Worst Crash Of Our Lifetime Ahead? "Great Depression Meets Weimar Germany" Warns John Rubino

if they get it wrong I mean if they if they make things worse with government responses to these things then then it could be the worst things worst thing we've seen in our lifetime certainly it could be something like a combination of the Great Depression and Weimar Germany or something like that very easily based on the numbers [Music] welcome to wealthyon I'm Wealthy on Founder Adam Taggart coal miners were famous for bringing canaries down into the mines with them as the birds served as an early warning system for poisonous gases if the canary suddenly died that was an important signal for the miners to drop everything and rush back to the surface today's guest expert macro analyst John Rubino has shared with us in the past the early warning indicator he watches closely to alert him when a recession is likely about to hit and that indicator has suddenly started flashing a bright warning what's the indicator and what's it telling us to expect to find out we'll ask them directly John thanks so much for joining us today hey Adam thanks for having me on good to talk to you again great well John look it's always a pleasure to have you on the program I your highly requested guest by the audience here but you're also a good friend we have lots of great discussions uh you know on our own off Channel um but it's always fun to have you back on and dive into things and this one's going to be really fun because uh we had you on this channel gosh I don't know almost a year ago when we were talking about um uh people's uh experts Brown M M's and that's a reference back to the old Rider and the Van Halen contract you know when they would show up at a venue they demanded that there be a bowl with all the brown M M's removed and everybody thought that they were big prima donnas but it was genius because they had such a complicated technological show with pyrotechnics where people could get injured they wanted to make sure that the venue that they were showing up at the people there had read the contract really closely and so they could just look at that bowl and if they saw Brown M M's in it they would say hey these guys didn't set the venue up well we have to check everything so um back when we uh when I asked you what are some of your brown M M's you told us what your indicator is which I'm going to keep it keep keep people in suspense about for just another minute um because before we get to it I do just want to start with a question I normally ask all my guests at the beginning which is what's your current assessment of the global economy and financial markets well the the world in general is a horrendous mess right now we've been making terrible mistakes since the at least the 1970s and there are those who would say that the uh the mistakes go back to 1913 with the formation of the FED but basically we've been in recent years borrowing way too much money and encouraging basically everybody else to leverage in one way or another so you got massively um indebted governments and then corporations and then individuals all with too much debt right now and that always leads to trouble whether it's you know whether you're an individual or a corporation or a government um when you borrow too much your life spins out of control and we are really for the first time in human history um in that situation globally now you it used to be that one country or another would uh would make some big mistakes blow up their currency have a gigantic crisis whatever uh but that would be in the context of a sound money world where everybody else was back uh was on the gold standard and therefore basically okay financially uh but now everybody has a fiat currency printing press and they're all abusing that privilege um so when the consequences come home and you can make the argument that they already are you know we've got inflation yada yada going on right now that that will lead to a lot of trouble but when when the serious problems hit from all this um it'll be the first time that it's Global in scale and in scope and and so that's going to make it very different and hard to predict but um I I think you can say with certainty that right now the Global Financial system is in very bad shape and headed for worship okay um that's a a big statement uh I'm sure people want me to dig into it with you and I'm going to um first though I want to go over to your early warning indicator your your Canary in the coal mine that I referenced in the introduction um that indicator that you have shared with us in the past that you've watched closely to try to get a sense for when we are going to tip from you know what's been sort of a an era of relative Prosperity um coming out of the global financial crisis where tons of stimulus was being pumped into the system asset prices pretty much went straight up for the better part of more than a decade um people have been feeling increasingly flush and one of the things that a lot of people did when they felt flush was go out and buy RVs and uh the pandemic when it sort of shut the world down you know offices were closed and people were being sent checks in the mail and whatnot uh boy RV sales kind of went through the roof as everybody wanted to try to you know have a covid safe way to to to get out of home uh and also they had that extra cash sort of sloshing around um so I know you've been watching that