whiskey and Gunpowder with Dan Denning, who we know, Jim Amrhein, he's still around as well, and myself. I said, "What do you want me to write about?" He said, "Well, you seem to know a lot about energy and military stuff. So my first article I ever wrote for Whiskey and Gunpowder was the Ghost of Colonel Drake. Colonel Drake being 1859, drove the well in Titusville. Kind of the birthplace, the DNA of the modern oil industry. Although people in Canada say they drove an earlier well and people in West Virginia say they drove an earlier well. But Colonel Drake gets the credit. We started Whiskey and Gunpowder. I would write about energy and the oil industry. We were writing about military things, US strategy. I mean, the war in Iraq. I remember this one article I wrote about the Sicilian invasion of ancient Greece when the Athenians invaded Sicily. And somebody says, "Why are you writing about the Athenian sailing across the Mediterranean to invade Sicily?" And I said, "I'm really not writing about the Athenians sailing across the Mediterranean to invade Sicily. I'm writing about the war in Iraq, I'm writing about the war in Afghanistan."Joel Bowman:This is actually a Trojan horse for me to get my point across, to go back to the Greeks. Byron King:I would write about Herodotus and I would write about ... But it was fun. We picked up a lot of names, and Whiskey and Gunpowder was a highly successful newsletter. Then one day in 2007, the phone rings, I picked it up, and it's someone from Agora. And they said, "Hey, Byron. The guy that edits our energy and mining pub, outstanding investment, just quit. You want the job?" I'm like, "Is it a real job?" "Yeah." "You pay me?" "Yeah." "You guys have healthcare coverage?" "Yeah. Don't give that job away."Joel Bowman:Sounds like a real job.Byron King:Literally, I hung up. This was in the morning, about 8:00 in the morning. I got in the car, I drove to Baltimore, which is about four and a half, five hours depending on traffic. I had lunch. I came home and I told my wife, I said, "Hey, I got a new job." She says, "What kind of job?" I said, "You know that Agora Group down in Baltimore?" "Yeah." I said, "They offered me a job." She's like, "Do they pay you?" And I said, "Yeah." She said, "Healthcare coverage?" "Yeah." And she said, "Great. Because you hate your other jobs so do this job."Joel Bowman:I liked that she had the same filters as you. That you get paid, there is healthcare...Byron King:I get paid, there's healthcare coverage, and we'll do some fun things. Anyhow, that was 15 years ago and I'm still around, part of the Agora family. I think first time I met you was we actually went to Titusville together.Joel Bowman:I was going to mention that.Byron King:I think it was 2005.Joel Bowman:I think it was probably back in 2005 because I'd read that piece that you wrote in Whiskey. I just mentioned it to you somewhat offhandedly maybe on the sidelines of an editorial meeting or something where we fleshed out these ideas. Within a week, you had sent an invitation saying, "Hey, if you're keen on having a look at this, why don't you come on up and we'll do an old school dynamite frack? I've got some buddies in the industry who can show us around." That was a real hoop. A blast, I got to say.Byron King:And that's what we do. You were up there and one or two others. I had my two children with me. And we went up to Titusville. It was a beautiful, gorgeous fall afternoon. The trees were beautiful and gorgeous, leaves of Western Pennsylvania. We go out to this a working oil well. I knew these fellas. They were doing an old time ... Well, it was an early frack, but it was an old time exploding the well. Literally, they would drop a charge down there. they called it a torpedo. And they would drop it down to the oil bearing zone. And then they covered it with water to keep all from blowing up out of the hole. And boom, they exploded and they fractured the well.They started doing that in the 1860s. There was some colonel or some general from the Union army, got wounded in battle in the Civil War. He couldn't be in the army anymore so he came back. But he knew a lot about explosives so he went to work in the oil fields. And so they came up with it. So fracking, in a sense, has been around for a long time. Although, today with hydraulic fracking, it's quite different than exploding things. For all the listeners, readers, viewers out there, it's an old story, it was a fascinating, old story. And that's how we started, that's how we really got up close and personal to the oil fields.Joel Bowman:For sure. It's very interesting because that dovetails very nicely into the something that I want to get into with you here. And that is an email that you sent around, like the old days, send on a letter and it spawns all these different branches here. Down here in South America, we say, [foreign language 00:11:54], to go for the branches. But anyway, the email that you sent earlier in the week, and I've got the article here was linking to a column that cited a well-known Goldman commodities analyst, Jeff Curry, who's been around the traps for, goodness, I think 30 odd years, maybe more, very well-known. And he said he's been examining the commodities markets, of which you're very familiar, and said he hasn't seen anything like it in his entire career.And I want to get this quote right here because it's a pretty powerful one. He says, here it is, "I've been doing this for 30 years. Never seen markets like this." Here's the key takeaway, "This is a molecule crisis." He said, "We're running out of everything. I don't care if it's oil, gas, coal, copper, aluminum, you name it, we're out of it." And I guess we're starting to see that reflecting itself in prices across the board with oil at its highest mark since 2014, I think. A basket of commodities covered by Bloomberg, a couple of dozen of them from ags to metals, to energy all across the spectrum were really, really ramping up here. So I guess, first, is that similar to your reading, with your experience in the commodities markets? These big shortages that are driving prices? What do you see when you look out across the horizon?Byron King:Well, I mean, I'm old enough to have been around for a few things. There are cycles and then there are really humongous cycles. So we're in a humongous cycle. Not to say that it won't be resolved, but I mean, as people say, the cure to high prices is high prices, the cure to low prices is low prices. But there's more to it than that really, because we're changing the whole investment paradigm industry in what is passed for the industrial revolution for the last 200 years. I mean, when Colonel Drake drilled his well, getting back to the 1859 and Colonel Drake, I mean, people lit their houses with whale oil. I mean, petroleum was this exotic stuff that they skimmed off of creeks and they sold it as a patent medicine. There was no petroleum. So to the modern mind or the modern ... A lot of people think, "There's no petroleum. I guess there were no gasoline engines. I couldn't drive to the mall." That's right. You didn't have any internal combustion engines and you couldn't drive to the mall, but there was no mall. And when you got to the mall that wasn't there, there was no stores selling clothing made out of plastics. And you didn't have natural gas to heat your house and you didn't have electricity for your light bulb, to illuminate.The industrial age has been a coal age but a petroleum age as well. Because you can't have electric wire without copper, but you can't have it without something to wrap around a copper, which is plastic. Much of the world's oil doesn't go to people just driving their cars to the mall. I mean, a big part of it goes to the trucks that pull everything around, to the ships that sail everything around, to the airplanes that fly everything around, to the plastics and to the precursor materials that go into everything that you wear. I mean, the buttons on your shirt, the soles on your shoes.Joel Bowman:Every molecule.Byron King:It's everything. The medicines, you think you're taking an antibiotic and you can label it as that. But if you really go back to where it all started, that antibiotic began in an oil well somewhere because the materials in which they ... The medium in which they grew the bugs that they wound up pressing in to it, the little plastic bottle that it came in. I mean, if you didn't have that, we would live in a very different world. Actually, we wouldn't be here. Somebody else would be here. We would've gone off, would be some alternative universe. Joel Bowman:Is there a shortage of molecules? Byron King:Yeah, of course. Of everything we can get into.Joel Bowman:For sure. I guess, right out the gate, an obvious question presents itself and that is what do you, as someone who is a trained geologist at one of those fringe institutions, I think, it was Harvard university. One of those ...Byron King:Wild and crazy place.Joel Bowman:So what do you say to people who essentially advocate for a world in which all of those processes, those very, very careful processes that you just outlined in which we take these raw materials, these petroleum-based materials, and turn them into finished goods, and all of the energy inputs that are needed along that value chain, what do you say to people who want to go back to an era pre that? To a so-called carbon neutral era? I mean, it seems like we're asking for trouble there.Byron King:They're not just asking for it, they're calling in the artillery on their own position. I mean, it's completely totally destructive. I mean, if you want to say we need to be better about using our energy, you want to be more efficient about energy, you want you want to change life. Well, yeah, except when it comes to changing lifestyles, I mean, how do you plan to do that? Are you going to lock the world down for two years and hold everybody at the point of a gun, and if they drive their trucks in front of your parliament building and honk their horns, you're going to arrest them all or something? I mean, how do you plan to really get this done other than to make life miserable for everybody? To borrow from Ernest Hemingway, "Slowly and then all at once."I mean, that's a very, very, very long talk, you know what I mean? Before we come here, I showed you a ... This is a piece of copper. This is elemental copper, literally chopped out of the ground with a rock hammer. This is a rock hammer, which helps to prove that I'm a geologist. Literally chopped out the ground in the Keweenaw Peninsula, the upper peninsula of Michigan there. I mean, this is copper. America's first mining boom was in about the 1840s in upper Michigan, upper peninsula, where people went up there and literally chopped this stuff up. This is the copper that that era of America used for its tea kettles and to line its ships and to make its wagon wheels and make copper nails to hold the shingles down on people's slate roofs and stuff like that.We don't have this anymore. Well, I mean, you can find it as an exotic specimen every now and then. I mean, this is 99% copper. Today, copper mining, people are mining fractions of a percent of grade of copper. How do you mine fractions of a grade of copper? Well, you go to a mountain somewhere in the Andes, big mountain in the Andes, and you put all sorts of explosives in the ground and you blow it up and you haul this rock out in the great big, huge trucks, and you crush it, and you process it, and you go through all sorts of chemistry. And eventually at the end, you wind up with copper, which you make your electric wire or what-have-you. At every step of the way, the explosive, the trucks, the facility where they crush it, the facility where they process it, the facility where they turn it into copper, all the trucking along the way, the ships that haul it across the ocean or whatever, if you don't have some stored energy in the form of hydrocarbon or various materials that come from hydrocarbon for your chemicals, that's not going to happen. So people will say, "Well, we're just going to go to electric cars." Your electric car uses about four times, maybe five times as much copper as your normal conventional internal combustion car. I mean, you're talking about increasing ... Just in the auto sector, you're increasing the use of copper by four X and five X. So when the man says there's not enough copper, that's partly what it means.Joel Bowman:And that's just one, of course, that's just one metal. This is just one element we're talking about.Byron King:One element on the periodic table. That's just one. I mean, we could go to other things. If you want to do exotic stuff. This is a specimen here, this is a titanium ore. This is rutile. Titanium dioxide. This is a beautiful specimen. I mean, no way I'm going to throw this one in the crusher. These crystals are as big as my thumb. I mean, if you want this thing, maybe I'll take 2,000 bucks for it as a mineral specimen. But it's not for sale.Joel Bowman:Where does this come from?Byron King:Well, this came from Graves Mountain in Georgia. Again, chopped out with my hammer. It's a unique geologic locale, but we don't have any of these anymore. When I say we, pretty much anywhere in the world, you don't find this stuff anymore. Maybe one or two here and there. You can go to Graves Mountain on a Saturday afternoon dig and maybe dig out a few of these things. But most of the world's titanium comes from very, very disseminated mineralization. What do you use titanium for? Well, it's everything in the white paint, all the way to a landing gear on airplanes. So where does most of the world's titanium come? It comes from Russia. I mean, let's all get mad at Russia. Let's all blame Russia for everything so that they can shut off titanium. They'll shut down Boeing in about three days if we don't have any titanium to build the jets with. Now we've covered two elements on the table. There's 90 others. Joel Bowman:So we've got a couple of ... I mean, you've touched on a few points here, but a couple of key takeaways thus far, I think is A, we're not just raking this stuff up off the front lawn anymore. These are hugely energy intensive processes in order to be able to get this stuff from whatever highly pressurized cavern. It is a subterranean, extreme environment up to whether it's painting your walls or driving your car, what-have-you. But the second component and from the Andes and to Russia, you've now mentioned, is not all of these elements, these raw materials are in geopolitically friendly jurisdictions. Which adds a huge price premium or at least a certain amount of market volatility that might be this kind of at the whims of just hoping things go the way that you want them to go. But that's not always the case.There's two angles to that geopolitically unfriendly jurisdictions. There are the geopolitically unfriendly jurisdictions where their government has contrary interest to our government, there's that kind of thing. But then there are the geopolitically unfriendly jurisdiction like Minnesota, where a very significant mine for copper, nickel, cobalt, there's several different proposals in Minnesota have all been shot down. They've all been killed off by the environmental lobby. Another geopolitical jurisdiction, California. You got to try opening new mines in California. Nevada, you can mine Montana, Idaho as if the ... The US and to some extent, Canada. Even Canada has become an unfriendly place to try to do any major projects because ... Byron King:It's not just that the permitting is so hard, it's the level of opposition. You get sort of I call it permanent capital. You know how BlackRock goes out and buys up entire neighborhoods, buys all the houses and nobody can ... You have to rent now. You can never own a house because BlackRock owns them all. Well, you get that same east and west coast permanent capital. And it funds these environmental lobbies and they come in, and their job is to stop projects. It doesn't matter the merits of the ore deposit, it doesn't matter the merits of the geology, it doesn't matter how many water quality analyses you do, how many air quality analyses you do, it doesn't matter how carefully you're going to run your mind or whatever. And if you've ever been around a modern mine, you'll see the absolute lengths to which the modern big guys go to to be safe and be careful and not be environmental stewards. There's those sort of geopolitical issues. And you know what? It's not even just a mining thing. I mean, a lot of people say, "We need more titanium. We need more copper here." It's a mining thing. It's sort of a mining thing. Your deposit is where it is. If it's not there, you can't mine it. If it is there, you still might not be able to mine it. It's a mining thing. But then, all you've done when you've blown up the rock and hauled it out in a truck is you've hauled out a bunch of rock. Now what? Now you need an entire industrial chain. You need the mills, you need the processing facilities, you need the refining facilities, you need the downstream facilities that keep adding value to it, add value, add value, add value. And the people who know how to do this in the world today, we call them Chinese. We don't call them Americans. We hardly ever call those kind of people Americans anymore. There are very, very few places in America where you can go to school and actually learn about, for example, rare earth refining. I mean, at one point, there were no places to go. Now there's Colorado School of Mines and a few other places around the country. China has entire universities that are devoted to teaching people chemistry metallurgy, hydro metallurgy, extracting these minerals. And they're capturing that part of the value chain. I'll just add one thing because I know we're going to talk some more of it. China is actually getting out of the mining industry. They don't want to dig up their ground as much anymore because they've got a huge environmental problems, water problems, food problems. They don't want to do that. They would rather buy the materials, process them in China down to a certain value add level, and then sell them to Western companies and sell them with strings attached saying that, "If you guys don't build a factory in China, if you don't share your technology with us, we're not going to sell you the materials you need." That would be the rarers, the permanent magnets, the phosphorous for lighting systems, things like that. We could talk about that all day.Joel Bowman:For sure. And if I'm not mistaken, China has some enormous percentage of the world's rare earth deposits, 90 plus percent or something. Am I in the right ballpark there? Byron King:You are absolutely in the right ballpark. I mean, you see a lot of figures and a lot of these figures are fudged figures. Well, China used to control 95%, but now it's only 80%. Well, really, when you get to the sweet spot, to the stuff that you can actually have a magnet and put it in the alternator of your car or have a phosphor and put it in your light bulb, things like that, China's back up around. They're way, way, way over 90%. What they're doing is, for example, in the US, there's a company called MP Materials, which mines rare earth ore at a place called Mountain Pass, California. It's a legacy operation going back to the '50s. Otherwise, they would never be able to build it today. But they literally mine the material, they crush it, they concentrate. They put it on in trucks, they haul it down to the port of Long Beach. And when those ships get done unloading in Long Beach and Los Angeles, they put the material on those ships and they send it back to China and we never see those molecules again. I mean, China isn't processing those on behalf of MP Materials. That's not what they call a tolling agreement. They're just selling them the ore, China gets it. And then they export it in the form of high value added materials, whether it's your microwave oven or your air conditioner or ...Joel Bowman:They send us back iPads and sneakers.Byron King:Yeah.Joel Bowman:I mean, all of these little tiles add up to a pretty dismal looking mosaic for the future of energy independence. If not only the US but in the west as well. So talk a little bit about how ... Because you touched on BlackRock just before and the idea of permanent capital and they're having such a mammoth share in the market. I'm talking BlackRock and Vanguard and these gigantic funds. When they move into the kind of mindset that is very high focused on environmentally sustainable governance, or ESG is another buzzword around now, when they go long on that type of regulatory framework, what does that do for American energy independence, and how much is it sending folding those cards to jurisdictions abroad?Byron King:Well, there you go. I guess you'd call it postmodernism. The philosophical postmodernism has transformed itself or it has beamed itself down as this ESG movement. And you get permanent capital, you get really big funds, really big organizations. They own a whole bunch of shares of all these different companies, pick her name, whatever you want. You had the one funded, owned enough shares in Exxon that they could influence other shareholders and they got their people on the board of Exxon. So all of a sudden Exxon went from saying, "We're an oil and energy company and this is who we are and this is what we do." To saying, "We're going to be carbon neutral and we're going to throttle back on this and that." Joel Bowman:That was just in the summer of '21, I think.Byron King:Just three, four months ago. Six or five months ago. Or you look at other big companies, Shell Oil, the Dutch company, or BP, British Petroleum, as it used to be called, as President Obama used to call it during the oil spill in the Gulf of Mexico, the British Petroleum, BP is their name. They're basically saying, "Well, we don't want to be called names, we don't want people to think harshly of us. We're going to be deinvesting in our traditional business opportunity. We're not going to drill as many wells. We're not going to explore as much. We're going to walk away from certain project, we're going to walk away from this big, huge gas project off of Mozambique or we're going to walk away from this opportunity offshore, Brazil or wherever."What it means is they are intentionally, consciously underinvesting in their business. When you say, "Who cares about Exxon?" "Well, I care about Exxon." I do not own a single share of Exxon. I don't think I ever have. Maybe I've bought and sold, I don't know. But I do not own a single share of Exxon. But I do care that they produce oil, gas, chemicals, plastics, what-have-you because I live in this world.Joel Bowman:You want to turn the lights on. Wear some shoes.Byron King:I like it when I flip the switch and the lights come on.Joel Bowman:Button your shirt up.Byron King:I like having little bull plastic buttons on my nice shirt. But when they underinvest, maybe we won't notice it today ... Well, we won't notice it today, tomorrow, next week, next month. But if they underinvest for the next year or two, by year three, we're going to begin to notice. Well, guess what? First of all, during COVID, there was a lot of underinvestment just because people are sick, can't work, can't show up to the office. Entire areas were just off limits. You can't fly anywhere, you can't drive anywhere, you can't cross borders. There was a lot of underinvestment for two years just because of COVID. And now as we wake up coming out of COVID because I mean, the COVID is ending. It's not over, but it's ending. That's a whole another discussion, but as we come out of it, we look around and we say, "Hey, wait a minute. Geez. People have been underexploring, under drilling, under developing, underplaying their geophysics, underdoing for the last two years. And we've got a couple more years of this as we look out on the whole ESG waterfront. What happens then? Well, if you don't invest in, go out, explore, drill fine, so what do the markets tell us? They're going to have a shortage of oil in the future. I guess, I'll bid oil up to $90 a barrel, maybe $100. How about $110 or $120? I mean, I've seen estimates of oil at $300 a barrel. Of course, when oil's at $300 a barrel, the economy crashes and everybody gets laid off. We'll see what happens. You'll see what the markets do. But then the other angle on that is that when a Western oil company walks away from developing a big oil or gas project somewhere, guess who else moves in? Either the state oil companies, the national oil companies of those other countries, Chinese capital moves in. China has plenty of permanent capital as well. They know how to write checks just as well as BlackRock and Vanguard. And if you pull out of here and you leave a vacuum, somebody else's capital will come in. Joel Bowman:Exactly as you would expect. As you said, we've been, goodness, I don't know how many years, but it would've been probably since the last peak in oil around 2014, thereabouts, that we've had this kind of cyclical turn. And as you mentioned, undercapitalization, underinvestment, under exploration, and now we're reaping the high prices of that under attention, I guess, to an entire sector. So let me ask you, because the people who are advocating for this, great transition, which they never fully get around to explaining how it's going to be funded, although we know the price tag is something extraordinary. I think Janet Yellen put it in the ballpark of $150 trillion. I guess they just print those. I have no idea where they all come from. Those people will say, "Okay, Byron, it's going to be tough. We're going to have to move from these fossil ideas, I guess, of the old oil and gas and the old stalwarts in delivering our energy. But what we're looking forward to is this utopia where we've got windmills and solar panels and all the rest of it." So talk a little bit about how that doesn't quite compute, doesn't quite deliver, how the sun doesn't shine, the wind doesn't blow, and all the rest of it. Because it seems to be a big gap between wishful thinking and cold, hard reality there.Byron King:For sure. I mean, windmills and solar have a place in the world. I call it a