indicator closely to see that you know is that strong buying demand going to to Peak and maybe start coming down and I believe and correct me if I'm wrong but one of the reasons kind of why you watch this is in past economic Cycles yeah when people feel good they go out and they buy big toys like this and then when we enter the bus cycle obviously the demand dries up and then you can pick these things up you know at the bottom of a cycle for a song So What are the indicators telling you right now in the RV space about where we're headed economically well they're rolling over again and you know I should say that um I've spent the last 30 or so years living more or less in suburbs where um where the RV ends up being the biggest toy that people buy at the peak of the cycle you know when I've got a boat they've got motorcycles and jet skis and a big house all that stuff and they still have extra money or at least they'll have extra credit they go out and they buy a house that you can drive from place to place which is a you know patently absurd idea just on the surface but um but it is a good cyclical indicator because um because it's usually the last thing people buy RV sales boom towards the end of credit expansions and then collapse on the other side of it you know and and so the lesson from that is twofold really the you know it's a sign of what's happening with the economy and it's also a sign of when you should be buying an RV do not buy one at the peak when the prices are going up uh but in the the depths of a recession people have to give their big toys away just about because they they run out of credit they can't cover their car loan and their motorcycle loan and their jet skis and all that that's when you buy these things so this would be a time when you probably still don't want to be buying an RV because we're still at that kind of elevated price levels but they're starting to roll over along with I would argue the rest of the economy you know we're headed into a recession it seems and a lot of other indicators point in that direction but the RV indicator definitely does you you told me that you saw a an ad for an RV that was 30 or 40 000 below MSRP uh that's the kind of thing you see just as the the cycle turns and uh sales dry up and prices start to get cut so if we're seeing that now then you can add the RV indicator to all the other indicators that say we're heading into a recession yeah it's funny you you you're you're right I I had a a friend who's sort of been monitoring RV prices basically largely based upon uh your earlier uh video on this channel from like I said about eight months ago or so we were talking about this indicator um so he he contacts the local dealership and just sort of you know every so often asks them hey where are prices right now well now the dealership actually reached out to him and said hey we know you've been calling from time to time we have a floor model here um that you know we're we're pricing for a song right now so if you're if you're interested come on in um and he said no that's okay I think the RV markets actually got a little further to fall so I'm going to wait but just curious what's the price uh of the model you're talking about the guy said it's uh MSRP of 133 000 uh and they're going to offer it to my friend for the low low price of 89 9.99 um so that's already a pretty substantial discount there what I'm doing the math in my head but it's it's getting close to like a 35 40 haircut that they're putting on MSRP right now um and again this knife may still be falling so it may still have a lot further to fall from here well yeah at the bottom of the cycle they'll give you that RV for 50. and they'll throw in a car that you can attach the back of the RV take with you since you're driving your house you might as well take another car too so you bring your entire Suburban lifestyle with you to wherever you go um and you know that's that's true of all the other big toys pickup trucks only buy pickup trucks at the very bottom of a recession and motorcycles etc etc um and we're nowhere near that yet we're just starting to take some baby steps in that direction uh so when this really gets going it'll be a completely different thing most of your audience probably remembers 2008 2009 because it was so recent but that was that was apocalyptic for a little while and based on the numbers something much worse than that should be coming so um when you're thinking about indicators and you're thinking if you're thinking about buying a big toy keep that in mind that the things are going to get much much worse as somehow someway all this debt work gets worked off and every indicator you know at the very bottom every indicator is going to look like end of the world and the prices of things that people are trying to sell will seem like Great Depression events you know where these people are going broke and they just have to get rid of something no matter what just take it away you know that that's the way it's going to be and uh um you know the the RV thing is is kind of that it's an indicator of that whole thing with a little bit of schadenfreude thrown in because at least this is again I'm talking about my own personal experience here you know I I used to feel kind of jealous when I'd see my neighbors buy these 40-foot RVs in the driveway and my kids thought they were so cool and wanted to play in them and everything and you know I never felt comfortable owning something like that but I did feel jealous of the people that did own them so so there's always a kind of a sense of of justification when we have a down cycle like this and and all those guys have to sell their big giant toys yeah I mean it's it's you're not I know you're talking about you're not necessarily delighting in someone else's pain but but you're you're sort of welcoming the return of rationality back to the world right where all right you know what we all know we shouldn't be living outside of our means and you know spending ridiculous amounts of money for toys that that uh yeah it's sort of the land about right I mean if you own a sailboat the thing is just a money pit right and it's not that you shouldn't own sailboats or whatnot but you shouldn't basically be you know over extending the way that people tend to with these toys in the late stage of the cycles and people that are more rationally minded like you and I it just you get angry at the fact that that it it works as long as it does for people when we know that it's it's it's not sustainable right and then when that sustainability starts re-expressing itself there is a little bit of a okay well thank goodness the world's starting to make sense again yeah that's a better way to put it I'm not taking pleasure in watching this happen to everybody it's uh but but it is nice to see a return of Sanity I kind of am taking pleasure sometimes and watching people who who throw money around like crazy uh get what's coming to them but uh so um uh you know another kind of related indicator though um is uh uh like uh the town I used to live in and even to a certain extent the town I'm in now um there are parts of town that when you go through an economic downturn um you people start parking their cars or their RVs even right with a big for sale signs on them right it kind of becomes like a de facto used car parking lot right but it's just where everybody in town has agreed okay this is where we're going to park our stuff during the day to try to sell it right and um I haven't uh like I'm beginning to see cars pop up around town with for sale signs on which which when I started to see it it made me realize how long it had been since I had seen them before because we've had this really pretty long stretch of of prosperity um but gosh I mean I remember the the last town I used to live in down in in Palo Alto um there's kind of a stretch of El Camino where people do this and I remember during the.com bust how I mean it was about as far as you could see down the road just you know cars with for sale signs on them because everybody was having to dump you know all these expensive cars they had overstretched to buy beforehand I'm beginning to see like I said a little bit of that begin to creep in where I am right now but it's sort of another one of those indicators that just we as regular people in addition to all the financial data that we see on our screens that we can just look at in our real lives as kind of a barometer for where we are in the story yeah yeah and we're nowhere near the bottom of anything yet like like um you and wolf Richter were talking about um a week or so ago the economy is actually surprisingly strong in a lot of ways considering all the the reasons that it should be weak um and today they just reported um the fed's favorite inflation measure went up so so um inflation is actually accelerating according to that measure um so you know we're not in a recession and a lot of the signs like the the for sale signs in that parking lot you were talking about are not that plentiful yet but there are a lot of reasons to think that that day is coming fairly quickly there's a lot of other indicators that uh that are more behind the scenes um than say for sale signs so you don't notice them when um when they're just kind of bubbling out there and getting ready to work their way into the real economy but a lot of those are are pointing down now at a steeper and steeper rate so I think as more and more things roll over than the the overall picture that most people have in the economy is going to be a lot more negative and the big numbers are going to reflect that so I think that's the second half of this year's story and I think it's it's reasonable to predict that by the end of this year we'll be in an in an official recession and um the question will be when does the FED start cutting interest rates so okay yeah let's let's dig into that and and I want to I want to just use the jumping off point in the discussion um it's it's a really weird time right now because like you said um there's a just a ton of indicators you know leading economic indicators uh Rising Consumer Debt falling savings rate declining real wages I mean we can go through a whole ton of them um and I'm sure we'll go back to talk about a bunch of these macro factors but at the same time you've got the stock market up you know nine plus percent this year you've got the NASDAQ up over 25 percent you've got Nvidia up like over 200 percent since the October lows in fact we actually have kind of a bubble going on right now in AI stocks and and the biggest stocks the biggest companies that are involved in AI happen to be those like top 10 stocks that you know oftentimes referred to as the Fang stocks that are kind of pulling the market indices up with them as they rage right now and so it's it's a weird time because you can you can see this euphoric party going on in