niche. They are niche performers. I mean, just to do windmills and solars, what do you need? You need steel, which comes from iron ore, which comes from rocks in the ground. You need coal to make the basic steel. You need coal to make the pig iron, and then once you have the iron, you can melt it. But you still need electricity, and where do you get your electricity from? You can't do big industrial scale electric things off of solar and wind because they ... Unless you have huge capacitors that somehow store the energy. I mean, I don't want to get all electrical engineering on you here. But to do solar and wind, you need a lot of steel, you need a lot of exotic elements, you need a lot of rare earth, you need a lot of silver. The polysilicon that is in the face of the solar panels. I mean, polysilicon is a very exotic material that the ... I mean, where's most of it made? Well, China. For windmills, you need all these big, fancy, permanent magnets in there. And these rotating machinery as the big blades go round and round and round. Where do those rares come from? China. Magnets? China. You've got other issues and these things have a life cycle. They aren't really renewable in the sense that after, pick a number 10, 15, 20 years, these machines, they too will wear out. They aren't going to last forever.Maybe you can rebuild them. Maybe there's a recycling element to them, but right now, what happens to old windmill blades? They bury them in landfills. Well, that doesn't seem very renewable. That's just the machinery about it. But you mentioned, the wind doesn't blow the sun, doesn't shine. The sun comes up and the sun goes down. And when the sun comes up, the little solar panels are out there and you go from no electricity, no electricity to, "Good. We're making lots of electricity. Lots of electricity." Sun goes down, no more electricity.What happens when you want to run your society during those nighttime periods or if it snows or if it's cloudy day or something like that? Well, now you need baseload power. Well, where's the baseload power come from? Well, traditionally coal. Nuclear, that'd be great. But we've really put a lid on nuclear. In the west, I mean, in Germany, they're shutting down their new plants. I wrote an article for Bonner Private Letter about that in December. Germany's energy StalingradJoel Bowman:That's right. Excellent metaphor and not a very good one for students of history who know how Stalingrad went.Byron King:It didn't work out well for the Germans the first time, they want to do it again. I don't get this. Some people don't learn. They don't learn too good, as the saying goes. Right now, as we speak, what happens when the sun goes down and we need to get that base load balanced again? We need to balance the load so that literally the lights will go on, so the refrigerators keep running, people's computers keep working, so that you can charge your Tesla at night or what-have-you. How do we get that power? In a lot of places in the United States, the way to get quick, almost instant electric power is you turn on your natural gas fired turbines. You have out there in the gas fields, you got the pipelines. Again, pipelines are made out of this thing called steel. That comes from ... They're put together by big, heavy machinery that are run by this stuff called diesel fuel. And they're wrapped in these protective coatings that are made out of this stuff called plastic, which comes from this thing called oil, which comes from these things called oil fields. In comes the natural gas to the great, big, huge gas turbines that are made by Siemens and General Electric and what-have-you, made out of all sorts of exotic materials like titanium and all sorts of fancy magnets made out of materials that came from China. We spool these babies up and we generate this electricity and now we balance the load. So by day, we are subsidizing solar power because they all have tax breaks and tax credits and everything for their solar panels and such. By day, we're flooding the market with this subsidized solar power. And by night, we're having to turn on these merchant power systems, these natural gas fired systems just to balance the load. We're really ruining the economics of a broad scale electric power industry. I mean, across the country, public utility commissions in every single state are wrestling with this. I mean, where the public utility goes to the commission and says, "Listen, we're having to pay these high rates back to the homeowners for their solar panels by day on the sunny days but that doesn't support our grid." And then meanwhile, we have these idle plants that we have, these natural gas plants on each side of the sunrise, sunset, we have to pay ... Those are capital costs, too. We have to pay for those. We don't use them for eight or 10 or 12 hours a day but then we have to spin them up at night. You get into public utility law that is very, very complex. The lawyers are having a field day with it, the lawyers and the economists who deal with this. Great jobs for those guys, those gals. There's a whole thoughtless sense to it all. Then you go to a place like California, which has reached something, on a sunny day, something like 30% of the California on a sunny day is solar-powered or so-called renewable power. Okay, but now you destabilize the whole grid with on again, off again power. And they're importing power from British Columbia, they're importing power from Nevada and Utah and other places. How do you do that? Joel Bowman:I mean, it goes back to what you were saying about Germany and what you wrote. I'll link to this article below for our listeners because it's really well worth their reading. It's a little peek into the future just as I'm down here in Buenos Aires, Argentina is a little peek into America's inflationary future if it doesn't pull its breeches up. But I think you can look into the future by having a look at what's going on in Germany. And if we keep down this path as Germany has done, not only do we watch just basic electricity heating costs go through the roof, as we've seen natural gas futures, and oil price skyrocket over the past couple of months during this winter.But also you eventually have to revert if you put a whole load of your power load onto an unreliable, so-called renewable or green energy grid. When that doesn't come through or when the wind doesn't blow, as they found out in Texas last year, then all of a sudden you're back to dirtier fuels. Coal, in the case of Germany. Where you're undercuting your whole reason for going green in the first place when you're ... I think it was actually lignite they went back to. It was even worse.Byron King:They come burning lignite. Is there a dirtier fuel than lignite? The answer, no. I guess if you could burn your front lawn or something...Joel Bowman:You could burn a rain forest.Byron King:They're burning lignite to release the energy to boil water, make steam, spin a turbine and literally keep their lights on and keep their little street cars running in diesel cars.Joel Bowman:Crazy. So what about people who say, "Okay, this is all well and good. But man has innovated past paraffin. We've had whale oil." In some parts of the world, in Indonesia, they're still burning through forests." We used to burn various types of fuels until we got to this high grade, high ERORI of the petroleum energy return and energy invested ... There you go. Until we got to these high ERORI fuel sources. So we've just got to have a bit of faith in technology, we've just got to have a bit of faith in innovation and tomorrow's battery cells and tomorrow's whatever. They're just going to be so much better that we just need to transition to the eutopic future and we'll all live happily ever after over there. What say ye, Mr. King?Byron King:Well, there's an old expression that I heard it long ago from a guy at Westinghouse, the old Westinghouse Electric Company, which was this massive company that it did everything. It made electrical appliances, it made electrical equipment, built nuclear plants. I mean, it built the nuclear reactors for Navy submarines, things like that. But they were very stovepipe company, they had a lot of different branches. And the guy said, "If we only knew what we know, we could really do much better." And when you say, "People are innovative, there's lots of patents out there." Yeah, there are. There's lots of patents out there. And if we knew what we know, we might be able to cobble something together. That takes political leadership and that takes policy making people who actually understand this stuff and who didn't just read a couple magazine articles or didn't just spool up after reading a New York Times article or two about, "We're going to kill ourselves. We're ruining the world," and all this sort of stuff. We're ruining the world and we're all going to die, okay. I grant you that. I mean, in rare earth, for example, there was a not too long ago study that I saw, heard about. They compared patents in the rare earth arena by different countries and they adjusted per population, what-have-you. For every patent in rare earth, which are important if you're going to do renewable, for every patent in rare earth that happens in the United States, there are 35 patents in China. Joel Bowman:Wow. This is population adjusted as you mentioned. That's an important caveat there.Byron King:When it comes to who's going to own the future, the people who are going to own the future are people who are thinking about it and thinking about tying it all together. Which is not to say that China's 10 feet tall, but Chinese people are 10 feet tall, that they strongest gorillas and all this sort stuff. No, no, no. I mean, they're people, too. But they think about it. And it doesn't mean that I want the CCP, the Chinese Communist Party, approach to running life in America or Canada. Even though sometimes you wonder. You kind of wonder, I mean, how much of that rule book over there have they brought over here?Joel Bowman:Gramsci's long march through the academies is alive and well.Byron King:These long march through the academy. I mean, when people say, "We have a carbon dioxide crisis." I said, "Well, all I can say for sure is that every year, there's more carbon dioxide in the atmosphere." It's a very, very, very small fraction. Some people say, "Well, it's enough to change the climate and everything else." "Well, I don't know that the models are that good." Other people who are smart have different models of it. I've spoken with Russian scientists who cover this and they think that Western scientists are just they don't know what they're talking about. And the Russians, they know a few things about the high arctic. I mean, half their, of countries in the north of the Arctic Circle. But we have really a global environmental crisis. I mean, if you look at how much crap is just being thrown into the rivers and streams and the off flow of agriculture chemicals and things, I mean, we're ruining the ecology of the planet, I'll grant you that. I mean, it just seems to me that the policy ought to be broader than just this crackdown on what I'd call the center of gravity of modern life, which is a petroleum-oriented or hydrocarbon-oriented energy and materials economy. When you say, "We've got to turn the valves and we've got to shut in the oil wells and shut in the natural gas. We're going to put the coal companies out of business. They should all go bankrupt." The woman who almost became the comptroller of the currency that President Biden nominated be the comptroller of the currency, from Cornell Law School. She was an immigrant from the Soviet Union. She wrote her thesis on A Marxian analysis of the economy. She said that in order to ...Joel Bowman:Omarova, I think her name was.Byron King:... have the future that we want, we're going to have to bankrupt all the oil companies. It's like, "Well, to bankrupt all the oil companies means our energy's going to go away. Our classics are going to go away, our agricultural fertilizers are going to away, our chemicals are going to go away. I guess that means you just want to kill us all off. Well, no, thank you. No, thank you. We're just fine killing ourselves off without you helping."Joel Bowman:Right. Saule Omarova I think her name was. Another of her quotes, I think she was taking the scorched earth approach. Not only to oil and gas, but I think to banking as well. She wanted something like some federal deposit accounts where, of course, the government would be able to control maybe through a central bank digital currency or some such. Where you spent your money, with whom, at what time, under what circumstances. Because of course, central planning worked out so well for the Soviets. She was a School of Moscow graduate, I think.Talk a little bit, Byron, about a potential kind of transition fuel. It strikes me that when people talk about, "Okay, let's throw the baby up with the bath water." Let's throw the entire petrochemical industry just in the drink. First of all, there's not enough room in St. Greta Thunberg's arc for two of every species at this point, let alone the whole human race. But is there some possibility that we could transition to say, a larger percentage of our energy needs reliant on, say, natural gas or nuclear, if we could get the political will behind it and move away from either geopolitical risk in some places? I mean, you speak about the United States, there's no shortage of natural gas there. One would think that would be a perfect strategy for ensuring a bunch of jobs, reinvesting in America's energy independence and its energy grid, and having a somewhat of a lot, well, a lot cleaner source than say coal or German lignite, for sure.Byron King:Well, it is a rough and rocky road ahead to change. I mean, we're looking at 200 years of inertia here. We're looking at a lot of what we call the built economy, the things that run on things that we used to have. I mean, the easements and the rights of way kind of like with the railroad, they are where they are and they were established long ago. And it's if you want to build a new railroad today or change the trackage of a railroad, how do you do that? I mean, I talked to a guy once at the US Department of Transportation and I said, "What's your biggest problem when it comes to building roads?" He says, "The biggest problem that we encounter most is graveyards." Every time they want to build a road or expand a road, they have to dig up a graveyard, move all the caskets. Transition the economy, every time you want to do something slightly different, you're going to have to dig up somebody else's graveyard. You break their rice bowl or dig up their graveyard. You know what I mean? Now we said, "The thing is we have what we have." And like I said earlier, if we knew what we already know, if people could actually synthesize what we already know, we can do this. And in fact, this is future looking in terms of where Byron is going with his writing. We'll talk about that in a few moments, if you wish. But if we knew what we know and we started to really tie things together, we could take what we have. We could take where we are and begin a reasonably decent transition and people who are part of it could make some money at it investment -wise.We can't just turn the valves and shut off the oil industry because a third of the oil goes for transportation and a third of it goes for industry and chemicals. I mean, it's not just people driving to the mall that's destroying the world. Don't take what you see every day when you're out and about. Don't take that as the problem or, natural gas. Let me just leap frog ahead a couple of things. I mean, we must absolutely revitalize the nuclear sector for base load electricity. Lots of great ideas out there for that. There's uranium. I mean, I could get into thorium but that's a whole another ... We could spend all day talking about thorium.Joel Bowman:It's another episode.Byron King:A whole another episode to talk about thorium. Just basic uranium reactors have an incredible future for base load electricity. Another thing and another point, and this is something that I'm working on right now and I'm going to be coming out eventually, give me a month or so with a report, it's going to be on fuel cells. You take a solid oxide fuel cell. You pass the hydrocarbon over it, natural gas or you could use diesel or you could use almost any hydrocarbon you want. But because of the chemistry and the physics of a fuel cell, and I don't want to get into it, this isn't going to be mechanical, electrical engineering class here. But because it is an immensely efficient way of removing the energy from that hydrocarbon, turning that energy into electricity and capturing and controlling the emissions, I'm not going to say that there will be zero emission. Fuel cells will never emit another molecule of CO2 again, but we will sure emit a lot fewer using fuel cells. And when you say, "Well, tell me more about this fuel cells." I don't want to get into the electrical engineering of how they work. I mean, you can read, I'll tell you more when I write about it and you can read about it eventually and you'll know about it.But the materials that go into these fuel cells, they are familiar materials, again, from the mine mill factory side, copper, nickel, platinum, palladium, rare earths. Oh my goodness. Yttrium-stabilized zirconia. You want exotic metals. I mean, we got to have yttria-stabilized zirconia to make these things work. Is there a molecule shortage of that? You're damn right there is. But what that means that if how to get yttria or if you know how to get zirconia, you're on the right track here investment-wise. That's one example.Joel Bowman:Well, let me ask that because I want to get around to your writings and where people can find them. But before we do that, give us a broad sweep. I don't want to undercut any of your own paid subscribers here, but for investors who are out there, who are they've been having a bit of a turbulent ride in the markets potentially so far this year, to say the least, if they've been investing in the new shiny things and they're looking at getting back to basics as it were. And this of course, Dan Tom have been writing about their trade of the decade, which very generally speaking is long energy, long, old energy that is. We spoke about this earlier in the year or late last year, rather, with Rick Rule, Winter Catastrophe Summit for Bonner Private Research. But when you are looking at ways to actively invest in this long term trend, what kind of sectors are you're looking at and how specific can you get with regards to sharing with us things that are on your radar?Byron King:Well, I'm still writing for one of the old line at Agora pubs. I work with Zach Scheidt on one called Lifetime Income Report. Every week or so, I write a little column that goes out in every month, I write another longer column for the monthly. It's a value investing kind of approach. I mean, just good basic companies in good basic sectors that can survive the tsunamis of what's going on. Nothing big and flashy, no Facebooks that are going to drop 25% one day, that kind of a thing. Joel Bowman:You mean we can't power the world with cat videos and the likes?Byron King:No. You just can't power the world with invitations to your birthday party kind of thing.Joel Bowman:Who would've thunk it?Byron King:That's where I'm at right now. In terms of what do I talk about? I talk about the classic things. I mean, I talk about gold, silver, just basic. I mean, there's definitely an upside to them but they also have what I like, which is the limited downside. And even if they do drop during a market crash, what's the first thing that recovers after a market crash? Gold. It's the most liquid thing there is. People sell their gold to pay their margin calls on Facebook or on Tesla or whatever like that because they got slammed. But then the thing is when they sell their gold, somebody else goes in there and buys it as with a lot of other things. Why do you think Facebook dropped 25%? Well, because it went no bid. Nobody wanted to buy it up there. Maybe some bottom feeding sharks came in to buy it down there. But I actually think some of those bottom feeding sharks are going to wish that they had found a lower bottom, so there's that.I like classic traditional energy. I mean, a company like Exxon or a company like Chevron. I mean, I was writing about Exxon a year ago when the share price was about 50% of where it is now. When the dividend yield was something like, I don't know, 10%. And you say, "Well, Exxon, who needs to be told to buy Exxon?" Well, I don't know. A lot of people seem to be told to buy Exxon because the share price has gone up significantly in the last year. Somebody was buying into it. And even with the people on the board who were like, "We're going to go ESG and we're going to decarbonize ourselves." They're making all this money in spite of themselves in the current oil environment. And I don't see the current oil environment self-correcting.I mean, it's not like government policy. Not this government, not the one we got now, not this ... They're not government policying towards more oil lower prices. I mean, you may have seen our wonderful Secretary of Energy, the former fashion model, tour guide at Universal Studios, Governor of Michigan, Jennifer Granholm, when she was asked, "What's your solution to lowering energy prices?" She literally laughed at the person who asked her that question. Somebody asked her, "How many barrels of oil does the United States use every day?" And she says, "Well, I don't really have that data." I'm like, "You're the secretary of energy and you don't know how many barrels of oil the United States uses every day? Why are you there?"Joel Bowman:You would think of all the pieces of information, that particular data might be one that would maybe spring forth from a well-fertilized mind, but doesn't appear that that's what we're speaking about at this juncture.Byron King:And it's an easy number. I mean, it's in the realm of about 20 million barrels a day to run the United States. Joel Bowman:It's a nice round number. Byron King:Nice round number. You just have to remember that. You don't have to get down to the nearest 100,000 or whatever. Just throw that out and you'll sound like you're smart, like you know what you're talking about. Where does it come from? Well, I mean the United States imports more oil every day from Russia than we do from Saudi Arabia or Mexico. I mean, nobody knows that. Again, let's get into a war with Russia here. Unless we can somehow make another Mexico to make up for that deficit. But anyhow, in terms of like, "What am I looking at?" I mean, basic energy, US natural gas, certain pipeline plays because ... Not all pipelines. I mean, if you have a pipeline to a declining energy basin, well, you have a 50% full pipeline. That's not a good pipeline.If you have pipelines into the Permian basin, which is 98% capacity, that's a good pipeline. So things like that. I have been spending a lot of time talking with the mining place and the processing place for the battery metals, the technology metals, the energy metals, the rare earth place. As I've mentioned earlier, in North America, US, Canada, we have some mining place. We don't have a lot of the downstream place. It's just not there. There are a couple that might turn into something. I mean, Canadian companies, a company like Appia Energy, A-P-P-I-A. Appia Rare Earths and Uranium is their full name, they have the best deposit of a mineral called monazite in North America, maybe the world. It's the highest grade minerality I've ever seen. It's unbelievable minerality. Monazite for again, not to get into all minerology on you here, but it's a fabulous ore for rare earth. The problem is with Monazite is you also get low levels of uranium and thorium so it's a radiation problem. They're in Saskatchewan. They have a relationship with the Saskatchewan Research Council, which has a licensed nuclear capable facility. So when they process their minerals, when they get there ... They're still developmental. But when they get there, when they process the minerals, the Saskatchewan Radionuclide site, they're going to take those radioactive minerals away. That's a good thing. And we'll be left with the molecules we want, which is the rare earths, the neodymium and the dysprosium and the erbium and terbium and gadolinium and all those good stuff that make things work. I've been working on that. It's a model of an investment paradigm that feeds on where the war world is going in the future. Again, if we could only know what we knew. That's going to be ...Joel Bowman:I think we have a title for this episode. If only we knew what we knew.Byron King:If only we knew what we know.Joel Bowman:Well, Byron, I'm cognizant of the fact that we've run a little over time here, but I'm always thrilled to talk to you. It's such an encyclopedic knowledge of all of the aforementioned subjects and so many more. Besides, we didn't even get into half of the things that I wanted to talk about but we can save those for another podcast in the future. And in the meantime, as you mentioned, it looks like trends in motion are going to stay in motion, at least for the remainder of this administration and who knows how long beyond. What that means, I guess, is to torture a metaphor, a rich vein for you to tap with regards to individual investments in a field that you know probably better than anyone out there. So that's good for followers of Byron King and good for followers of Bonner Private Research. We'll be talking to Byron plenty more in the future if we're so lucky. So mate, thank you so much for taking the time. I really appreciate.Byron King:That's great. I thank you for your time and your courtesy. For all the viewers and listeners out there who watch this or listen to it, thank you so much. I truly appreciate that you would give me any of your time at all. And I hope that we've helped you with your thinking.Joel Bowman:Excellent. Byron, thanks a lot, man. I really appreciate it. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit bonnerprivateresearch.substack.com/subscribe

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The $1 Billion Commercial Flooring Business

TalkFloor Podcasts

Play Episode Listen Later Feb 8, 2022 7:00

National commercial flooring installation and interior services company Diverzify has combined with Spectra Contract Flooring and ProSpectra Contract Flooring, both divisions of Shaw Industries Group, Inc., to become the largest independent commercial installation business in the world. Bill Bonner, vice president communications, Diversify, and Jim Pels, president of Spectra Contract Flooring, offer insight into what's next for commercial flooring.

national billion diversify flooring bill bonner

Joel Bowman and Dan Denning on A New Beginning

Play Episode Listen Later Feb 1, 2022 26:18

“This is now the greatest financial crisis in American history. We don't know how long it'll last, whether it'll be something like the 1930s or whether it will be something more volatile and violent, but let's not be afraid to call it what it is.”~ Dan Denning, Bonner Private ResearchTRANSCRIPT:Joel Bowman:Welcome back to the Bonner Private Research Podcast. I'm Joel Bowman coming to you from my home office down here in Buenos Aires, Argentina. Now, it is a capital city in the middle of South America, so if you do hear some impatient Argentines honking horns and some construction across the street, you'll just have to chalk that up to a little ambient sound. A special thanks, too, to our new readers and listeners, many of whom are joining us for the first time this Christmas season. By way of a little backstory, I've known Bill Bonner personally for almost 20 years now. And as his long-term readers will know, nothing Bill ever does is uninteresting. I expect this latest adventure to be no exception to that general rule. For those of you who perhaps don't know, it's been a decade or more since Bill, Dan, Tom, and I wrote together for the same publisher back in Baltimore, in and around the mid-2000s.So, in that way, this does feel a little like getting the old band back together. I'd like to say thanks therefore to my once and future colleagues for joining us along the ride. On that note, we'll have some other personalities dropping in along the way, some of whom you may be already familiar with. Folks like Chris Mayer, Rick Rule, Byron King, Verne Gowdie in Australia, Tim Price and Charlie Morris in the UK, Ronan McMahon, wherever we can track him down, and plenty of others besides.As you well know, the world has changed plenty over these past couple of years, not least in the way that we communicate with one another, from Zoom conferences to webinars and podcasts just like this one, we now have more tools than ever to stay connected with you, which is exactly what we're hoping to do with this new venture. It's a small core team to be sure, just the four of us, Bill, Dan, Tom, and myself. So, we'll be freewheeling a bit and ask your patience for any bumps that we may encounter along the ride. "Ready, fire, aim," is our general motto here. To help us explain a bit more of what you can expect from the Bonner Private Research project, I caught up with my co-pilot Dan Denning a little earlier this week. I invite you to stick around for our quick powwow up right after the break.All right. We're talking today to Dan Denning, all the way up in Wyoming in the northern end of the Americas. I'm Joel Bowman. I'm coming to you from down in Buenos Aires in the southern tip down here in Bill's sometimes home of Argentina. Dan, how are you doing today?Dan Denning:I'm all right, Joel. Thanks. Yeah. Laramie's really high plains. It's where the, as you know, where the Great Plains meet the Rockies. And it is super windy here today. That's one of the quality of life issues I ran into when I picked it. So, if I blow away or the roof rips off, that's why.Joel Bowman:We'll just-Dan Denning:But hopefully we'll be okay.Joel Bowman:We'll just continue recording. It'll make for good footage. Mate, so, we've got a little bit of housekeeping to get through today because we've got some new readers and new listeners along for the journey, along with our long-suffering, faithful and unfaithful readers, I guess. So, we'll get to all that in a little bit, but first, I guess, an update on something that you and I have been discussing for a long time, both professionally and just by way of email, and something that you and Bill and Tom have been writing about for the better part of a couple of decades, perhaps even longer, and that is the question on everyone's lips and one which becomes more urgent with every passing month and every passing week, it seems like now, and that is whether or not we are in the greatest financial crisis in American history.Dan Denning:Yeah, that's a good question. And-Joel Bowman:Just to start with a small question.Dan Denning:No, it's a serious one. And it's one that I've already received from new readers who've signed up for Bonner Private Research. And I should say that that's not my phrase, actually. Tom Dyson and I went and visited Bill in Baltimore in late October, and we were trying to be very precise about what we thought was at stake for investors right now. And Bill, who is not prone to hyperbole and is usually fairly reserved about what he claims to know had said, "Well, what we're really talking about is the greatest financial crisis in American history." And one of the reasons he had mentioned that is we had been discussing what happened during the Civil War, which was obviously more than a financial crisis, but there was an aspect to it that was purely financial.And the monetary aspect was Lincoln printing greenbacks in order to pay for the war. So, that was a huge crisis for the country. Then there was another crisis in World War II where the government's debt inflated massively against the size of GDP. And again, there was an existential crisis for the country and it came after the Depression. So, we coupled the Depression and World War II as a second great crisis. And both of those were also historical and demographic. But since our beat here is money, we're always focused on following the money. And typically when the money goes, everything else goes. So, when we were talking about it in Baltimore, Bill said, "Look, the trends are pretty unequivocal." We look at government debt to GDP. We looked at the inflation figures, which have just gotten worse since then.And we look at the length of the current monetary regime, which started in 1971 when the Fed, Richard Nixon, decoupled gold from the dollar. This is now the greatest financial crisis in American history. We don't know how long it'll last, whether it'll be something like the 1930s or whether it will be something more volatile and violent, but let's not be afraid to call it what it is. So, that really focused our minds and energies on, "Well, what can we do now to prepare for that and to help readers get through it unscathed?"Joel Bowman:Right. So, we're now, this year, actually, you mentioned 1971, where exactly half a century into this monetary experiment. And I think people are getting a sense that things are starting to unravel. The kind of things that you and Bill and Tom have been writing about for the past couple of decades are really now coming to the fore. And we're seeing what previously would've been headlines in fringy, alternative news outlets starting to hit the mainstream papers. So, I think people are really starting to wake up to what's going on around them. So, this brings us to, why this new project? Why have we chosen this particular outlet affording us the independence to speak directly to readers? Do you want to speak a little bit to that about Bonner's new project and how we're all involved in that?Dan Denning:Sure. I think when we had our discussion we just thought, "It's a really serious moment for anyone who's retired or at or near retirement age." If you already have a lot of money invested in both the housing market and the stock market, typically we don't like to lose that money. So, for a long time, since Bill and I have been collaborating, especially since the Bonner-Denning Letter started almost five years ago, the main investment goal was not to lose money. And the main investor that we were speaking to was someone who may be doing other things with their money, but also wanted someone who looking at for what the big risks were. And so we wanted to be able to just focus on that message without any interference, not interference, really, but without any distractions, because it's not only a full-time job to try to understand this stuff and then make the right moves with your money, but it's not going anywhere anytime soon.We think that this is something that may play out over the next decade or so. So, what we really wanted was a way to talk to and write to readers who are interested in help in that problem, where we could write to them as often as we'd like, where we could sometimes talk to them this way, or they could engage with us on message boards. And also, they could do it in an ad-free environment. This is the only thing we're doing now, and so we can focus on it 100% and they're not going to receive any other ads for anything else, which to some readers that helps them focus on what's going on as well.So, we looked around for a platform. There's a lot of interesting digital platforms where you can express yourself without getting canceled, hopefully, and we thought this was a really good self-publishing platform. A little bit different than what we've worked with in the past. But as Bill mentioned, the world is changing and we thought, "Well, let's change with it and try something to see if it's a better service for the readers that are interested in our message."Joel Bowman:Right. So, you and I have been having conversations much like this for the past, going on maybe a year or so now. And we've touched on a bunch of different topics that seemed to us, at the time, very relevant. We couldn't have known, of course, how relevant they would become. And I'm talking, of course, about all of the trends that have been accelerated during this past year, whether it be with regards to government indebtedness or surveillance, or our ability or rather inability to travel freely, to protect our money against the inflationary whims of central bankers, et cetera, et cetera, et cetera. This medium, us being able to speak directly to our readers, is something that's going to change our relationship with our readers. Do you want to take a look under the hood and maybe explain to readers and listeners now how this is going to be different and maybe a little bit of what exactly they can expect going forward with regards to specifics of subscriptions and such?Dan Denning:Sure. Yeah. That's a good question. And I'll just tell a quick backstory. I first started working with Bill in 1997, but I was in France before I'd moved to France permanently in 2002. I was there in the August and September of 2001. I was there with some other colleagues and we had retreated to Bill's house to try to figure out what was going on in the world. And of course we were all in the Paris office on September 11th, and we didn't see what had happened until later. We heard it on the radio, but the media world was different back then. So, the fortunate thing, which was very small in the context of what was going on, is that we were in the same place and we had a chance to spend some time thinking about what it might mean for a lot of things, not just financial markets, but for the universe of issues that we concern ourselves with: money, history, markets.So, a similar thing happened in late 2019 when Bill and I were in Baltimore and we started hearing about this virus from China and what was going on. And then of course, I ended up shortly thereafter... Tom was with us at that time as well. And then we all spread to the four corners of the earth. Bill got trapped in Argentina. I got trapped in Australia. And I don't know where Tom was at the time. He was somewhere in America on the road or something.Joel Bowman:Might been up in Canada or something. Yeah.Dan Denning:Yeah, yeah. But we started doing things like this. We knew we needed to talk about what was going on. And we were having private conversations about what this meant for investors. So, as you remember, in March of 2020, the S&P 500 fell 35% in 23 days. And since then the rally has been considerable. So, everything that was happening in the world started happening a lot faster. We needed a way to talk about it amongst each other so we could better advise the readers what was going on. So, we started having a lot more private conversations, not only amongst ourselves, but with you and with people we'd known for a long time, like Verne Gowdie down in Australia, Tim Price and Charlie Morris in the UK, and then Rick Rule, Byron King, Chris Mayer, Ronan McMahon. Just people Bill has known and relied on for a long time to help him figure stuff out.And so we thought, we've been doing that really since 2020, and in the last six or eight months we thought, "Well, maybe that's what we should be doing for everyone. Maybe that should be available to all of our colleagues and readers that we've met all over the world all these years past." So, we decided to do it. Now, what it means is it's really not going to change much if you were already an existing reader of the Bonner-Denning Letter or Tom Dyson's Portfolio or Bill's Diary, except you're going to get all that work in one place now, instead of having to subscribe to multiple things that come out at different times. What you'll end up getting is you'll end up getting an email from Bill every day, which is his Diary. It used to be the Daily Reckoning. You'll end up getting, if you're a free reader, you'll get a summary of everything at the end of the week which, Joel, you're going to prepare so people can see what's going on behind the scenes if they're busy and they don't always have time to read every day. And then for-Joel Bowman:Yeah. It's a kind of digest.Dan Denning:Yeah, that's right. It's a little more convenient for people to keep up with everything that we've published. And then for readers who are paying subscribers, I'll continue to provide what I've been providing to readers of the Bonner-Denning Letter, which is just a review of any important events that happened that week that might affect either our long-term strategy or, and and this will be a bit different, our shorter term strategy. And that's because Tom, the work that he used to be doing for his Portfolio readers, will now be doing in this place with Bill and I. So, Tom's work is a little bit more tactical. There are a few more trades involved. And by trades, I don't mean day trading. I mean, things that he has spotted in his research, like the tanker trade that he made and obviously the Dow gold ratio. That's going to be what he's focusing on. So, in the weekly updates you'll get anything related to Tom's individual trades.And then you'll get a monthly research report, which is a collaboration amongst all of us, which focuses on our best ideas. And it tends to be a weightier, more thoughtful piece that you can print out, sit down and read. And that's a lot like the Bonner-Denning Letter, except now it's going to be called Bonner Private Research. Tom has accepted the role of being our investment director. I'm going to be the managing editor. And my job is to continue my work on the macro themes, but to also bring in the work of people that I mentioned before, like Chris Mayer and maybe Byron King from time to time, and anybody else who we know, like Rick, who has interesting things to say and wants to share them with you. So, you'll be getting daily, weekly, and monthly research. And then from time to time, hopefully even before Christmas, we'll be doing something like this, where you get to engage and talk back and ask questions. And it's more of a conversation or a dialogue rather than a monologue.Joel Bowman:Right. All right. So, lots of new stuff to look forward to. I feel like this might be just the right time for this. I mean, were we to have this exact conversation a couple of years ago in the pre z-Zoom era or the pre-work-at-home era, some of this might have seemed a little different. But as you say, the world's changing. Platforms are adapting. The way that we best reach our readers and our listeners is changing. So, there's a whole host of new ways that we're going to be able to engage and people will be able to choose a level of engagement that best suits their needs. So, on that point, I wonder if there might be people asking, "Hey, is this for me? Do I need to be a pro investor? Maybe I'm just somebody concerned about what I see on the headlines." Who in particular is this for? Do you want to speak a little bit to that perhaps?Dan Denning:Yeah, I can try. And in fact, this is the interesting thing. If you've ever owned a small business or started a business, or I guess really worked in any enterprise whatsoever, small group dynamics are funny. People all have their own idea of how things should be. And so I think one of the things new subscribers should expect is that we kind of have an idea of what we're trying to do in terms of... Well, we definitely know the problem we're trying to solve, but the division of labor and how we work together, those things are evolving. And one of the issues we'll have is, who are we writing for? So, for example, I know that Bill and Tom write to currently hundreds of thousands of people who don't consider themselves investors, but they enjoy reading about the world. They enjoy Bill's perspective on financial markets. I know a lot of people are completely fascinated with Tom's journey with his family, with his personal story, with his getting back together with Kate, and of course, with the homeschooling of their kids.So, we don't want to lose that because we're real people too, and we all have real lives. And some of the things that we're doing in our own lives are interesting to our readers. But I would say that the focus will probably shift more work towards investors. So, if you are a saver, if you are a retiree, if you're on a fixed income, if you're interested in buying a house or selling a house, these are huge financial decisions. And if you're at that point in your investment journey where you're trying to preserve the value of the assets you've accumulated, that's mostly our audience. So, those are mostly the things we're going to be writing about. And so a lot of the work that we're going to be doing now is for investors, and therefore you're going to have to pay for that work. But Bill's also made a career out of not being too adamantine about how he wants to do things. He likes to let things evolve. So, he wants to continue to write for free every day.People who want to read that, even if they don't necessarily invest, will want to subscribe to what we're doing. So, we're going to try to create a subscription option where you can read all of the research at a reasonable price, but also make it possible to continue to read, if you're just interested in Bill's analysis of what's going on in America. Because it's funny, it's lighthearted, it's not as serious. It doesn't mean it's not sophisticated, but Bill has this incredible talent of making complex things sound interesting and finding the humor in them. And I think that's important as well for people, that we don't want to just write about problems that are not solvable. We want to try and solve them. And occasionally we want people to remember, "You're not in this alone and sometimes there's even funny things that happen." So, that's how we're going to try it going forward.Joel Bowman:Yeah. Something tells me we're going to need, as much as anything, a sense of humor over the months and years that are waiting ahead of us. So, definitely stay on board for that. And I wanted to just ask very quickly if people are just joining us now for the first time and maybe they want to get other people, their friends or family, their loved ones involved, they want to sign them up, they can share links to our free resources and there'll be no problem with sharing our stuff around and inviting other people on board. That's correct?Dan Denning:Yeah, that's right. And this will be strange for people who've been with us for a long time because we're used to being part of larger organizations that we've built or joined and they have substantial resources to create large archives and libraries of introductory material. And there's lots of resources available, including customer service and phone numbers. This is very much a startup. And I know it sounds strange to hear that coming from people who've been in the publishing industry for, in Bill's case, 40 years, and in Tom and I's case, 25 years almost, but it's really a four man band right now. It's you, me, Tom and Bill. We're doing everything ourselves. And so the reason we picked the platform we picked is that they could do the payment processing and all we're going to do is write to you.So please, when you go to those construction sites and it says, "Please excuse our dust. We're trying to improve things," we're building everything from scratch here. And if we had waited to have everything built out so that it was a brand new, shiny, gleaming, perfectly functioning thing, we would've waited too long. We thought it was more important to start now and just focus on the important stuff, which is the ideas, the investment research and getting those to readers on a regular basis. But if you think it's interesting to you and you want to share it, the only social media we have right now is Twitter. So, if you want to follow us on Twitter, it's @bonnerprivate. Otherwise, if you want to keep hearing what we have to say, then you can either sign up for the free email, which doesn't cost anything, and that gives you what Bill says every day and that weekly update from you, Joel.And then if you want to pay 10 bucks a month or 100 bucks a year, that gives you a subscription with all the research. That's it so far. And it really is paired back. There's no fancy website. There's no username or password to log in. Substack handles all of your login for you. So, I know there'll be a few bumps in the road and I know people will have some questions on how things are going to work. We'll try to get to them as quickly as we can, but be as patient as possible with us, since it's just the four of us. Which really, because Bill's in Ireland and Tom is on the road, means it's just you and me. And you have a daughter and a wife, so it means it's just me. So, I will do my best as quickly as I can, I promise.Joel Bowman:Right on. Well, having worked with you on and off over the years, Dan, I know our readers and listeners are in good hands. And really, this is all part of the adventure too. Because as the old motto, "Ready, fire, aim," goes, we're going to be learning by the seat of our pants. But one thing that it does mean is that we're going to be able to be nimble and dynamic and responsive, which I think is very key in the kind of world that we live in today, where things are changing week by week, month by month.For anybody who had travel plans interrupted over the last year or budgets that they had to recalibrate because of price differences or market action or what have you, we'll be able to hopefully stay on top of all that with conversations like this and plenty more. But I think, mate, that probably does it for a bit of an introduction to our new readers. Please spread the word. Get other people involved and on board. And we look forward to talking to you again soon. Dan, thanks for chiming in from Wyoming today, mate. Good to talk to you.Dan Denning:Yeah. Thanks, Joel. One last thing real quick just so people, whenever they're listening to this... Our first monthly issue will be in January. Tom is headed back to London. He's made the decision to hunker down there for a while with the kids who got their passport from the home office. So, the first monthly report will be in January. We're going to start publishing Bill's daily emails in late December, and I'll start putting out weekly updates this weekend. So, if you're just joining us, that's what you can expect in the coming days. There's always a little bit of a lull in the holidays, which should help us work out any of our technical issues. But on a personal note, I just want to thank everyone who's decided to join us. It's really exciting to be involved with it again. It's always a little intimidating when you're not quite sure what it looks like, but off we go.Joel Bowman:All right, mate. Tally ho. For readers who are just joining, there's a whole bunch of archives on the website of old podcasts and things that we've had over the last couple of years or the last couple of months. You'll get a little bit of a look in to some of the other personalities that will be joining us along the way. Dan mentioned a few of them at the top of the episode. So, have a look through there, and look out in your inbox for future communications. Thanks a lot, and talk to you again soon.Thanks for listening to this episode of the Bonner Private Research Podcast. You can find more conversations like this in the members only section of our website. We look forward to hearing from you either way. Until next week. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit bonnerprivateresearch.substack.com/subscribe