the markets where they're just pricing in wonderful days ahead of us but then you can turn and look at all this other data that you just referenced to and say my God it looks like we might be going off a cliff later this year right so it's it's just such a weird time right now I know that a lot of investors are really caught between which do I believe because in a real sense people are making a lot of money today in certain stocks and while they're fearful of what might be coming ahead with the the Grim data you referenced they also have you know fomo is starting to come back of like but but my idiot friend is making a ton of money right now why am I missing out on that party so I just I wonder if you could sort of speak to this this very schizophrenic kind that we're in right now yeah the headlines do not seem recessionary really and uh what one thing we could say about the stock market two things really one is NVIDIA is a serious short candidate right now you know I'm really tempted um and the other is that market breath which is you know how are the average stocks doing not just the the handful of great stocks is the uh the worst it's ever been just about um the there are just this tiny handful of stocks pulling the rest of the broad Market averages up and historically that's the end of a cycle you know when you when breath gets narrower and narrower and narrower narrower eventually a few of those stocks a few of the um the stocks that are doing great stop doing great in part because they're just overvalued you know they roll over and then that pulls everything else down and then you get that bear Market that coincides for recession so this is normal it's normal for Market breath to contract and a few stocks to do great right at the end of the cycle um hey can I just interrupt it in so you say this is a store a cyclical story we see right we're at the end of the cycle uh Market breath continues to narrow until it's just in a few stocks and then they they tumble and then everything goes into the corrective phase it sort of sounds a lot like um you know the ship the sinking ship at Sea right where um you know the the nose of the ship goes under the water but but the stern is actually rising and everybody rushes up into the stern of course because it's above water um and even though the stern is rising yeah for a brief period of time you know it's it's it's still going up but then eventually it slips under the water like everything else before it did and it brings all the people that got concentrated up in there down with it when it finally goes under is that an apt analogy oh that's a good visual for something that's a a non-visual phenomenon but yeah that's uh that's basically how it works and I you know I think the override I mean we can go through some specific indicators of imminent trouble but I think the biggest thing to pay attention to now is the money supply we are shrinking the M2 money supply at least uh for the first time uh first far back is a lot of the charts go you know we we just don't normally have a shrinking money supply in a fiat currency system because a fiat currency system is basically a Ponzi scheme right it must grow money yeah the money supply has to grow to cover all the interests that has to be paid off you know interest charges go up along with debt year after year after year you need more money coming in to pay those off um when the money supply starts to shrink that means a growing number of people out there can't get the new credit in order to cover their interest costs and they start to go bust and and that's how a Ponzi scheme finally blows up when when the new money coming in is inadequate to cover the uh the payouts to the existing investors well we've got that going on right now and unless the money supply or start would start to increase dramatically from here there's no alternative but to a lot of different over leveraged entities blowing up in the not too distant future and there's nothing happening to make the money supply go up now interest rates are still Rising um the FED is still um shrinking its balance sheet so so we're still in quantitative tightening which means the money supply is going to continue to decrease which means lots of people are going to blow up here pretty soon um you know this economy is full of financial zombies whether they're individuals or corporations or even some governments um and they're just not going to be able to make their payments at some point in the future so leaving everything else aside what stocks are doing what the housing market is doing what car prices are doing um a shrinking money supply and a fiat currency system means big trouble out there so that's almost all we have to look at to know that at some point something really big has to change either the FED has to start flooding the system with money again or we get you know that little mini banking crisis we had just lately on steroids just writ large and the insurance companies and the Pension funds and the rest of the banks all start healing the effects of not enough money and seeing their balance sheets blow up in one way or another and having to report horrible numbers and having people pull their money out because of that um that's the kind of thing that is virtually guaranteed unless we make some big change here and there's apparently no big change coming especially with today's inflation number you know that makes it almost impossible for the FED to