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#46 - Dan Denning on A New Beginning

Play Episode Listen Later Dec 24, 2021 26:18

(00:50) - Intro (03:10) - [START] (03:50) - The Greatest Financial Crisis in American History... (06:20) - Half a century into the modern monetary experiment and where it's headed (07:50) - What does Bonner Private Research mean for YOU? (08:50) - Bill Bonner, Dan Denning, Tom Dyson and Joel Bowman, direct to you (10:50) - Daily musings, weekly podcasts, deep dive investment insights (13:20) - Welcome to Bill's personal network of investors, analysts and thinkers (14:20) - What you'll get with your new BPR subscription... (16:50) - The world is changing... this is how we're changing to keep you informed (20:50) - Sharing is caring! Please invite your friends and family along for the ride... (23:50) - Nimble, dynamic and responsive... a new way forward for a new year. (25:50) - A look at the days to come... and a big thankyou to everyone (26:00) - END

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Demetri Kofinas—Challenge the Consensus to Find What's Really Driving Change EP34

Play Episode Listen Later Dec 6, 2021 58:30

Demetri Kofinas is interested in looking beyond the epiphenomena to find out what's really driving change. Rather than accept the superficial, popular narrative around current events, he challenges the consensus and explores novel solutions to complex problems. Demetri is the host of Hidden Forces, a podcast that uses a financial and cultural lens to make connections among disciplines and challenge today's popular narratives. On this episode of The Wiggin Sessions, Demetri joins me to discuss how he chooses guests for Hidden Forces and describe how technology platforms like podcasting facilitate the democratization of ideas. Demetri shares what he learned from his interview with Google CEO Eric Schmidt around artificial intelligence and the problem of goal optimization, explaining how social media channels with a business model based on advertising are incentivized for outrage. Listen in to understand how a high speed of change impacts society and learn how to maintain your humanity and sustain an open mind as you uncover the hidden forces that shape our changing world. Key Takeaways Demetri's background as a media entrepreneur and financial analyst What technology platforms allow for the democratization of ideas How Demetri chooses podcast guests who look beyond epiphenomena to what's really driving change Demetri's take on the influence we have as individuals and why we're on the verge of political realignment in the US What Demetri learned from his conversation with Google CEO Eric Schmidt around AI and the problem of goal optimization Why social media platforms with a business model based on advertising are optimized for outrage Edward O. Wilson's concepts of consilience and eusociality How the human desire to do meaningful work is fueling the Great Resignation The costs associated with navigating a high speed of change The pros and cons of Demetri's open-minded approach to Hidden Forces Connect with Demetri Kofinas Hidden Forces Podcast Demetri on Twitter Connect with Addison Wiggin Consilience Financial Be sure to follow The Wiggin Sessions on your socials. You can find me on— Facebook @thewigginsessions Instagram @thewigginsessions Twitter @WigginSessions Resources 5-Minute Forecast The Meaning of Human Existence by Edward O. Wilson The Daily Reckoning Kurt Richebacher Mobs, Messiahs and Markets: Surviving the Public Spectacle in Finance and Politics by Bill Bonner and Lila Rajiva Empire of Debt: The Rise of an Epic Financial Crisis by Will Bonner and Addison Wiggin The Demise of the Dollar … and Why It's Great for Your Investments by Addison Wiggin Hans-Hermann Hoppe Financial Reckoning Day: Surviving the Soft Depression of the 21st Century by William Bonner and Addison Wiggin Richard Duncan Substack Theodore Roosevelt's ‘The Man in the Arena' Capital Account with Lauren Lyster Mark Moss on The Wiggin Sessions EP030 Market Disruptors Live Tristan Harris Tristan Harris on The Joe Rogan Experience The Social Dilemma Eric Schmidt on Hidden Forces EP218 A World Only Lit by Fire: The Medieval Mind and the Renaissance by William Manchester Ray Kurzweil Plato at the Googleplex: Why Philosophy Won't Go Away by Rebecca Goldstein Rebecca Goldstein on Hidden Forces EP069 ‘A Collective Mass Refusal to Work in Poor Conditions Is Driving the Labor Shortage' in Business Insider A Most Violent Year Speed Limits: Where Time Went and Why We Have So Little Left by Mark C. Taylor Land of Desire: Merchants, Power and the Rise of a New American Culture by William R. Leach

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Bill Bonner—Escalating Inflation & Our Inevitable Financial Reckoning EP33

Play Episode Listen Later Nov 29, 2021 29:08

In the 1970's, then Federal Reserve Chair Paul Volcker implemented a series of interest rate hikes to curb inflation. But times have changed. Today, the powers that be no qualms about pumping trillions of dollars into the economy with nothing to back it. And businesses, individuals and the government itself are all dependent on very low interest rates. So, what is the likely outcome of the current economic policy? Is it time to stock up your bolt-hole? My long-time friend and mentor Bill Bonner is the founder of Agora Financial , the leading innovator in the financial advice industry for the last two decades. On this episode of The Wiggin Sessions, Bill joins me to discuss Joe Biden's $6 trillion Build Back Better social engineering plan and share his take on skyrocketing inflation—with no sign of a Fed Chair like Paul Volcker in sight. Bill explains how the Fed's aim has changed from protecting our currency to manipulating the economy and describes the two ways a bubble built on credit ends. Listen in for Bill's insight on how we're following Argentina's financial playbook and learn how to protect yourself from the impending financial reckoning day here in the US. Key Takeaways The real cost of the government's infrastructure and social spending bills How printing money is responsible for skyrocketing inflation What former Fed Chair Paul Volcker did to kill inflation in the 1970's How the Fed's aim has changed from protecting our currency to manipulating the economy The 2 ways a bubble built on credit is likely to end Bill's insight on how the US is following Argentina's financial playbook The challenge of running a business when you don't have confidence in the government How the pandemic contributed to the current economic environment Why we're in for a chaotic, impoverishing few years (and how to protect yourself) Connect with Bill Bonner Bill Bonner's Diary at Rogue Economics Connect with Addison Wiggin Consilience Financial Be sure to follow The Wiggin Sessions on your socials. You can find me on— Facebook @thewigginsessions Instagram @thewigginsessions Twitter @WigginSessions Resources 5-Minute Forecast Empire of Debt: The Rise of an Epic Financial Crisis by Will Bonner and Addison Wiggin Financial Reckoning Day: Surviving the Soft Depression of the 21st Century by William Bonner and Addison Wiggin Infrastructure Investment and Jobs Act Build Back Better Act ‘The Real Biden Bill: At Least $4.6 Trillion' in The Wall Street Journal ‘Build Back Better Cost Would Double with Extensions' on The Committee for a Responsible Federal Budget Blog National Taxpayers Union Paul Volcker IOUSA Ludwig von Mises David Stockman's Contra Corner CARES Act ‘Deere Strike to End as Workers Vote to Approve Contract' in Reuters ‘Ford, GM Step into Chip Business' in The Wall Street Journal The Demise of the Dollar … and Why It's Great for Your Investments by Addison Wiggin Hans-Hermann Hoppe

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#44 - Bill Bonner on COP26 Glasgow, the Fed's hypothetical 3rd Mandate and more...

Play Episode Listen Later Nov 19, 2021 41:06

Time stamps - A rough guide... (03:00) - “Helllloooooo Bill...” (04:00) - Bill chimes in on the cult of St. Greta and the COP26 gabfest in Glasgow (06:10) - “A lot of people are making a lot of money out of this green stuff,” Bill Bonner (09:55) - Bill's take on climate change: It's a whole lot more complicated than that! (11:10) - Would we be better off with lower CO2? What's the cost? Nobody knows... (12:10) - Viva la (Brown) Revolution! 7 billion people depend on industrialization (13:10) - Supply Chain Disruptions as a result of energy breakdowns (15:40) - Bill on the true genius of capitalism in a free and open market (17:00) - Adam Smith's invisible hand and the making of a single pencil (21:10) - Nature is full of tricks and surprises... technology makes it possible to survive them (24:25) - Top down experiments in economic mismanagement... and The Fed's “3rd mandate” (26:25) - Bill on untruths, public relations and environmentally friendly governance (27:40) - “The Fed has two choices. All the rest is poppycock. They inflate, or they don't inflate. My opinion is, they're gonna inflate.” (30:40) - Where is Paul Volcker when you need him? Long, long gone... (31:40) - How the entire elite of America got rich from printing money (33:40) - Lessons from the past... money printing and the great Faustian pact (35:40) - Do the recent elections suggest a cultural pushback? (38:40) - What's in a name... or a pronoun? (41:00) - END

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#42 - Bill Bonner on How Economic Policies Are Eroding Two Millennia of Progress

Play Episode Listen Later Oct 15, 2021 40:18

Time stamps - A rough guide... (00:50) (02:50) - Bill Bonner (03:00) - Advice from father of the bride - Start saving now (04:00) - What to do when inflation hits 50% (Learn mental math!) (05:00) - Trends in motion accelerated by a pandemic (06:30) - The US follows Tokyo... all the way to Buenos Aires! (08:30) - How the country is going down the tubes... let us count the ways (12:00) - How might 2021 years of progress come to a grinding halt? (15:00) - Out shrinking world - How the State curtails freedoms (16:00) - “What makes progress is the ability of people to decide what to do for themselves. It's freedom.” (17:00) - What we learned from the 20th Century's 3 Great Mistakes (19:30) - Welcome to the USSA: Saule Omorova and the New World Improvers (22:30) - Public profligacy, private snooping - Big Brother eyes your accounts (23:30) - “The whole idea of democratic government is basically a fraud.” Bill Bonner (24:20) - “The actual value of a single vote in America today is approximately zero.” (29:30) - Bill weighs in on vaccine mandates and the absence of consent (30:30) - Fake whistleblowers and Facebook's war against competing ideas (35:00) - The corruption of the dollar and the false signals it sends (38:00) - A sneak peek into the future of Bill's new private research project

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Joel Bowman and Bill Bonner discuss How Economic Policies Are Eroding Two Millennia of Progress

Play Episode Listen Later Oct 15, 2021 40:19

Time stamps - A rough guide...(00:50)(02:50) - Bill Bonner(03:00) - Advice from father of the bride - Start saving now(04:00) - What to do when inflation hits 50% (Learn mental math!)(05:00) - Trends in motion accelerated by a pandemic(06:30) - The US follows Tokyo... all the way to Buenos Aires!(08:30) - How the country is going down the tubes... let us count the ways(12:00) - How might 2021 years of progress come to a grinding halt?(15:00) - Out shrinking world - How the State curtails freedoms(16:00) - “What makes progress is the ability of people to decide what to do for themselves. It's freedom.”(17:00) - What we learned from the 20th Century's 3 Great Mistakes(19:30) - Welcome to the USSA: Saule Omorova and the New World Improvers(22:30) - Public profligacy, private snooping - Big Brother eyes your accounts(23:30) - “The whole idea of democratic government is basically a fraud.” Bill Bonner(24:20) - “The actual value of a single vote in America today is approximately zero.”(29:30) - Bill weighs in on vaccine mandates and the absence of consent(30:30) - Fake whistleblowers and Facebook's war against competing ideas(35:00) - The corruption of the dollar and the false signals it sends(38:00) - A sneak peek into the future of Bill's new private research project This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit bonnerprivateresearch.substack.com/subscribe

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Preparing for the 'Zombie Apocalypse' with Bill Bonner

Play Episode Listen Later Sep 23, 2021 57:25

On this week's episode of the Stansberry Investor Hour, Dan invites an incredibly special guest onto the show... He's a man who's launched over 1,000 new products, acquired dozens of businesses, and employed thousands of people... In a way, he's largely responsible for helping Dan get to where he is today... His biggest claim to fame is founding Agora Financial, now the largest independent research network on the planet... The one and only Bill Bonner. For those of you that don't know, Bill was the one who interviewed Dan, way back in November of 1997, when he first set out to become a financial analyst... The two kick off the conversation like old friends, recounting tales from the old days, and catching up on what's new in life... But the conversation turns gravely serious when Dan gets Bill's take on some major developments happening in the world right now... The two discuss the fast-developing Evergrande debt crisis, the rising inflation we're seeing just about everywhere, and where we might see societal upheaval flare up next... Bill explains what this all means for investors, and gives the listeners some key advice on how to protect yourself from that worst-case scenario... If you're concerned about what's going on in America today, it's a conversation you do not want to miss... You can listen to Dan's full conversation with Bill and much more in this week's episode.

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Preparing for the 'Zombie Apocalypse' with Bill Bonner

Breakthrough Marketing Secrets

Play Episode Listen Later Sep 23, 2021 57:25

How to write copy that sells [simple framework]

Play Episode Listen Later Sep 13, 2021 59:32

Links related to this episode: https://www.btmsinsiders.com/courses/high-velocity-copywriting?utm_source=btms-daily&utm_medium=email&utm_campaign=20210913 (High-Velocity Copywriting Training) https://www.btmsinsiders.com/bundles/btmsinsiders-all-access-pass?utm_source=btms-daily&utm_medium=email&utm_campaign=20210913 (BTMSinsiders is like Netflix for Copywriting & Marketing Training — Stream all of Roy's training for one low monthly fee) https://www.breakthroughmarketingsecrets.com/ask (Ask Roy your question) https://www.youtube.com/user/royfurr?sub_confirmation=1 (Subscribe to Roy's YouTube channel) https://breakthroughmarketingsecrets.captivate.fm/listen (Subscribe to the Breakthrough Marketing Secrets podcast) https://www.breakthroughmarketingsecrets.com/work-with-roy/ (Work With Roy) https://www.breakthroughmarketingsecrets.com (Get Roy's Daily Emails) This will help you write more interesting, compelling copy… It's a simple framework. It works for both novice and pro copywriters. It draws on the work of legendary copywriters like Bill Bonner and Eugene Schwartz. And it leverages the work of modern giant Russell Brunson. (With yours truly doing the job of wrangling these masters to bring them together for you.) All to create a framework you can use in minutes to make your copy more compelling. All in service of responding to this subscriber request: — I just want to learn how to write copy (or in general) as clearly and convincingly as possible. I'm not engaged in any specific business, other than writing. I am only here for enhancing my writing ability. - Billy — https://youtu.be/_pyse5hAuY4 (Discover how to write copy that sells with this simple framework in today's episode.) Yours for bigger breakthroughs, Roy Furr

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Afghanistan Graveyard — Claims Another Victim

The Castle Report

Play Episode Listen Later Aug 20, 2021 14:47

Darrell Castle talks about Afghanistan, and how the 20-year long effort of the United States to bring gender identity and social justice to a medieval society ends in failure in about 72 hours. Transcription / Notes AFGHANISTAN GRAVEYARD—CLAIMS ANOTHER VICTIM Hello this is Darrell Castle with today's Castle Report. This is Friday the 20th day of August in the year 2021 and I will be talking about Afghanistan as the 20-year long effort of the United States to bring gender identity and social justice to a medieval society with a strange religion, strange culture, and where the word gender does not appear in any of the many languages ends in failure in about 72 hours. The Castle Family is doing well this week as the kids are back in school and the summer winds toward a close. We get up each day and go to work where we work hard and then we return home for a night's rest and work around the daily chores of living. That is life in America today for the fortunate ones like us. I'm sure the family daughter is enjoying many of the same things safe in the golden land of Los Angeles, California. Why is Afghanistan sometimes referred to as the Graveyard of Empires? For the answer I turn to writer and economist Bill Bonner. “The British Empire concluded 80 years of warfare in Afghanistan in 1919. Their empire survived approximately 20 years after that when it faltered, declined, and was replaced by the United States as the new emperor of the world. The Soviet Empire fought there for 10 years and left in 1989. One year from the Afghanistan retreat the Soviet Empire was gone from the earth. Now the United States is withdrawing after 20 years of fighting, killing, and dying there so the future will tell us what happens to the American Empire as a result.” We do know for sure that the struggle cost the lives of some 2500 American military and a couple of thousand civilian contractors plus approximately $2.26 trillion dollars. Why do I say that the U.S. mission was a 20-year effort to teach gender identity and social justice to that medieval land? Because according to U.S. Government Reports, $787 million was spent directly on gender programs but the final amount was much larger because almost every program had gender education included. The effort apparently had mostly negative effects on a land and people who were unable to comprehend what would eventually happen. The programs included childcare for working mothers who were prevented by law and culture from working. Gender goals were required for the Afghan army which needed training in combat and esprit de corps. The primary result appears to have been rebellion and instability. In the end all the girls' schools had to tell their kids to run for their lives. The Afghan women's soccer team were told to burn their uniforms. People relied on the word of those in control whom they thought were honorable but, they were less than honorable plus very stupid. Often, at the moment something is happening we are told it is not happening and will never happen. This is manifestly no Saigon Secretary of State Blinken told us, but in the end that's exactly what it was. The Afghan troops the U.S. trained and equipped for 20 years just laid down their American weapons and joined the other side. President Biden and Secretary of State Blinken were briefed by the 17 different U.S. intelligence agencies about what was going to happen. The agencies all have billion-dollar budgets, and their leadership all went to all the right schools so how could they be incompetent. The Pentagon says that for many years it had been reporting to various presidents that the Afghan army, which outnumbered the Taliban 4-1, was unreliable and incompetent. It is interesting, however, what you can miss no matter how obvious it is when you are paid not to see. Afghanistan includes dozens of tribes each with its own religion culture and language. It is preposterous to think that a western style democracy with all the current woke id...

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31 - Bill Bonner on the Real Asset Economy

Play Episode Listen Later Jul 8, 2021 38:45

What can the average salary earner do to prepare for the triple specter of rising inflation, rising interest rates and rising taxes? What business do world-improvers and do-gooders have predicting the needs of the world 50 years out... while imposing their plans in the here and now? What happens to revolutionaries when it comes time to confront their own sordid pasts? I posed these questions, and plenty more, to Bill Bonner when I caught up with him earlier in the week. Bill is happily ensconced in Youghal, Ireland, where he just welcomed the 7th Bonner grandchild into the fold. We begin our conversation by imagining what the world might look like when the next generation reaches college age. Please enjoy my conversation with Bill, up next... (00:50) - Intro (01:45) - Start (02:30) - Bill reports from Youghal, Ireland, on the state of affairs there... (04:15) - Looking ahead to the world one generation from now (05:35) - Grandpa Bill's “wet blanket” investment advice (08:10) - “It's a fantastic conceit to think that whatever we want no is what the world needs years from now.” (09:05) - A the distinction between private undertaking and public folly (09:45) - Lockdown grievances and the definition of “essential” vs. “non-essential” work (11:20) - A common thread for all central planners (13:00) - Living with government meddlers - Living free in an unfree world (14:30) - The “Workers' Party” - Eternal enemy of the Working Class (15:45) - Are we beyond full employment? (16:30) - “There's no man so conservative as a revolutionary who has just seized power.” (16:45) - News from Nicaragua... a tale of (yet another) revolution gone bad (22:20) - Uncrowded beaches, uncrowded trades, uncrowded investments... (23:00) - Bill's latest Trade of the Decade: An update... (25:00) - Inflation: What the government wants, the government shall get... (26:00) - $10 Trillion: Welcome to the fake money boom! (29:00) - The Housing Boom as a “bridge” between the Financial and Consumer markets (33:00) - Are the Feds about to “Go Big”! (34:00) - What can the average citizen do to ride out the coming storm?