cut interest rates anytime soon and it makes it really hard for them to even stop increasing rates so that's the the really really macro meta view of what's going on right now and that's almost all you need because you know that that mathematically is going to cause a big problem in the not too distant future all right so um I follow that logic completely um a conversation that we've had on the site on this channel relatively of late is uh it all makes sense so like where are the defaults right you know you um we jacked up interest rates faster and by a greater magnitude than we ever have before in history at least within the short period of time in which we've jacked them up and um uh uh you know we've had uh mortgage rates double um we we all know that the system we have right now got accustomed one could easily argue addicted to kind of a zerp world right um and yet yes we had a correction last year but like I said markets are up against this year um there's a lot of people who are saying yeah everyone keeps telling me the housing Market's going to correct but in my area you know prices aren't come down they're still bidding wars um so there's this and we in the Press we now have a huge debate over you know hey it might not be a hard Landing if we have a recession there's more voices coming out for a soft Landing or even no Landing right people are arguing that we're going to be able to somehow skate by without going into recession um you know showing my my cards for a moment you know I personally ascribe to what you're saying there John but I understand uh that some people are asking the hey it hasn't happened yet and if you had told me a year ago that you're the Fed was going to increase fed funds right by more than 500 basis points and we were going to double mortgages and you know do QT and all this stuff and we're gonna have a banking crisis thrown in and all that stuff I would have thought you know stock price stock market would hit another correction housing would be done way more than it is but but these things haven't happened and I'm guessing you're going to say yeah they haven't happened yet but why is it taking so long well that that might be the the single biggest question of most people's lives right why hasn't this happened yet it should happen and that's that's kind of how life Works usually if it's something you really want it takes a lot longer than it ought to to happen um and you know for people who don't want a stock stock market crash in a recession um you know they it could go on forever and just be fine um but for the people who are watching for it because we think based on past experience and you know the numbers as they are right now that it should be happening and it's not happening it's frustrating but you know I can I can tell you that it's always been this way at the peak of every cycle um especially now that we're firmly in bubble territory here um things that should happen don't happen for a really long time like um just one example um back in the 1990s I was a tech stock columnist for a um uh online magazine called thestreet.com and I was kind of you know by 1998 I was kind of the resident bear and uh so I used to get horrible hate mail from all the the tech stock bubble guys and everything but by 98 it should have that bubble should have burst all the numbers were crazy and and there was no reason for it to keep going on but it did it went through 1999 and then through part of 2000 before it finally did blow up this is like that you know this is something that should be happening there's a lot of stuff in the background that kind of implies that it's going to happen soon but it's not happening yet but um life is that way it just takes longer than it should for a lot of things to happen and you know let's go through some stats that kind of implied that it will happen pretty soon because that's what I tend to look at and I come away whenever I dig into the stuff that's behind the scenes um it seems clear that we are headed into some kind of a recession if not something much worse that you know whether it's much worse depends on how governments respond to it and uh there's no clear you know way to know how they're going to respond to the next thing when it happens because they're so spooked by inflation right now but anyhow um yeah it uh you know the the short answer is that uh what should happen eventually does happen just not always on the um in the time frame that we think is logical and wish for and this is just one of those times okay I mean one of the answers that I've been hearing asking this question of others of late is you know we've had this pig through the python effect right where we just shoved an unprecedented amount of stimulus into the system you know in response to the pandemic and um you know eventually that that stimulus will make its way through the system that pig will will exit the other end of the Python um but some of the explanations have been just been that pig was so damn big maybe we should even be calling it like a hippopotamus through the python where it's just still going through it like it's just it's it's delayed the Reckoning because we we still have to get the remaining amount of stimulus out of the system before the system really can start rolling over due to the the impacts that you and I are talking about um I'm just curious do you do you think similarly or have a different opinion well yeah we increased the money supply