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#26 - Dan Denning on a National Trend in Local RE, Metals Markets and Bugs on the Menu

Play Episode Listen Later May 28, 2021 29:35

Time Stamps... a rough guide (05:10) - Welcome back to the USA, a stroke of Dumb Luck for the Bowman Family (06:30) - America Unmasked! Dan checks in from his Colorado Bolt Hole (07:25) - Is it full speed ahead for a post COVID-19 America? (08:15) - News from Dan's side hustle as a parks and wildlife advocate (09:00) - Retail and air travel take off once again (11:00) - What tools, if any, do the Feds have in their arsenal to contain and control inflation? (12:15) - Median house prices across the US up 19% Y.O.Y. What is that telling us? (13:00) - De-dollarization - the stampede out of fiat and into hard assets (13:20) - Meat, food, energy... prices are up, up, up and away! (14:00) - Zoom Town USA - Notes from the 6th great migration (16:30) - FOMO coming to a housing market near you, soon! (21:00) - Dan talks the gold silver ratio and a potential buying opportunity for metal heads among us (22:30) - Silver trades at a significant premium to the spot price (23:15) - How best to invest in physical silver. “If it's not in your hot little hand, it's not yours.” (24:30) - Dan Denning does his best Bill Bonner impersonation (25:15) - Three resets happening as part of the one, great reset... (26:15) - “We're being groomed to become bug eaters.” (26:30) - Latest news from everyone's favorite Doom Goblin (Greta Thurnberg)

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22- Bill Bonner on the press, so-called “white supremacy” and the illusion of free money

Play Episode Listen Later Apr 23, 2021 47:19

In this week's episode of the Bonner Private Research podcast I'm joined by Bill Bonner, author and founder of the Bonner Private Research Group. Today's conversation takes us for a journey through both time and space. We take a look at everything from the illusion of free money to the advent of free market money. From Dogecoin to Ford Motor Company, from bad ideas to real wealth and plenty more besides. Such is the breath of conversation one might reasonably expect when sitting down with no other than Bill Bonner, a man of a great many interests and insights, a few of which he was kind enough to share with us today. I hope you enjoy my conversion with Bill, up next Bullet Points 00:50 - A conversation through time and space 02:14 - The Irish language and lessons in how to mispronounce “Youghal” 03:22 - Calchaqui to Blackwater: Valley to valley lockdowns from Argentina to Ireland 05:38 - Bill on facemasks and PPE gear for children and students 06:24 - The advantage of multilingualism in a multi-polar world 07:34 - Speaking gaelic where nobody goes, and where nobody knows 09:31 - Coming to America! What to expect when we head north for the summer 10:25 - Bill on Chinese-style struggle sessions in America's “leading” institutions 11:50 - Bill on so-called “white supremacy” and the electoral current in America 12:46 - General Motors, accusations of racism and the case of corporate blackmail 13:40 - The MS Press as leader in the vilification of the european cultural heritage 15:00 - What might the New Dark Ages look like? 15:47 - The progress of Civil Society vs the progress of technology 16:10 - Nazi Germany: An ordinary case of extraordinary stupidity 18:40 - What happens when you combine nuclear bombs with dark age brains 21:25 - Why is human kind incapable of ridding itself of demonstrably bad ideas? 21:55 - Lessons from the historical, irrational, involuntary act of “falling in love” 23:17 - “Hans, do you zinc zat ve are ze bad guyz?” 25:04 - The diabolical advent of (what looks like) “free money” 25:55 - Freud on limits and the civilizing instrument of restraint 27:10 - Humans have not evolved to understand or live alongside Facebook 28:45 - The grave impact of Social Media on an increasingly Anti-social society 30:11 - Why are humans so fascinated by markets? Bill's thoughts... 31:45 - The ultimate pretense of the investment world 32:20 - How (not) to become your own online casino... and go broke doing so 33:17 - The great cycle of life: Making money... then figuring out how to get rid of it 33:51 - Not all booms are created equally - the real, legit vs. the phony crack-up 35:05 - (Re)introducing the coming “katastrophenhausse” 39:19 - Looking for warning signs along the road to monetary ruin 40:21 - Is Dogecoin really “worth” more than Ford Motor Company? When the money doesn't seem real 44:03 - Had the Feds done their job and kept their word, maybe crypto would not have taken flight 45:20 - Honesty in money is a basic building block of civilization

Bill Bonner—Safe Havens and A Modest Theory of Civilization - EP02

Play Episode Listen Later Mar 17, 2021 48:11

When there is a rotting at the center of government, people lose faith in the system and move toward radical solutions. And we don't have to look far to find examples of this in the US today. So, what are the potential consequences of this fundamental change in our politics? Do we need to find a safe haven outside the US? And how might we change the system so that it's less barbaric and more honest? Bill Bonner is the Founder of Agora Financial and the bestselling author of several books, including Empire of Debt and Financial Reckoning Day. Bill's latest release is called A Modest Theory of Civilization, and he publishes a daily newsletter at Rogue Economics, Bill Bonner's Diary. On this episode of The Wiggin Sessions, I sit down with Bill to discuss his safe haven in Argentina through the Coronavirus lockdown and why it's not a bad idea to have a ‘bolt hole' outside the US. Bill explains why people shift to extreme views when society is corrupt at the center, describing some of the political ideas we're willing to entertain today that would have been laughable just a few years ago, including invoking the 25th Amendment and printing trillions of dollars for a stimulus package. Listen in to understand the concept of win-win or lose Bill presents in A Modest Theory of Civilization and learn what he is doing right now to build and preserve generational wealth. Key Takeaways Bill's experience in lockdown at his ranch in Argentina and the case for having a ‘bolt hole' there The political ideology of South America's gauchos and why it's impossible to work against these self-declared originaries Bill's insight on why people move to extremes when society is corrupt at the center How the current circumstances in the US parallel Germany after World War I Bill's take on the comedy of a stimulus package and how there's no evidence that printing money actually stimulates an economy The political ideas we're willing to entertain today that would have been laughable just a few years ago (i.e.: stacking the Supreme Court, invoking the 25th Amendment, etc.) What Old Democrats and Old Republicans stood for and how politics has changed in a fundamental way The justification for modern monetary theory and why it's a fraudulent system The concept of win-win or lose Bill presents in A Modest Theory of Civilization Why Bill sees politics as a fundamentally barbaric institution and how a progressively bigger government impacts citizens Bill's projects around building generational wealth, Blackwater River Press and Woodlock House Family Capital Connect with Bill Bonner Bill Bonner's Diary Connect with Addison Wiggin Consilience Financial Be sure to follow The Wiggin Sessions on your socials. You can find me on— Facebook @thewigginsessions Instagram @thewigginsessions Twitter @WigginSessions Resources Agora Financial Doug Casey As We Go Marching: A Biting Indictment of the Coming Domestic Fascism in America by John T. Flynn A Modest Theory of Civilization: Win-Win or Lose by William Bonner Woodlock House Family Capital Chris Mayer Daniel Denning at Blackwater River Press

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Addison Wiggin—Introduction: Surviving and Thriving in the Empire of Debt - EP01

Play Episode Listen Later Mar 10, 2021 35:39

Between the growth of government and rampant deficit spending, we were woefully unprepared for the pandemic. And by the end of 2021, the US is likely to hit $30 trillion (with a T) in national debt. So, what does this mean for you and me? How long will it take the economy to recover in a post-pandemic world? What do we need to know to survive and maybe even thrive in this Empire of Debt? On this inaugural episode of the podcast, I'm explaining how my efforts to make sense of what was happening as the pandemic unfolded inspired the creation of The Wiggin Sessions and discussing the themes we'll explore on the show around economics, philosophy, history and politics. I share my background in forecasting economic trends, describing how the book Empire of Debt and the film I.O.U.S.A. predicted the collapse of the financial markets in 2008—and how ongoing deficit spending (exacerbated by the pandemic) is likely to impact the average American moving forward. Listen in to understand how the policy response to COVID will inform the economy for years to come and learn how to preserve and grow your wealth through an extended period of low or negative economic growth. Key Takeaways How my efforts to make sense of what was happening as the pandemic unfolded inspired The Wiggin Sessions My collaboration with Bill Bonner to illustrate how we saw politics, the economy and financial markets unfolding The in-depth study of booms and busts as well as demographic trends detailed in Financial Reckoning Day How Empire of Debt predicted the collapse of the financial markets in 2008 The consequences of the rising deficit as explained in my documentary I.O.U.S.A. (and how Warren Buffet took the air out of our sails at the film's premiere) James Rickards' forecast re: the US's growing national debt and the massive inflation the deficit is likely to trigger The themes we'll explore on the podcast around science, health, personal finance, communication and tech innovation The extended period of sustained low or negative economic growth precipitated by the pandemic and what stocks will weather the storm ahead How we can use macro ideas re: politics and the economy to pick assets that will preserve existing capital and help you grow wealth My take on network news and how The Wiggin Sessions will be different in terms of helping you make informed decisions Connect with Addison Wiggin Be sure to follow The Wiggin Sessions on your socials. You can find me on— Facebook @thewigginsessions Instagram @thewigginsessions Twitter @WigginSessions Resources Consilience Financial 5 Min. Forecast Bill Bonner Financial Reckoning Day: Surviving the Soft Depression of the 21st Century by William Bonner with Addison Wiggin The Daily Reckoning Empire of Debt: The Rise of an Epic Financial Crisis by William Bonner and Addison Wiggin I.O.U.S.A. Documentary Film IOUSAtheMovie on YouTube Government Accountability Office George Gilder on The Daily Reckoning Ray Blanco on The Daily Reckoning James Rickards on The Daily Reckoning The New Great Depression: Winners and Losers in a Post-Pandemic World by James Rickards Zach Scheidt

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16 - Diego Samper on the Bonner Private Wine Partnership and why you have to be a member

Play Episode Listen Later Mar 6, 2021 49:37

In today's installment of the Bonner Private Research Podcast I'm joined, in studio, by Mr. Diego Samper. Hailing from the coffee regions of Colombia, Diego moved to Argentina's capital city more than a decade ago. Having fast fallen in love with Argentina's unique wines, Diego soon began working with Bill Bonner and his sons, Will and Jules, on developing the family wine partnership. Located in Gualfin (literally the “end of the road”) in the far-flung province of Salta, the Bonner Family ranch is truly a remote and rugged patch of land... with an environment particularly well-suited to producing some of the world's highest-altitude Malbec grapes. The Estancia's own production, Tacana, is an intense wine of strong, robust character... as I discovered on the show when Diego and I shared a couple of glasses over an hour-long conversation. We spoke about what goes into making a top notch wine (hint: it's not about points or fancy labels), the unique characteristics of ultra high-altitude grapes and how the Bonner Private Wine Partnership http://bit.ly/BonnerPrivateResearch is working to bring some of the world's best and undiscovered wines to your table. So grab a glass of your own and join us for a look inside the rapidly evolving world of wines... Bullet Points 01:15 - Introducing Diego Samper: From Colombia to Argentina 02:00 - The similarities between coffee and wine 06:17 - The Legendary Gualfin in Salta, Argentina 10:19 - How altitude affects wine 14:32 - Argentina's wine history & production 16:48 - Producing wine without pesticides 18:33 - How production started in Salta 21:35 - The partnership: Helping small wine producers get to the US 24:52 - The democratization of the market 26:16 - Argentinian wines 28:16 - The club that allows you to try out wine from different regions 30:31 - Putting argentinian wine in the map, and a price comparison 32:31 - The different wine regions in Argentina 35:19 - Why wine rates are overrated, and how to approach wine instead 38:48 - How to taste wine 40:07 - How different variables affect the wine

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15 - Bill Bonner on sound money, civil society and the Trade of the Decade

Play Episode Listen Later Feb 26, 2021 40:06

In this week's episode of the Bonner Private Research podcast, I'm joined by Bill Bonner, author and founder of the Bonner Private Research Group. Today, Bill and I talk about currency as a fundamental building block of civilization, and why America is coming apart. We also touch on why getting out of dollars seems like a sensible idea, and identify the Primary Trend for the next decade. So please, join us for all that and more, in my conversation with Bill, below… Bullet Points 00:50 - Group thinking 04:00 - Sound money and civil society 06:40 - Life in Nicaragua and a word on travel advisories and “crisis vacationing” 09:22 - Venezuela, a real “worker's paradise” 10:47 - Bill reminisces on his very first Trade of the Decade 12:20 - Bill on Richard Russle's Dow Theory Letters and the Primary Trends that fortunes are made of... 14:06 - Identifying the Primary Trend for the next decade 16:18 - From bailing out Wall Street to bailing out Main Street 17:15 - Universal Basic Income (UBI), the next step from “stimmy checks” 17:50 - Get out of dollars… but get into what? 18:57 - Argentine real estate as a hedge against rampant peso-inflation 21:11 - Bill wades into crypto... as a pedagogical tool rather than an investment one 24:00 - When you get out of dollars, there are lots of places you can go 25:05 - Buy energy... big, bad, ugly, unpopular energy 27:44 - America is coming apart - financially, sociologically and culturally... 30:12 - Bill Bonner on the Bill O'Reilly saga 29:17 - Donald Trump's disservice 31:11 - The currency as a fundamental building block of civilization 34:20 - What happens when we're told “capitalism fails”? And what is really going on behind the scenes? 37:35 - The insurrection in the Capitol was a farce, says Bill

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Health & Wealth - Bill Bonner

The Charles Mizrahi Show

Play Episode Listen Later Feb 23, 2021 37:24

What was once a side project is now a newsletter powerhouse… Author, lawyer and businessman Bill Bonner established his publishing career by communicating ideas that are often underrepresented. Bonner discusses the humble beginnings of his business, the focus of his publications and his predictions for the future of financial publishing and our country with Agora colleague and host, Charles Mizrahi. Topics Discussed: From Law School to Newsletters (00:02:05) The Next Step (00:04:55) International Living (00:09:10) When the Internet Came Along (00:10:59) Back in the Day (00:13:55) Interpreting Events (00:17:45) Health & Wealth (00:20:01) Where the Industry Is Going (00:25:41) Bill’s Biggest Concern (00:27:19) The Importance of Domestic Life (00:32:34) Expanding Agora (00:34:01) Guest Bio: Bill Bonner is founder and chairman of The Agora, the largest independent research network in the world, and co-founder of Bonner & Partners publishing. Over the course of several decades, Bonner established a powerful newsletter business with a global footprint — spanning 14 countries and eight languages. His continued success stems from a desire to share opportunities that are overlooked or stifled by most media outlets. Bonner is also a New York Times best-selling author and has co-written several books and essays on debt, family fortunes and the market. You can check them out https://www.amazon.com/William-Bonner/e/B001ITRR4O/ref=dp_byline_cont_pop_book_1 (here). Resources Mentioned: · https://internationalliving.com/ (International Living) · https://www.rogueeconomics.com/bill-bonner-diary/ (Bill Bonner’s Diary) Don't Forget To... https://the-charles-mizrahi-show.captivate.fm/listen (Subscribe to my podcast! ) Download this episode to save for later Liked this episode? Leave a kind review! Subscribe to Charles' Alpha Investor newsletter today: https://pro.banyanhill.com/m/1729783

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13 - Eric Fry - The Wall Street outsider

Play Episode Listen Later Feb 19, 2021 51:51

Welcome to the 13 episode of the Bonner Private Research Podcast. I'm joined by Eric Fry, a specialist in international equities. Eric was Bill Bonner's man on Wall Street, and helped to co-write Bill's Daily Reckoning publication. In this episode, we'll talk about how to identify major trends and why “techno-chasm” is a trend you should befriend. We also discuss Eric's take on gold, and what the future may hold for investors as America's social cohesion seems to come apart. All that and more in my conversation with Eric Fry, up next

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12 - Dan Denning - The Reddit saga, the end of the Bezos era and the latest Trade of the Decade

Play Episode Listen Later Feb 19, 2021 67:17

In this week's episode of the Bonner Private Research podcast, I'm joined by my good friend and tireless champion of the individual, Mr. Dan Denning. In our free-wheeling discussion, we visit the Reddit saga, take a peek at what a “Bezos-less” Amazon might look like after he steps down as CEO later this year and finally, we unpack Dan and Bill Bonner's latest Trade of the Decade. All that and more in this week's show, below... Bullet points 00:51 - Intro 05:45 - Interview with Dan Denning 06:13 - Contactless payments, COVID-19 passports, RFID chips and the singularity of identity 08:43 - The seamless shift to a cashless society 09:43 - The War on Cash and the elimination of privacy in financial transactions 12:18 - “Just to be clear, I don't get checks from the government. Ever. I only write checks to the government.” 12:43 - “Rational resistance to these things happens at the individual level; Acceptance happens at the collective level, because it's a mob or a crowd or whatever.” 13:33 - Addressing the unbanked problem in a cashless society 14:43 - Jeff Bezos leaves Amazon and an update on the “River of No Returns” 16:33 - An update on ExxonMobil - Defending the Dividend 17:13 - A new Trade of the Decade from Dan and Bill Bonner 20:03 - “How can we take the family money, find something that noone wants to buy, buy it, forget about it for ten years and make money on it?” 20:58 - Dan on Robinhood: “More people than ever before who have never invested in stocks are buying stocks. That alone doesn't make them investors.” 24:38 - Climate change, renewable energy and the great “thermodynamic fraud” 26:13 - ERORI (Energy Returned on Energy Invested) - You can't get out more than you put in 30:13 - Real Assets vs. Financial Assets in an age of debt, deficits and decline 33:45 - Trade of the Decade... but wait, what's on the sell side? 35:45 - A little about the so-called debt ceiling 36:45 - What is the “Gephardt Rule” 38:45 - Dan recommends (not) reading the Monthly Statement of the Treasury 40:45 - “There's one party in Washington, there's the Welfare State and the Warfare State.” Dan Denning 42:03 - “The world in which the US dollar is the reserve currency because it's the best store of value is over.” Dan Denning 47:30 - Has the Gamestop/retail trader/Reddit story proven the market is broken as a weighing machine? 50:25 - “The ‘memes of production' had been stolen by the proletariat.” 51:15 - “Fair and efficient markets.” Janet Yellen provides some comic relief in the Reddit story. 53:45 - Are Signal, Telegram and other end-to-end encrypted communications apps next on the Deep State's hit list? 55:50 - (CUT - I've got a motorcycle going by outside here) 58:45 - What to do when free speech is considered dangerous speech

11 - Chris Mayer - Mayer's Bookshelf

Play Episode Listen Later Feb 19, 2021 73:09

Welcome to the 11 episode of the Bonner Private Research Podcast. I'm joined by Chris Mayer, Portfolio Manager of Woodlock House Family Capital fund and co-founder of the firm along with Bill Bonner. In this episode, Chris recommends some of his favorite books. We talk about “the big idea guys”, his beloved book collection, and how would he start one now. All that and more in my conversation with Chris Mayer, up next. Bullet points 03:00 - Introducing Chris Mayer 05:32 - Curating a book collection 06:57 - Fiction meets non-fiction: The value of maintaining an omnivorous reading diet 08:26 - (Authors mentioned: Neil Postman, 1931-2003; Richard Buckminster Fuller, 1895-1983; Alfred Korzybski, 1879, 1950) 08:48 - (P.G. Wodehouse, 1881-1975, British-born humourist and prolific author of more than 90 novels. Died in Southampton, NY) 09:00 - (Honoré de Balzac, 1799-1850. French author widely considered the founder of European realism. His novel sequence La Comédie humaine, runs over 90 works, finished and unfinished.) 10:00 - (Christopher Hitchens, 1949, 2011) 11:35 - The big idea guys 12:18 - Alfred Korzybski, considered by many to be the “Father of General Semantics.” https://amzn.to/2KW1IUA 12:40 - How Do You Know? By Chris Mayer (See link below to order) https://amzn.to/3a9s5PG 14:17 - Check out the Buckminster Fuller Institute at https://www.bfi.org/ 15:20 - See links to all books mentioned below https://amzn.to/3qXKPs0 16:30 - Alan Watts, 1915-1973, British author https://amzn.to/2Mc8E0x 22:20 - Henry Miller, 1891-1980 23:50 - Yuval Noah Harari, author of Sapiens, A Brief History of Mankind 24:40 - Harry Browne, American writer, libertarian and author of a dozen books, including Why Government Doesn't Work 27:32 - Anthony Bourdain, 1956-2018. American traveler, writer, television presenter and world-renowned story-teller. Author of Kitchen Confidential, among other works 28:05 - Ludwig Bemelmans, 1898, 1962. Austrian-American author, illustrator, traveler and gormandizing cosmopolitan 32:22 Hotel Bemelmans: https://amzn.to/3opA3Jn 32:30 When You Lunch with the Emperor: https://amzn.to/3j2LRjJ 34:15 - George Orwell, Down and Out in Paris & London; Emile Zola, The Belly of Paris and L'Assommoir; Nicolas Freeling, The Kitchen 35:50 - Jim Harrison, 1936-2016. American poet, novelist and oyster aficionado 37:24 - Henry Miller, The Colossus of Maroussi https://amzn.to/3cnHmyS 38:00 - Bemelmans Bar https://bit.ly/3ah0MD7 40:00 - James Thurber, 1894, 1961. American cartoonist, author, humourist, columnist and celebrated wit 42:16 - Investors / Authors 43:10 - Martin Sosnoff, Martin Sosnoff, CFA. Founder. Founder of Atalanta Sosnoff Capital Corporation 45:34 - hook·ah noun - an oriental tobacco pipe with a long, flexible tube which draws the smoke through water contained in a bowl 46:46 Humble on Wall Street: https://amzn.to/2Ynxugr 46:54 Silent Investor, Silent Loser: https://amzn.to/39rUFMN 49:30 - Ludwig von Mises, 1881-1973. Austrian School economist, proponent of Subjective Value Theory (as opposed to, for example, Labor Value Theory, something expounded by Karl Marx) 50:43 - Thomas W Phelps, 1906-1996. Author of 100-1 in the Stock Market 100-1 in the Stock Market: https://amzn.to/2NKzLQN 52:35 - Read Chris Mayer's 100 Baggers: Stocks that Return 100-1and How to Find Them (link below) https://amzn.to/36jxG4w 55:00 - What to start with 56:35 - Seneca... Epictetus... H.L. Mencken... 57:10 - Albert Jay Nock, Our Enemy, The State https://amzn.to/3t7L4CT 01:00:16 - Christopher Hitchens, 1949-2011 01:02:20 - Being able of entertain two opposite thoughts 01:07:30 - Thomas Hobbes, 1588-1679. English philosopher, author of Leviathan and (we think) not a particularly uplifting dinner guest. Still, worth the read... 01:09:55 - John Maynard Keynes, 1883-1946