by between 40 and 60 percent depending on which monetary measure you're using um in within just two years right yeah in two years yeah so um that accounts for the uh the spike in home prices for instance and the fact that stocks went up so far during a recession and a pandemic you would think that uh people would go risk averse um in a time like that but um money was just so cheap that they instead they just uh you know they went risk on bought whatever they could buy um because that's what people do when they have too much money on their hands um uh by the way RV sales boomed during that time too but yeah um it could well be that all of that money is still working its way through the system but that is coming to an end now too if you look at interest rates for instance car loans now especially for used cars or up in double digits um 14 record high yes yeah so that's that's not easy money anymore mortgage rates just this week hit seven percent again which which make the average more the average mortgage now um accounts for 41 of the disposable income of the the family that has the mortgage which is way too high you know that's way too higher yeah um and there are lots of other housing related stats pointing in that direction but but money is no longer easy uh and because of that uh what existing home sales are down by 23 year over year um and home prices are starting to fall they're down by four percent year over year and or I'm sorry four percent sequentially now month over month so we're seeing it start to happen and it just hasn't worked its way into the the very top line numbers yet um but housing is a big part of the economy and if interest rates are too high for housing to really function you know you had a really good interview a few weeks ago where you had one of your resident experts um interview another Resident real estate expert and uh they they talked about housing as being Frozen right now because yeah prices are really high but there's very little inventory people don't want to sell at these prices because they remember slightly higher prices in the recent past and buyers can't buy here you know very few people can buy a half a million dollar house with a seven percent mortgage that's just beyond the means of 70 or 80 percent of the country right and with anybody with their brain you don't want to buy uh even if you could because you're like I'm still getting your record prices I'm I'm having to pay a very high price and I've got a mortgage rate that's double what it was two years ago so I'm getting worse to both worlds I'm getting the high price and I'm getting a high mortgage even if you can it's a horrible deal compared to anything in your adult history right you remember 20 or 30 years when it was a better deal than this so it's just hard to do and uh you know that the way it works in the housing market is that sales tend to dry up at a peak because of the factors we just talked about the prices don't go down for a while it's just fewer and fewer sales and then people start to panic people who have to sell um put their house on the market for just whatever and then there are all these empty houses out there there's something there's something like 10 times as many empty houses in the U.S as there are um houses that are currently for sale and a lot of those empty houses are there Airbnb or they're um things where people bought it bought them as an investment and whatever but a lot of those people can be spooked by what's happening they can have problems in their own lives and then have to sell the um the optional stuff you know the house that they're not living in and when that hits the market that will push prices down dramatically so along with all this other stuff you know roll over in the economy in a recession we should see a big drop in house prices in the coming year and I'm glad you said that because you you've seen a lot of Cycles um when you've written books you know about these Cycles one of your most recent ones being the money bubble um and uh I I I I like hearing your statements here because the corroborating statements that I've made in the past which is that um you know we have a lot of uh a lot of folks uh more I think than previous generations who own second homes or and certainly the Airbnb you know boom encouraged people to buy many homes right to rent them at an Airbnb um and those are you're not living in them right so if you personally uh enter tighter Financial Times well it's pretty easy to sell one of those properties right because it's not essential to you yeah especially if it's an Airbnb and it's starting to go negative right you're like yeah just get this thing just let me stop the bleeding let me just sell this thing right so when when you have this this sort of freeze in the market right now transaction wise right it's right now this the sellers are are just trying to see if they can hold on through this rough patch right and then hopefully the fed's going to Pivot and and we'll get back to the point where interest rates go back down and I'll be okay housing wise right and prices will will stabilize or come back to where they were but the longer that that doesn't happen right um there are going to always be some organic trends actions right the people die they get divorced they have to move whatever right and so because housing is priced at the margin it's it's that percentage of organic transactions that are going to start to reset prices in