00 BPRP - Chris Mayer - Henry David Thoreau, technology and the future of the market

Play Episode Listen Later Feb 19, 2021 34:34

Welcome to the first episode of the Bonner Private Research Podcast. We're joined by Chris Mayer, Portfolio Manager of Woodlock House Family Capital fund and co-founder of the firm along with Bill Bonner, who I'm sure the listeners know. In this episode, we discuss Henry David Thoreau's work and how technology reshapes the environment it enters. We also touch on the current state of the market, and whether or not the change that the pandemic brought will be permanent.

technology market portfolio managers henry david thoreau chris mayer bill bonner

07 - Bill Bonner - Democracy, the upcoming election and the news cycle

Play Episode Listen Later Feb 19, 2021 50:46

Welcome to the seventh episode of the Bonner Private Research Podcast. I'm joined by Bill Bonner, author and founder of Bonner Private Research Group. In this episode we discuss win-win deals, the Black Lives Matter movement and how fake facts and the new media are pushing America's once stable center to the extreme fringes. We also touch on the upcoming presidential election, why it might result in serious disruption and the importance of making contingency plans. Bullet points 00:50 - Rethinking your own freedom and independence 03:44 - Introducing Bill Bonner 08:10 - Approaching the presidential election: does the fate of the nation really hang in the balance or is this just the media doing what the media does? 09:27 - An hypothesis: is Trump derangement syndrome giving away to Trump fatigue syndrome? 12:45 - Black Lives Matter 14:07 - Bill's take on the confirmation conversation of Justice Brett Kavanaugh 15:15 - The semantic overload inherent in the Black Lives Matter label 16:35 - Bill's take on the confirmation of Justice Amy Coney Barrett 17:15 - Bill's take on Dr. Scott Atlas statement 18:49 - The new mainstream media: how much are they driving the wedge? 21:40 - A third of all voters would be willing to use violence if the election doesn't go their way 24:00 - Defending democracy 26:45 - Win-win arrangements vs. win-lose deals 34:00 - Analyzing money printing in different countries 38:33 - Having an outsider's perspective 44:17 - The entrepreneurial spirit and being of value 46:20 - Things are gonna get rough

america donald trump elections black lives matter democracy rethinking defending analyzing bullet news cycle scott atlas bill bonner

05 - Chris Mayer - A Trade of the Decade

Play Episode Listen Later Feb 19, 2021 46:46

Welcome to the fifth episode of the Bonner Private Research Podcast. I'm joined by Chris Mayer, Portfolio Manager of Woodlock House Family Capital fund and co-founder of the firm along with Bill Bonner. In this episode, we talk about what he looks for when distilling a trade of the decade, from big macro ideas down to sharp investible ones. We also touch on the mechanics of the trait itself, where he thinks we are in regards to the current credit cycle, and the inherent optimism involved in taking the long view. All that and more in my conversation with Chris Mayer. Bullet Points 00:50 - The history of gold 07:25 – The guiding principle of the trade of the decade 09:23 - Introducing Chris Mayer 10:25 - Where was Chris in 2000? 12:00 - Approaching a trade of the decade 15:10 - Studying the track records of the great investors 21:00 - The average hold time for a 100-bagger 22:03 - A look back over the past decade 26:40 - A look at the UK FTSE100 28:27 - The resource complex 29:40 - Looking at the macro picture 34:02 - Value vs. Growth 36:45 - Different risk profiles for different age cohorts 37:14 - Cryptoassets 41:00 - Investment ideas for a 5-year old 42:56 - Investment ideas for 10 years 43:32 - The trade of the decade: an inherently optimistic thought experiment?

trade investment decade studying portfolio managers chris mayer bill bonner

03 - Bill Bonner - Will the economy ever recover?

Fede Tessore - El Podcast

Play Episode Listen Later Feb 19, 2021 36:57

Welcome to the third episode of the Bonner Private Research Podcast. I'm joined by Bill Bonner, author and founder of Bonner Private Research Group. In this episode we discuss the impact of the coronavirus pandemic on the economy and why America is in decline. We also touch on the problem with printing money and examine the Argentine Paradox as an example of what not to do. Will the economy ever recover? 00:50 - Introducing Bill Bonner 07:30 - Why America is in the decline 14:05 - The impact of the coronavirus pandemic on the economy 18:50 - What not to do: The Argentine Paradox 27:53 - When the fish rots from the head: corrupted money vs honest money 32:05 - The one thing that both political parties in the U.S. agree on 35:45 - Does the Fed really know?

america economy fed recover bill bonner

The Psychology of Money · Collaborative Fund

Josh on Narro

Play Episode Listen Later Jan 16, 2021 47:38

Let me tell you the story of two investors, neither of whom knew each other, but whose paths crossed in an interesting way. Grace Groner was orphaned at age 12. She never married. She never had kids. She never drove a car. She lived most of her life alone in a one-bedroom house and worked her whole career as a secretary. She was, by all accounts, a lovely lady. But she lived a humble and quiet life. That made the $7 million she left to charity after her death in 2010 at age 100 all the more confusing. People who knew her asked: Where did Grace get all that money? But there was no secret. There was no inheritance. Grace took humble savings from a meager salary and enjoyed eighty years of hands-off compounding in the stock market. That was it. Weeks after Grace died, an unrelated investing story hit the news. Richard Fuscone, former vice chairman of Merrill Lynch’s Latin America division, declared personal bankruptcy, fighting off foreclosure on two homes, one of which was nearly 20,000 square feet and had a $66,000 a month mortgage. Fuscone was the opposite of Grace Groner; educated at Harvard and University of Chicago, he became so successful in the investment industry that he retired in his 40s to “pursue personal and charitable interests.” But heavy borrowing and illiquid investments did him in. The same year Grace Goner left a veritable fortune to charity, Richard stood before a bankruptcy judge and declared: “I have been devastated by the financial crisis … The only source of liquidity is whatever my wife is able to sell in terms of personal furnishings.” The purpose of these stories is not to say you should be like Grace and avoid being like Richard. It’s to point out that there is no other field where these stories are even possible. In what other field does someone with no education, no relevant experience, no resources, and no connections vastly outperform someone with the best education, the most relevant experiences, the best resources and the best connections? There will never be a story of a Grace Groner performing heart surgery better than a Harvard-trained cardiologist. Or building a faster chip than Apple’s engineers. Unthinkable. But these stories happen in investing. That’s because investing is not the study of finance. It’s the study of how people behave with money. And behavior is hard to teach, even to really smart people. You can’t sum up behavior with formulas to memorize or spreadsheet models to follow. Behavior is inborn, varies by person, is hard to measure, changes over time, and people are prone to deny its existence, especially when describing themselves. Grace and Richard show that managing money isn’t necessarily about what you know; it’s how you behave. But that’s not how finance is typically taught or discussed. The finance industry talks too much about what to do, and not enough about what happens in your head when you try to do it. This report describes 20 flaws, biases, and causes of bad behavior I’ve seen pop up often when people deal with money. 1. Earned success and deserved failure fallacy: A tendency to underestimate the role of luck and risk, and a failure to recognize that luck and risk are different sides of the same coin. I like to ask people, “What do you want to know about investing that we can’t know?” It’s not a practical question. So few people ask it. But it forces anyone you ask to think about what they intuitively think is true but don’t spend much time trying to answer because it’s futile. Years ago I asked economist Robert Shiller the question. He answered, “The exact role of luck in successful outcomes.” I love that, because no one thinks luck doesn’t play a role in financial success. But since it’s hard to quantify luck, and rude to suggest people’s success is owed to luck, the default stance is often to implicitly ignore luck as a factor. If I say, “There are a billion investors in the world. By sheer chance, would you expect 100 of them to become billionaires predominately off luck?” You would reply, “Of course.” But then if I ask you to name those investors – to their face – you will back down. That’s the problem. The same goes for failure. Did failed businesses not try hard enough? Were bad investments not thought through well enough? Are wayward careers the product of laziness? In some parts, yes. Of course. But how much? It’s so hard to know. And when it’s hard to know we default to the extremes of assuming failures are predominantly caused by mistakes. Which itself is a mistake. People’s lives are a reflection of the experiences they’ve had and the people they’ve met, a lot of which are driven by luck, accident, and chance. The line between bold and reckless is thinner than people think, and you cannot believe in risk without believing in luck, because they are two sides of the same coin. They are both the simple idea that sometimes things happen that influence outcomes more than effort alone can achieve. After my son was born I wrote him a letter: Some people are born into families that encourage education; others are against it. Some are born into flourishing economies encouraging of entrepreneurship; others are born into war and destitution. I want you to be successful, and I want you to earn it. But realize that not all success is due to hard work, and not all poverty is due to laziness. Keep this in mind when judging people, including yourself. 2. Cost avoidance syndrome: A failure to identify the true costs of a situation, with too much emphasis on financial costs while ignoring the emotional price that must be paid to win a reward. Say you want a new car. It costs $30,000. You have a few options: 1) Pay $30,000 for it. 2) Buy a used one for less than $30,000. 3) Or steal it. In this case, 99% of people avoid the third option, because the consequences of stealing a car outweigh the upside. This is obvious. But say you want to earn a 10% annual return over the next 50 years. Does this reward come free? Of course not. Why would the world give you something amazing for free? Like the car, there’s a price that has to be paid. The price, in this case, is volatility and uncertainty. And like the car, you have a few options: You can pay it, accepting volatility and uncertainty. You can find an asset with less uncertainty and a lower payoff, the equivalent of a used car. Or you can attempt the equivalent of grand theft auto: Take the return while trying to avoid the volatility that comes along with it. Many people in this case choose the third option. Like a car thief – though well-meaning and law-abiding – they form tricks and strategies to get the return without paying the price. Trades. Rotations. Hedges. Arbitrages. Leverage. But the Money Gods do not look highly upon those who seek a reward without paying the price. Some car thieves will get away with it. Many more will be caught with their pants down. Same thing with money. This is obvious with the car and less obvious with investing because the true cost of investing – or anything with money – is rarely the financial fee that is easy to see and measure. It’s the emotional and physical price demanded by markets that are pretty efficient. Monster Beverage stock rose 211,000% from 1995 to 2016. But it lost more than half its value on five separate occasions during that time. That is an enormous psychological price to pay. Buffett made $90 billion. But he did it by reading SEC filings 12 hours a day for 70 years, often at the expense of paying attention to his family. Here too, a hidden cost. Every money reward has a price beyond the financial fee you can see and count. Accepting that is critical. Scott Adams once wrote: “One of the best pieces of advice I’ve ever heard goes something like this: If you want success, figure out the price, then pay it. It sounds trivial and obvious, but if you unpack the idea it has extraordinary power.” Wonderful money advice. 3. Rich man in the car paradox. When you see someone driving a nice car, you rarely think, “Wow, the guy driving that car is cool.” Instead, you think, “Wow, if I had that car people would think I’m cool.” Subconscious or not, this is how people think. The paradox of wealth is that people tend to want it to signal to others that they should be liked and admired. But in reality those other people bypass admiring you, not because they don’t think wealth is admirable, but because they use your wealth solely as a benchmark for their own desire to be liked and admired. This stuff isn’t subtle. It is prevalent at every income and wealth level. There is a growing business of people renting private jets on the tarmac for 10 minutes to take a selfie inside the jet for Instagram. The people taking these selfies think they’re going to be loved without realizing that they probably don’t care about the person who actually owns the jet beyond the fact that they provided a jet to be photographed in. The point isn’t to abandon the pursuit of wealth, of course. Or even fancy cars – I like both. It’s recognizing that people generally aspire to be respected by others, and humility, graciousness, intelligence, and empathy tend to generate more respect than fast cars. 4. A tendency to adjust to current circumstances in a way that makes forecasting your future desires and actions difficult, resulting in the inability to capture long-term compounding rewards that come from current decisions. Every five-year-old boy wants to drive a tractor when they grow up. Then you grow up and realize that driving a tractor maybe isn’t the best career. So as a teenager you dream of being a lawyer. Then you realize that lawyers work so hard they rarely see their families. So then you become a stay-at-home parent. Then at age 70 you realize you should have saved more money for retirement. Things change. And it’s hard to make long-term decisions when your view of what you’ll want in the future is so liable to shift. This gets back to the first rule of compounding: Never interrupt it unnecessarily. But how do you not interrupt a money plan – careers, investments, spending, budgeting, whatever – when your life plans change? It’s hard. Part of the reason people like Grace Groner and Warren Buffett become so successful is because they kept doing the same thing for decades on end, letting compounding run wild. But many of us evolve so much over a lifetime that we don’t want to keep doing the same thing for decades on end. Or anything close to it. So rather than one 80-something-year lifespan, our money has perhaps four distinct 20-year blocks. Compounding doesn’t work as well in that situation. There is no solution to this. But one thing I’ve learned that may help is coming back to balance and room for error. Too much devotion to one goal, one path, one outcome, is asking for regret when you’re so susceptible to change. 5. Anchored-to-your-own-history bias: Your personal experiences make up maybe 0.00000001% of what’s happened in the world but maybe 80% of how you think the world works. If you were born in 1970 the stock market went up 10-fold adjusted for inflation in your teens and 20s – your young impressionable years when you were learning baseline knowledge about how investing and the economy work. If you were born in 1950, the same market went exactly nowhere in your teens and 20s: There are so many ways to cut this idea. Someone who grew up in Flint, Michigan got a very different view of the importance of manufacturing jobs than someone who grew up in Washington D.C. Coming of age during the Great Depression, or in war-ravaged 1940s Europe, set you on a path of beliefs, goals, and priorities that most people reading this, including myself, can’t fathom. The Great Depression scared a generation for the rest of their lives. Most of them, at least. In 1959 John F. Kennedy was asked by a reporter what he remembered from the depression, and answered: I have no first-hand knowledge of the depression. My family had one of the great fortunes of the world and it was worth more than ever then. We had bigger houses, more servants, we traveled more. About the only thing that I saw directly was when my father hired some extra gardeners just to give them a job so they could eat. I really did not learn about the depression until I read about it at Harvard. Since no amount of studying or open-mindedness can genuinely recreate the power of fear and uncertainty, people go through life with totally different views on how the economy works, what it’s capable of doing, how much we should protect other people, and what should and shouldn’t be valued. The problem is that everyone needs a clear explanation of how the world works to keep their sanity. It’s hard to be optimistic if you wake up in the morning and say, “I don’t know why most people think the way they do,” because people like the feeling of predictability and clean narratives. So they use the lessons of their own life experiences to create models of how they think the world should work – particularly for things like luck, risk, effort, and values. And that’s a problem. When everyone has experienced a fraction of what’s out there but uses those experiences to explain everything they expect to happen, a lot of people eventually become disappointed, confused, or dumbfounded at others’ decisions. A team of economists once crunched the data on a century’s worth of people’s investing habits and concluded: “Current [investment] beliefs depend on the realizations experienced in the past.” Keep that quote in mind when debating people’s investing views. Or when you’re confused about their desire to hoard or blow money, their fear or greed in certain situations, or whenever else you can’t understand why people do what they do with money. Things will make more sense. 6. Historians are Prophets fallacy: Not seeing the irony that history is the study of surprises and changes while using it as a guide to the future. An overreliance on past data as a signal to future conditions in a field where innovation and change is the lifeblood of progress. Geologists can look at a billion years of historical data and form models of how the earth behaves. So can meteorologists. And doctors – kidneys operate the same way in 2018 as they did in 1018. The idea that the past offers concrete directions about the future is tantalizing. It promotes the idea that the path of the future is buried within the data. Historians – or anyone analyzing the past as a way to indicate the future – are some of the most important members of many fields. I don’t think finance is one of them. At least not as much as we’d like to think. The cornerstone of economics is that things change over time, because the invisible hand hates anything staying too good or too bad indefinitely. Bill Bonner once described how Mr. Market works: “He’s got a ‘Capitalism at Work’ T-shirt on and a sledgehammer in his hand.” Few things stay the same for very long, which makes historians something far less useful than prophets. Consider a few big ones. The 401(K) is 39 years old – barely old enough to run for president. The Roth IRA isn’t old enough to drink. So personal financial advice and analysis about how Americans save for retirement today is not directly comparable to what made sense just a generation ago. Things changed. The venture capital industry barely existed 25 years ago. There are single funds today that are larger than the entire industry was a generation ago. Phil Knight wrote about his early days after starting Nike: “There was no such thing as venture capital. An aspiring young entrepreneur had very few places to turn, and those places were all guarded by risk-averse gatekeepers with zero imagination. In other words, bankers.” So our knowledge of backing entrepreneurs, investment cycles, and failure rates, is not something we have a deep base of history to learn from. Things changed. Or take public markets. The S&P 500 did not include financial stocks until 1976; today, financials make up 16% of the index. Technology stocks were virtually nonexistent 50 years ago. Today, they’re more than a fifth of the index. Accounting rules have changed over time. So have disclosures, auditing, and market liquidity. Things changed. The most important driver of anything tied to money is the stories people tell themselves and the preferences they have for goods and services. Those things don’t tend to sit still. They change with culture and generation. And they’ll keep changing. The mental trick we play on ourselves here is an over-admiration of people who have been there, done that, when it comes to money. Experiencing specific events does not necessarily qualify you to know what will happen next. In fact it rarely does, because experience leads to more overconfidence than prophetic ability. That doesn’t mean we should ignore history when thinking about money. But there’s an important nuance: The further back in history you look, the more general your takeaways should be. General things like people’s relationship to greed and fear, how they behave under stress, and how they respond to incentives tends to be stable in time. The history of money is useful for that kind of stuff. But specific trends, specific trades, specific sectors, and specific causal relationships are always a showcase of evolution in progress. 7. The seduction of pessimism in a world where optimism is the most reasonable stance. Historian Deirdre McCloskey says, “For reasons I have never understood, people like to hear that the world is going to hell.” This isn’t new. John Stuart Mill wrote in the 1840s: “I have observed that not the man who hopes when others despair, but the man who despairs when others hope, is admired by a large class of persons as a sage.” Part of this is natural. We’ve evolved to treat threats as more urgent than opportunities. Buffett says, “In order to succeed, you must first survive.” But pessimism about money takes a different level of allure. Say there’s going to be a recession and you will get retweeted. Say we’ll have a big recession and newspapers will call you. Say we’re nearing the next Great Depression and you’ll get on TV. But mention that good times are ahead, or markets have room to run, or that a company has huge potential, and a common reaction from commentators and spectators alike is that you are either a salesman or comically aloof of risks. A few things are going on here. One is that money is ubiquitous, so something bad happening tends to affect everyone, albeit in different ways. That isn’t true of, say, weather. A hurricane barreling down on Florida poses no direct risk to 92% of Americans. But a recession barreling down on the economy could impact every single person – including you, so pay attention. This goes for something as specific as the stock market: More than half of all households directly own stocks. Another is that pessimism requires action – Move! Get out! Run! Sell! Hide! Optimism is mostly a call to stay the course and enjoy the ride. So it’s not nearly as urgent. A third is that there is a lot of money to be made in the finance industry, which – despite regulations – has attracted armies of scammers, hucksters, and truth-benders promising the moon. A big enough bonus can convince even honest, law-abiding finance workers selling garbage products that they’re doing good for their customers. Enough people have been bamboozled by the finance industry that a sense of, “If it sounds too good to be true, it probably is” has enveloped even rational promotions of optimism. Most promotions of optimism, by the way, are rational. Not all, of course. But we need to understand what optimism is. Real optimists don’t believe that everything will be great. That’s complacency. Optimism is a belief that the odds of a good outcome are in your favor over time, even when there will be setbacks along the way. The simple idea that most people wake up in the morning trying to make things a little better and more productive than wake up looking to cause trouble is the foundation of optimism. It’s not complicated. It’s not guaranteed, either. It’s just the most reasonable bet for most people. The late statistician Hans Rosling put it differently: “I am not an optimist. I am a very serious possibilist.” 8. Underappreciating the power of compounding, driven by the tendency to intuitively think about exponential growth in linear terms. IBM made a 3.5 megabyte hard drive in the 1950s. By the 1960s things were moving into a few dozen megabytes. By the 1970s, IBM’s Winchester drive held 70 megabytes. Then drives got exponentially smaller in size with more storage. A typical PC in the early 1990s held 200-500 megabytes. And then … wham. Things exploded. 1999 – Apple’s iMac comes with a 6 gigabyte hard drive. 2003 – 120 gigs on the Power Mac. 2006 – 250 gigs on the new iMac. 2011 – first 4 terabyte hard drive. 2017 – 60 terabyte hard drives. Now put it together. From 1950 to 1990 we gained 296 megabytes. From 1990 through today we gained 60 million megabytes. The punchline of compounding is never that it’s just big. It’s always – no matter how many times you study it – so big that you can barely wrap your head around it. In 2004 Bill Gates criticized the new Gmail, wondering why anyone would need a gig of storage. Author Steven Levy wrote, “Despite his currency with cutting-edge technologies, his mentality was anchored in the old paradigm of storage being a commodity that must be conserved.” You never get accustomed to how quickly things can grow. I have heard many people say the first time they saw a compound interest table – or one of those stories about how much more you’d have for retirement if you began saving in your 20s vs. your 30s – changed their life. But it probably didn’t. What it likely did was surprise them, because the results intuitively didn’t seem right. Linear thinking is so much more intuitive than exponential thinking. Michael Batnick once explained it. If I ask you to calculate 8+8+8+8+8+8+8+8+8 in your head, you can do it in a few seconds (it’s 72). If I ask you to calculate 8x8x8x8x8x8x8x8x8, your head will explode (it’s 134,217,728). The danger here is that when compounding isn’t intuitive, we often ignore its potential and focus on solving problems through other means. Not because we’re overthinking, but because we rarely stop to consider compounding potential. There are over 2,000 books picking apart how Warren Buffett built his fortune. But none are called “This Guy Has Been Investing Consistently for Three-Quarters of a Century.” But we know that’s the key to the majority of his success; it’s just hard to wrap your head around that math because it’s not intuitive. There are books on economic cycles, trading strategies, and sector bets. But the most powerful and important book should be called “Shut Up And Wait.” It’s just one page with a long-term chart of economic growth. Physicist Albert Bartlett put it: “The greatest shortcoming of the human race is our inability to understand the exponential function.” The counterintuitiveness of compounding is responsible for the majority of disappointing trades, bad strategies, and successful investing attempts. Good investing isn’t necessarily about earning the highest returns, because the highest returns tend to be one-off hits that kill your confidence when they end. It’s about earning pretty good returns that you can stick with for a long period of time. That’s when compounding runs wild. 9. Attachment to social proof in a field that demands contrarian thinking to achieve above-average results. The Berkshire Hathaway annual meeting in Omaha attracts 40,000 people, all of whom consider themselves contrarians. People show up at 4 am to wait in line with thousands of other people to tell each other about their lifelong commitment to not following the crowd. Few see the irony. Anything worthwhile with money has high stakes. High stakes entail risks of being wrong and losing money. Losing money is emotional. And the desire to avoid being wrong is best countered by surrounding yourself with people who agree with you. Social proof is powerful. Someone else agreeing with you is like evidence of being right that doesn’t have to prove itself with facts. Most people’s views have holes and gaps in them, if only subconsciously. Crowds and social proof help fill those gaps, reducing doubt that you could be wrong. The problem with viewing crowds as evidence of accuracy when dealing with money is that opportunity is almost always inversely correlated with popularity. What really drives outsized returns over time is an increase in valuation multiples, and increasing valuation multiples relies on an investment getting more popular in the future – something that is always anchored by current popularity. Here’s the thing: Most attempts at contrarianism is just irrational cynicism in disguise – and cynicism can be popular and draw crowds. Real contrarianism is when your views are so uncomfortable and belittled that they cause you to second guess whether they’re right. Very few people can do that. But of course that’s the case. Most people can’t be contrarian, by definition. Embrace with both hands that, statistically, you are one of those people. 10. An appeal to academia in a field that is governed not by clean rules but loose and unpredictable trends. Harry Markowitz won the Nobel Prize in economics for creating formulas that tell you exactly how much of your portfolio should be in stocks vs. bonds depending on your ideal level of risk. A few years ago the Wall Street Journal asked him how, given his work, he invests his own money. He replied: I visualized my grief if the stock market went way up and I wasn’t in it – or if it went way down and I was completely in it. My intention was to minimize my future regret. So I split my contributions 50/50 between bonds and equities. There are many things in academic finance that are technically right but fail to describe how people actually act in the real world. Plenty of academic finance work is useful and has pushed the industry in the right direction. But its main purpose is often intellectual stimulation and to impress other academics. I don’t blame them for this or look down upon them for it. We should just recognize it for what it is. One study I remember showed that young investors should use 2x leverage in the stock market, because – statistically – even if you get wiped out you’re still likely to earn superior returns over time, as long as you dust yourself off and keep investing after a wipeout. Which, in the real world, no one would actually do. They’d swear off investing for life. What works on a spreadsheet and what works at the kitchen table are ten miles apart. The disconnect here is that academics typically desire very precise rules and formulas. But real-world people use it as a crutch to try to make sense of a messy and confusing world that, by its nature, eschews precision. Those are opposite things. You cannot explain randomness and emotion with precision and reason. People are also attracted to the titles and degrees of academics because finance is not a credential-sanctioned field like, say, medicine is. So the appearance of a Ph.D stands out. And that creates an intense appeal to academia when making arguments and justifying beliefs – “According to this Harvard study …” or “As Nobel Prize winner so and so showed …” It carries so much weight when other people cite, “Some guy on CNBC from an eponymous firm with a tie and a smile.” A hard reality is that what often matters most in finance will never win a Nobel Prize: Humility and room for error. 11. The social utility of money coming at the direct expense of growing money; wealth is what you don’t see. I used to park cars at a hotel. This was in the mid-2000s in Los Angeles, when real estate money flowed. I assumed that a customer driving a Ferrari was rich. Many were. But as I got to know some of these people, I realized they weren’t that successful. At least not nearly what I assumed. Many were mediocre successes who spent most of their money on a car. If you see someone driving a $200,000 car, the only data point you have about their wealth is that they have $200,000 less than they did before they bought the car. Or they’re leasing the car, which truly offers no indication of wealth. We tend to judge wealth by what we see. We can’t see people’s bank accounts or brokerage statements. So we rely on outward appearances to gauge financial success. Cars. Homes. Vacations. Instagram photos. But this is America, and one of our cherished industries is helping people fake it until they make it. Wealth, in fact, is what you don’t see. It’s the cars not purchased. The diamonds not bought. The renovations postponed, the clothes forgone and the first-class upgrade declined. It’s assets in the bank that haven’t yet been converted into the stuff you see. But that’s not how we think about wealth, because you can’t contextualize what you can’t see. Singer Rihanna nearly went broke after overspending and sued her financial advisor. The advisor responded: “Was it really necessary to tell her that if you spend money on things, you will end up with the things and not the money?” You can laugh. But the truth is, yes, people need to be told that. When most people say they want to be a millionaire, what they really mean is “I want to spend a million dollars,” which is literally the opposite of being a millionaire. This is especially true for young people. A key use of wealth is using it to control your time and providing you with options. Financial assets on a balance sheet offer that. But they come at the direct expense of showing people how much wealth you have with material stuff. 12. A tendency toward action in a field where the first rule of compounding is to never interrupt it unnecessarily. If your sink breaks, you grab a wrench and fix it. If your arm breaks, you put it in a cast. What do you do when your financial plan breaks? The first question – and this goes for personal finance, business finance, and investing plans – is how do you know when it’s broken? A broken sink is obvious. But a broken investment plan is open to interpretation. Maybe it’s just temporarily out of favor? Maybe you’re experiencing normal volatility? Maybe you had a bunch of one-off expenses this quarter but your savings rate is still adequate? It’s hard to know. When it’s hard to distinguish broken from temporarily out of favor, the tendency is to default to the former, and spring into action. You start fiddling with the knobs to find a fix. This seems like the responsible thing to do, because when virtually everything else in your life is broken, the correct action is to fix it. There are times when money plans need to be fixed. Oh, are there ever. But there is also no such thing as a long-term money plan that isn’t susceptible to volatility. Occasional upheaval is usually part of a standard plan. When volatility is guaranteed and normal, but is often treated as something that needs to be fixed, people take actions that ultimately just interrupts the execution of a good plan. “Don’t do anything,” are the most powerful words in finance. But they are both hard for individuals to accept and hard for professionals to charge a fee for. So, we fiddle. Far too much. 13. Underestimating the need for room for error, not just financially but mentally and physically. Ben Graham once said, “The purpose of the margin of safety is to render the forecast unnecessary.” There is so much wisdom in this quote. But the most common response, even if subconsciously, is, “Thanks Ben. But I’m good at forecasting.” People underestimate the need for room for error in almost everything they do that involves money. Two things cause this: One is the idea that your view of the future is right, driven by the uncomfortable feeling that comes from admitting the opposite. The second is that you’re therefore doing yourself economic harm by not taking actions that exploit your view of the future coming true. But room for error is underappreciated and misunderstood. It’s often viewed as a conservative hedge, used by those who don’t want to take much risk or aren’t confident in their views. But when used appropriately it’s the opposite. Room for error lets you endure, and endurance lets you stick around long enough to let the odds of benefiting from a low-probability outcome fall in your favor. The biggest gains occur infrequently, either because they don’t happen often or because they take time to compound. So the person with enough room for error in part of their strategy to let them endure hardship in the other part of their strategy has an edge over the person who gets wiped out, game over, insert more tokens, when they’re wrong. There are also multiple sides to room for error. Can you survive your assets declining by 30%? On a spreadsheet, maybe yes – in terms of actually paying your bills and staying cash-flow positive. But what about mentally? It is easy to underestimate what a 30% decline does to your psyche. Your confidence may become shot at the very moment opportunity is at its highest. You – or your spouse – may decide it’s time for a new plan, or new career. I know several investors who quit after losses because they were exhausted. Physically exhausted. Spreadsheets can model the historic frequency of big declines. But they cannot model the feeling of coming home, looking at your kids, and wondering if you’ve made a huge mistake that will impact their lives. 14. A tendency to be influenced by the actions of other people who are playing a different financial game than you are. Cisco stock went up three-fold in 1999. Why? Probably not because people actually thought the company was worth $600 billion. Burton Malkiel once pointed out that Cisco’s implied growth rate at that valuation meant it would become larger than the entire U.S. economy within 20 years. Its stock price was going up because short-term traders thought it would keep going up. And they were right, for a long time. That was the game they were playing – “this stock is trading for $60 and I think it’ll be worth $65 before tomorrow.” But if you were a long-term investor in 1999, $60 was the only price available to buy. So you may have looked around and said to yourself, “Wow, maybe others know something I don’t.” And you went along with it. You even felt smart about it. But then the traders stopped playing their game, and you – and your game – was annihilated. What you don’t realize is that the traders moving the marginal price are playing a totally different game than you are. And if you start taking cues from people playing a different game than you are, you are bound to be fooled and eventually become lost, since different games have different rules and different goals. Few things matter more with money than understanding your own time horizon and not being persuaded by the actions and behaviors of people playing different games. This goes beyond investing. How you save, how you spend, what your business strategy is, how you think about money, when you retire, and how you think about risk may all be influenced by the actions and behaviors of people who are playing different games than you are. Personal finance is deeply personal, and one of the hardest parts is learning from others while realizing that their goals and actions might be miles removed from what’s relevant to your own life. 15. An attachment to financial entertainment due to the fact that money is emotional, and emotions are revved up by argument, extreme views, flashing lights, and threats to your wellbeing. If the average American’s blood pressure went up by 3%, my guess is a few newspapers would cover it on page 16, nothing would change, and we’d move on. But if the stock market falls 3%, well, no need to guess how we might respond. This is from 2015: “President Barack Obama has been briefed on Monday’s choppy global market movement.” Why does financial news of seemingly low importance overwhelm news that is objectively more important? Because finance is entertaining in a way other things – orthodontics, gardening, marine biology – are not. Money has competition, rules, upsets, wins, losses, heroes, villains, teams, and fans that makes it tantalizingly close to a sporting event. But it’s even an addiction level up from that, because money is like a sporting event where you’re both the fan and the player, with outcomes affecting you both emotionally and directly. Which is dangerous. It helps, I’ve found, when making money decisions to constantly remind yourself that the purpose of investing is to maximize returns, not minimize boredom. Boring is perfectly fine. Boring is good. If you want to frame this as a strategy, remind yourself: opportunity lives where others aren’t, and others tend to stay away from what’s boring. 16. Optimism bias in risk-taking, or “Russian Roulette should statistically work” syndrome: An over attachment to favorable odds when the downside is unacceptable in any circumstance. Nassim Taleb says, “You can be risk loving and yet completely averse to ruin.” The idea is that you have to take risk to get ahead, but no risk that could wipe you out is ever worth taking. The odds are in your favor when playing Russian Roulette. But the downside is never worth the potential upside. The odds of something can be in your favor – real estate prices go up most years, and most years you’ll get a paycheck every other week – but if something has 95% odds of being right, then 5% odds of being wrong means you will almost certainly experience the downside at some point in your life. And if the cost of the downside is ruin, the upside the other 95% of the time likely isn’t worth the risk, no matter how appealing it looks. Leverage is the devil here. It pushes routine risks into something capable of producing ruin. The danger is that rational optimism most of the time masks the odds of ruin some of the time in a way that lets us systematically underestimate risk. Housing prices fell 30% last decade. A few companies defaulted on their debt. This is capitalism – it happens. But those with leverage had a double wipeout: Not only were they left broke, but being wiped out erased every opportunity to get back in the game at the very moment opportunity was ripe. A homeowner wiped out in 2009 had no chance of taking advantage of cheap mortgage rates in 2010. Lehman Brothers had no chance of investing in cheap debt in 2009. My own money is barbelled. I take risks with one portion and am a terrified turtle with the other. This is not inconsistent, but the psychology of money would lead you to believe that it is. I just want to ensure I can remain standing long enough for my risks to pay off. Again, you have to survive to succeed. A key point here is that few things in money are as valuable as options. The ability to do what you want, when you want, with who you want, and why you want, has infinite ROI. 17. A preference for skills in a field where skills don’t matter if they aren’t matched with the right behavior. This is where Grace and Richard come back in. There is a hierarchy of investor needs, and each topic here has to be mastered before the one above it matters: Richard was very skilled at the top of this pyramid, but he failed the bottom blocks, so none of it mattered. Grace mastered the bottom blocks so well that the top blocks were hardly necessary. 18. Denial of inconsistencies between how you think the world should work and how the world actually works, driven by a desire to form a clean narrative of cause and effect despite the inherent complexities of everything involving money. Someone once described Donald Trump as “Unable to distinguish between what happened and what he thinks should have happened.” Politics aside, I think everyone does this. There are three parts to this: You see a lot of information in the world. You can’t process all of it. So you have to filter. You only filter in the information that meshes with the way you think the world should work. Since everyone wants to explain what they see and how the world works with clean narratives, inconsistencies between what we think should happen and what actually happens are buried. An example. Higher taxes should slow economic growth – that’s a common sense narrative. But the correlation between tax rates and growth rates is hard to spot. So, if you hold onto the narrative between taxes and growth, you say there must be something wrong with the data. And you may be right! But if you come across someone else pushing aside data to back up their narrative – say, arguing that hedge funds have to generate alpha, otherwise no one would invest in them – you spot what you consider a bias. There are a thousand other examples. Everyone just believes what they want to believe, even when the evidence shows something else. Stories over statistics. Accepting that everything involving money is driven by illogical emotions and has more moving parts than anyone can grasp is a good start to remembering that history is the study of things happening that people didn’t think would or could happen. This is especially true with money. 19. Political beliefs driving financial decisions, influenced by economics being a misbehaved cousin of politics. I once attended a conference where a well known investor began his talk by saying, “You know when President Obama talks about clinging to guns and bibles? That is me, folks. And I’m going to tell you today about how his reckless policies are impacting the economy.” I don’t care what your politics are, there is no possible way you can make rational investment decisions with that kind of thinking. But it’s fairly common. Look at what happens in 2016 on this chart. The rate of GDP growth, jobs growth, stock market growth, interest rates – go down the list – did not materially change. Only the president did: Years ago I published a bunch of economic performance numbers by president. And it drove people crazy, because the data often didn’t mesh with how they thought it should based on their political beliefs. Soon after a journalist asked me to comment on a story detailing how, statistically, Democrats preside over stronger economies than Republicans. I said you couldn’t make that argument because the sample size is way too small. But he pushed and pushed, and wrote a piece that made readers either cheer or sweat, depending on their beliefs. The point is not that politics don’t influence the economy. But the reason this is such a sensitive topic is because the data often surprises the heck out of people, which itself is a reason to realize that the correlation between politics and economics isn’t as clear as you’d like to think it is. 20. The three-month bubble: Extrapolating the recent past into the near future, and then overestimating the extent to which whatever you anticipate will happen in the near future will impact your future. News headlines in the month after 9/11 are interesting. Few entertain the idea that the attack was a one-off; the next massive terrorist attack was certain to be around the corner. “Another catastrophic terrorist attack is inevitable and only a matter of time,” one defense analyst said in 2002. “A top counterterrorism official says it’s ‘a question of when, not if,” wrote another headline. Beyond the anticipation that another attack was imminent was a belief that it would affect people the same way. The Today Show ran a segment pitching parachutes for office workers to keep under their desks in case they needed to jump out of a skyscraper. Believing that what just happened will keep happening shows up constantly in psychology. We like patterns and have short memories. The added feeling that a repeat of what just happened will keep affecting you the same way is an offshoot. And when you’re dealing with money it can be a torment. Every big financial win or loss is followed by mass expectations of more wins and losses. With it comes a level of obsession over the effects of those events repeating that can be wildly disconnected from your long-term goals. Example: The stock market falling 40% in 2008 was followed, uninterrupted for years, with forecasts of another impending plunge. Expecting what just happened to happen soon again is one thing, and an error in itself. But not realizing that your long-term investing goals could remain intact, unharmed, even if we have another big plunge, is the dangerous byproduct of recency bias. “Markets tend to recover over time and make new highs” was not a popular takeaway from the financial crisis; “Markets can crash and crashes suck,” was, despite the former being so much more practical than the latter. Most of the time, something big happening doesn’t increase the odds of it happening again. It’s the opposite, as mean reversion is a merciless law of finance. But even when something does happen again, most of the time it doesn’t – or shouldn’t – impact your actions in the way you’re tempted to think, because most extrapolations are short term while most goals are long term. A stable strategy designed to endure change is almost always superior to one that attempts to guard against whatever just happened happening again. If there’s a common denominator in these, it’s a preference for humility, adaptability, long time horizons, and skepticism of popularity around anything involving money. Which can be summed up as: Be prepared to roll with the punches. Jiddu Krishnamurti spent years giving spiritual talks. He became more candid as he got older. In one famous talk, he asked the audience if they’d like to know his secret. He whispered, “You see, I don’t mind what happens.” That might be the best trick when dealing with the psychology of money. http://www.collaborativefund.com/blog/the-psychology-of-money/ growing businessand answeredsingle funds todayS&P 500stories people tell themselvesdirectly ownwe know that’s the keyI remember This is from 2015Barack Obamaone above it mattersis hard to spot.I published

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#139 – Tres estrategias para emprender con éxito - Consejos de Mark Ford - FTS

Play Episode Listen Later Sep 16, 2020 15:53

Hoy les propongo cambiar de tema, no vamos a hablar de inversiones, sino que vamos a hablar de emprendimientos, de técnicas y estrategias para hacer crecer los negocios que luego nos van a dar el dinero para poder invertir.Y en ese sentido, quiero compartirles tres estrategias para emprender, para hacer crecer negocios con éxito. Estas tres estrategias no sólo me permitieron a mi hacer crecer mis negocios, sino también a miles de emprendedores en todo el mundo. Son tres estrategias que no invente yo, pero si son estrategias que usé en el pasado y que me sirvieron y que me funcionaron bien y que creo que te pueden servir también a vos, por eso las comparto.Estas estrategias las invento un gran emprendedor, que no solo admiro mucho sino que además tengo la suerte de tener como amigo y mentor. Este gran emprendedor se llama Mark Ford, y tal vez algunos de ustedes ya lo conozcan.Mark Ford es norteamericano y en sus más de 40 años de experiencia en el mundo de los negocios ha fundado varias empresas, en diferentes partes del mundo, en una gran variedad de rubros como el de las publicaciones o medios, real estate o finanzas.Conocí a Mark en el año 2008, en una visita que hizo a Buenos Aires con su socio Bill Bonner. Los dos me vinieron a visitar a la oficina que tenía en ese momento en Buenos Aires, en la esquina de Callao y Santa Fe donde teníamos un muy lindo centro de capacitación con varias clases donde recibíamos cientos de alumnos de todo el país.00:00 Introducción01:15 Quién es Mark Ford02:05 Cómo lo conocí a Mark04:48 La estrategia del emprendedor Gallina07:00 Atajos a la estrategia 08:49 Estrategia Preparados, Fuego, Apunten12:22 Estrategia 25/25/5015:00 Cómo acceder a mas conocimiento de Mark

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#99 Dan Denning: Investing Defensively & bear market prospects

State of the Markets

Play Episode Listen Later Jun 3, 2020 70:15

Dan Denning is the co-author of The Bonner-Denning Letter. Along with his co-author Bill Bonner, Dan writes about the stock market, classical economics, and classical liberal values like sound money, limited government, and the rule of law. He began his financial publishing career in 1997 and has lived and worked in London, Paris, and Melbourne. He can be found on Twitter https://www.twitter.com/danielkdenning Media picks: Altered Carbon (Netflix): https://g.co/kgs/k45k6n Alpha Go https://youtu.be/WXuK6gekU1Y HyperNormalisation: https://youtu.be/fh2cDKyFdyUn Andrew Cotter: https://twitter.com/mrandrewcotter?lang=en State of the Markets Podcast Paul Rodriguez of https://ThinkTrading.com https://twitter.com/prodr1guez Tim Price of https://Pricevaluepartners.com https://twitter.com/timfprice Podcast links: https://sotmpodcast.com https://anchor.fm/stateofthemarkets https://apple.co/2OUGW6R All podcasts available on youtube: https://www.youtube.com/channel/UC-tcfr0by81zN6DMn2Oii0A --- Send in a voice message: https://anchor.fm/stateofthemarkets/message

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EP#12 - HELENA DE GUIDE - ELA APRENDEU COPYWRITING COM OS MAIORES E MELHORES DO MUNDO.

Teste A/Z

Play Episode Listen Later Feb 4, 2020 98:55

Helena de Guide é copywriter na Empiricus há 4 anos e já escreveu inúmeras cartas de vendas com resultados extraordinários. Hoje ela é o braço direito do Beto Altenhofen no Copycamp, o curso de Copywriting da Empiricus. Já participou de treinamentos e imersões da Agora Company nos Estados Unidos, aprendendo copy com nada menos que Mark Ford e Bill Bonner. Cheia de carisma ela abriu os principais aprendizados que teve na sua carreira e recheou esse episódio com indicações e dicas práticas.

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TTS207 Joel Bowman

The Tatiana Show!

Play Episode Listen Later Jul 30, 2019 54:00

Joel Bowman, a writer who has written from more than 85 countries, was our special Vaultoro guest this week. Tatiana and Josh have a long history with him, and have met with him across Europe and in Argentina. We discuss the impact of sound money, the future of economics, free markets, and more about Joel's work with previous Tatiana Show guest Doug Casey. Joel Bowman is an independent writer, speaker and incurable peripatetic with over 15 years publishing experience. During his professional career, Joel has written from more than 85 countries, a dozen of which he called temporary home. His columns have appeared in well known libertarian outlets, such as Mises.org, FEE.org, lewrockwell.com and The Daily Reckoning, which he managed for 5 years with Bill Bonner and Addison Wiggin. Joel speaks regularly at conferences in North and South America as well as in Europe and his birth country, Australia. Topics of interest include philosophical anarchism, internationalization, cryptocurrency and the decentralization revolution. Joel is also a novelist, currently penning his second work of literary fiction and host of the upcoming podcast, The Joel Bowman Show. If you like this content, please send a tip with BTC to: 1444meJi7YjgQGNg3U8Z6qYZFA5cgz4Gmj More Info: TatianaMoroz.com CryptoMediaHub.com JoelBowmanShow.com Friends and Sponsors of the Show Vaultoro.com Proof of Lovecast

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Writing Copy in Scenes

Copywriters Podcast

Play Episode Listen Later Jul 29, 2019

We start with some very powerful copy from the great Bill Bonner, which is written in a way most copy is not written. For the purposes of today’s show, we’ll call this “writing copy in scenes.” Writing this way makes the copy come across as very immediate and real… and sets up the reader in a very good way for what comes next. In today’s show, we talk about: - What writing in scenes means, and why it’s so much more powerful than simply writing with either facts, benefits, or the type of stories most copy contains - The big difference between writing in “narrative” style, and writing in scenes - A couple of examples from outside copywriting that make “scenes” crystal-clear - How writing in scenes works, and why it works - A simple way to get started writing your copy in scenes - Some additional tips from another renowned writing teacher - The four parts of your copy where writing in scenes will make the biggest difference in influence, and conversions! Download.

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Writing Copy in Scenes

Copywriters Podcast

Play Episode Listen Later Jul 29, 2019

movies writing fiction scenes copywriting screenplays writing copy bill bonner

065: How to Internationalize Your Life - Joel Bowman

The Expat Money Show - With Mikkel Thorup

Play Episode Listen Later Feb 15, 2019 61:22

Joel Bowman, the Editorial Director for https://internationalman.com/ (International Man), talks to us today about real-world economic examples. He works alongside https://expatmoneyshow.com/doug-casey-anarcho-capitalist-speculator-autobiography/ (Doug Casey) and Dr. John Hunt helping individuals around the world to understand how internationalizing your life can free you from the State. During Joel Bowman's professional career, he has written from more than 85 countries, a dozen of which he called temporary home. His columns have appeared in well know libertarian outlets, such as Mises.org, https://fee.org/ (FEE.org), https://www.lewrockwell.com/ (lewrockwell.com) and The Daily Reckoning, which he managed for 5 years with Bill Bonner and Addison Wiggin. He speaks regularly at conferences around the world on topics including philosophical anarchism, internationalizing your life and the decentralization revolution. Real World Economic Examples Listen in to this amazing episode to hear Joel Bowman and Mikkel Thorup discuss real-world economic examples. We've never done an episode like this, so if you want to understand world economics past, present, and future, then you'll love this interview. Also, we delve into how our life can look when these lessons are implemented; therefore, creating a more interesting and peaceful life. Internationalizing Your Life Have you ever wondered what this means? 'Internationalizing Your Life' Today we chat about why and how this can be done, from the beginning of deciding this life is for you, to implementing all of the steps for yourself. Here are a few of the ideas you can look at to see if internationalizing your life is for you: Cost of Living in your current home city Monthly outlay, examples: mortgage, credit card repayment, car insurance Health Insurance Cost Also, never think you can't afford it, you can afford it! Travel is Fatal to Prejudice, Bigotry and Narrow Mindedness, and Many of Our People Need It Sorely on These Accounts ~ Mark Twain 1869 Once you start traveling and seeing the world, the way others live, you start to question how you were brought up, what the governments have been telling you; most importantly, our schooling. Besides that, we have thousands of different ways to see culture, and there is no right way or wrong way. 'Learn By Doing' - Doug Casey You can learn more about Joel Bowman and his work at https://internationalman.com/ (InternationMan.com) FINAL THOUGHTS This interview is a real-life model of how to internationalize your life with Joel Bowman and I thoroughly enjoyed our conversation. The how-to episode for those that don't think they can do it. If you would like to stay up to date with all new content that comes out at https://expatmoneyshow.com/subscribe/ (The Expat Money Show) make sure you sign up below for our newsletter; EMS Pulse. – My behind the scene daily correspondence where I give you all the intel as I travel the world and build my business, develop key relationships and invest in non-traditional investments overseas (very profitably I might add!) Support this podcast

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CW 1032 FBF – What Central Banks Do To Real Estate Investors & Aligning Investments With The Fed, The Creature From Jekyll Island

Creating Wealth Real Estate Investing with Jason Hartman

Play Episode Listen Later Jul 27, 2018 45:20

Today's Flash Back Friday comes from Episode 653, originally published in March 2016. Jason's mom will be attending the upcoming Venture Alliance Mastermind trip to Jekyll Island. She decided to prepare herself by reading the updated version of The Creature from Jekyll Island again. She and Jason review sections of the book and discuss the insanity which is the Federal Reserve and how the entity came to be. You are invited to join Jason and his mother on the Jekyll Island trip as a Venture Alliance member or as a guest. If you attend you will experience a piece of American financial history and possibly have your coffee disturbed by a famous hotel ghost. Key Takeaways: [3:47] Jason's mother's assessment of the book “The Creature From Jekyll Island” and the history of the Federal Reserve. [12:27] The ghosts of the Jekyll Island hotel do more than drink the guests coffee, they pick pockets too. [18:28] Past podcasts guests, Chris Martenson and Bill Bonner agree, the Federal Reserve system is convoluted. [22:38] We all easily pay 60% or more of our income to some sort of tax. [32:36] Listeners must see the 99 Homes, The Big Short and Life and Debt documentaries. [34:11] The government can tax people through taxes or inflation, which is the hidden tax. [40:06] When you invest in income property you align yourself with the Federal Reserve. Websites: Jason Hartman Venture Alliance Mastermind

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#49 - As diferentes escolas de copywriting com João Campos

Dominando o Jogo

Play Episode Listen Later Jul 18, 2018 77:25

Quer aprender mais sobre copywriting? Este episódio é incrível e nosso convidado João Campos trouxe um conhecimento que poucas pessoas tem acesso! -> As 3 diferentes escolas de copy write (16m) As três escolas de copywriting: Benefícios, Provas e Idéias 1. BENEFÍCIOS (1914) * Claude C. Hopkins, John E. Kennedy e Albert Lasker Livro em português: A ciência da propaganda -https://www.estantevirtual.com.br/livros/claude-hopkins/a-ciencia-da-propaganda/892226551 * TRANSIÇÃO BENEFÍCIOS/BIG IDEA: (20m) - Gary Halbert (Livro The Boron Letters), Eugene Schwartz (1966), David Ogilvy (Começa BIG IDEA, Dan Kennedy Jay Abraham e John Carlton 2. PROVA (2005) * Aconteceu paralelo a transição de Benefícios/Big Ideas * Gary Bencivenga * Make them believe do Dan Kennedy 3. BIG IDEIA (http://theagora.com) - Bill Bonner, Mark Ford e Todd Brown - Livros: Great Leads, The Architecture of Persuasion, Copy Clinic, The Agora's Big Black Book - Clayton Makepeace - http://www.makepeacetotalpackage.com Livro: Quickstart Copywriting System - https://www.awai.com/p/qsc/ --------------------- Precisa de ajuda para criar seu podcast? Para produção, edição e distribuição entre em contato com cassiohff@gmail.com

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June 24, 2018 - "Lessons from the Vineyard" by Pastor Bill Bonner

Waterbrooke Christian Church

Play Episode Listen Later Jun 27, 2018 32:33

This Sunday, we have the joy and privilege of having Pastor Bill Bonner speaking. Bill and Maureen as a couple were the founding leaders/planters for Waterbrooke Church and have been instruments of Christ in the lives of many of our Waterbrooke family. Come and worship and rejoice in God’s unfailing love and pray that God would bless and encourage the Bonners as they join us to glorify Christ!

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How to Spot Breakout 100-Bagger Stocks

Play Episode Listen Later Jun 20, 2018 52:20

Chris Mayer, editor of Chris Mayer’s Focus at Bonner & Partners, joins Buck to discuss the four simple things anyone can do to succeed in the stock market, how he builds a portfolio for the stock-averse founder of Agora Publishing, Bill Bonner, and what he looks for in companies that could be potential “100 bagger” investments. John Gillin and Scott Garliss stop by to give you a preview of the new Investors Marketcast podcast from Stansberry Research. You’ll hear about the classic signs of a recession that are starting to be more obvious in economies around the globe, why a projected 2.25% Fed rate hike could be deadly for bond markets by 2020, and what it means for the markets right now when fund managers are still holding record amounts of cash. Try Chris Mayer’s Focus risk free when you go to www.FocusOffer.com

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Why GE Could Be the Next Enron & How to Fix Corporate America

Play Episode Listen Later Feb 1, 2018 76:58

Porter reveals why no major media outlet will cover his best-selling book, American Jubilee, which has sold over 50,000 copies in the last few months. Is the dirty math at General Electric about to get a lot worse? Porter has new information about dubious accounting practices used at GE that could potentially put the conglomerate in the same league as Enron. He offers a solution for corporate America that would immediately stop the crazy debt madness and financial shenanigans found at some major public companies. Dan Denning of the Bill Bonner Letter joins Buck and Porter to talk about the early days of Porter’s publishing business, why he recently traveled 3,000 miles out west looking for “bolt hole” communities, how he hates to disagree with Steve Sjuggerud, and what newsletters he’s reading these days for ideas and inspiration. The mailbag is filled with questions about Porter’s natural gas prediction, capital efficiency, and the Stansberry Alliance. One listener writes in to tell everyone how he was almost “Bucked” on a position in GE before he heard Porter’s analysis. 0:38: Porter tells Buck about his new status as a best-selling author, and theorizes about why the New York Times will never put him on their bestseller list. 4:00: Porter reads from Grant’s Interest Rate Observer regarding the Multi-Employer Pension Reform Act of 2014 that gives pension plans an avenue to reduce payments to their beneficiaries up to 50%. 7:18: What’s going on in the FBI? Buck breaks down the latest in the FBI’s alleged plans to take down Trump’s campaign in what could be a bigger scandal than Watergate, and why he’s still reserving judgement. 10:35: Buck makes a prediction if Democrats take Congress this fall: They will impeach Donald Trump. It’s what their base will demand they run on – but even if they take control, one threshold in the Senate might save Trump. 12:43: Porter shares his own radical fix for our broken, circular-firing squad politics: Give citizens voting power equal to the taxes they pay. “Look at the history of our democracy since we went to universal suffrage – they’re not good outcomes.” 23:15: Porter picks apart the lie that ballooning CEO compensation is “just what the market bears out” and reveals why the situation with GE is about to get $20 billion worse. 27:36: Buck introduces Dan Denning, and Porter shares the story of how he was broke, recently fired, and “at loose ends” when Dan’s seemingly small but momentous gesture let him launch a newsletter empire. 30:22: Porter asks Dan which newsletters he’s reading these days and he tells you why he never likes to disagree with Steve Sjuggerud. Dan gives Porter a tip about a favorite new writer he’s reading that you’ve likely never heard of before. 36:49: Dan tells you about his recent 3,000-mile journey in the western US looking for “bolt hole” communities that you can move to in times of crisis. He found whole parts of America that are emptying out, but offering great opportunities in real estate and peace of mind. 40:09: There’s one recommendation that probably embodies his investing philosophy better than any other – Hershey – and Porter reveals what makes it so special. Dan shares the two qualities he looks for, and the investment that went up 5,000% after he recommended it. 45:44: There’s only one area where Porter thinks Agora founder Bill Bonner’s been wrong for as long as he’s known him, and that’s his general aversion to the stock market. “Aren’t you giving up too much upside?” 49:26: Dan explains why history is of little help making sense of today’s markets where traditional asset class relationships don’t seem to be working anymore. Porter agrees and goes into detail on how the true barometer of financial excesses today isn’t in the stock market. 58:34: With a small amount of envy, Porter shares the findings from the full audit of Steve Sjuggerud’s newsletter recommendations, and how since inception of his letter in 2001, the average gain is 20.6% – a record that beats virtually every hedge fund and mutual fund, and doubles the S&P 500’s return. 1:06:02: Buck reaches into the mailbag and pulls out a question from Jim T., who asks Porter how he gets his prediction that natural gas prices will rise to $10 when fracking is already unleashing such a supply glut. Porter responds it all comes down to what the Chinese will STOP doing.

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The Myth of Artificial Intelligence, Manning Up, and a Trip to Nicaragua

Play Episode Listen Later Nov 9, 2017 64:55

Porter reports on Rancho Santana – the Nicaraguan development started by Bill Bonner and Agora over 20 years ago that has turned into a world-class boutique resort featured in the New York Times, Forbes, Travel & Leisure, and Bloomberg. Why are investors and retirees so interested in this part of Central America? Porter and his special guest from Rancho reveal why Nicaragua is finally getting noticed as a place to vacation, invest, and live full-time. Buck sits down with Kenneth Cukier – senior technology editor at The Economist and co-author of Big Data: A Revolution That Will Transform How We Live, Work, and Think. Kenn explains to Buck why many of the doomsday scenarios surrounding artificial intelligence you hear from the likes of Tesla’s Elon Musk are dead wrong. Entrepreneur, author, and business coach Bedros Keuilian joins the show to tell you why you need to unlock your leadership potential and make business decisions that move you forward right now. Bedros tells Buck how he almost lost his entire business because he didn’t man up and confront the problems right in front of him. Buck tells you how you can join us at the 2018 Stansberry Winter Investment Conference at Rancho Santana in February. Full details at www.stansberryrancho.com.

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How to Profit from the Death of Retail. Guest Bill Bonner.