these markets and yes sellers can hang in there for a certain period of time but once you've got somebody who gets either enters into a distress state or is just looking and seeing that the prices are starting to come down because of the organic sales there's a first mover Advantage right to bolt from the herd if you're a seller and say well look if I do a price reduction now and get out I can still get out with about 95 percent of what I have right now right so I can still get most of my equity in the house I don't want to be one of the bag holders who's waiting you know later on once everybody else has started to sell so people will start to bolt and when that happens I think it sort of becomes a Scramble for the exit for anybody who is going to sell right which is well Jesus I better put my market my house in the market now because I'm going to get a better price this week than I will a month from now and then you kind of get this Cascade Factor do you see it the same way oh yeah that's how markets work at the peak and because we have to remember the prices are set at the margin in other words with the house if you sell your house for 10 less than the previous house in your neighborhood sold for you've changed the comps in your every priced every house yeah every house you have with that and see that that that's um especially in a fiat currency system that's how fast wealth can evaporate because that that one house like you said it made the whole rest of the neighborhood less valuable so just that relatively little amount of money that changed hands had this massive multiplier effect negative multiplier effect on the neighborhood that's going to happen in the stock market when somebody decides to bail on a big position in Amazon or something like that and then all of a sudden um half a trillion dollars just evaporates um and and when I short Nvidia and it plunges yeah that that's going to be you know another half of half a trillion dollars just um gone it's not like it goes anywhere it just ceases to exist and this is an important point I'm glad you mentioned it um I've referred to this in previous videos as money heaven and I I I find that people don't really understand this so much so to use your example of houses in a neighborhood right um let's say the houses and there's ten houses in the neighborhood and um after the past couple years when it's been a hot housing market they're all now worth a million dollars each right so the market valuable those houses in the neighborhood is now 10 million dollars right then to use your example somebody then sells their home for 10 less all the other houses are repriced down right it's not like uh you know we were at 10 million dollars now the market value of the the neighborhood is is nine million dollars it's not like that million dollars went into somebody else's pocket right it just went poof right or technically it's nine hundred thousand dollars that went poof but it's it's nobody got it it just literally was fantasy value fantasy market value that probably wasn't merited and once that new comp hits it's just gone nobody got it it went to money heaven yeah another way of putting that is leverage as a two-edged sword you know it increases values across the board dramatically on the way up and then those values and the wealth that was attached to those values just disappears on the way down so yeah um if um you know if you're somebody who might want to buy a house now or two or three years from now two or three years from now it's gonna be way better because because that this process will have had a chance to work out where a huge amount of value will just evaporate and then the people who are left selling will be just so panicked that they'll entertain lowball offers without being offended and that's the time to be buying so you know I think we're headed into a time like that for definitely for financial assets like equities their stocks are going to be much much cheaper at some point in the not too distant future and and so will you know quasi Financial assets like houses that you buy with the mortgage um just because that's how Cycles work you can go back through uh well go back to for instance the.com bust in 2000. there was a thing called the 90 Club there where a lot of big name tech stocks went down 90 from their previous highs and nobody got that money that money just disappeared and the same thing with houses in 2008-2009 um house prices in the U.S dropped by what was the average it was like 30 or something like that I have to use that yeah yeah after but after never having dropped since the Great Depression I wrote a book on the housing bubble in 2000 or yeah 2003 which was way early for that bubble bursting but uh one of the criticisms I got I'd go on you know radio shows and things like that and they'd have somebody saying but house prices never go down you know can you point to a time when house prices have gone down and and I would have to say well the 1930s the 1930s you know attention history yeah yeah and uh but then it happens eventually you know when things get too far out of whack even things that never seem to go down go down and where you know to repeat the theme we're headed for a time like that because we've inflated so many bubbles all at once that are gonna not just burst on their own but they'll feed off of each other um and the the end result will be that governments of the world will have to either let it burn and I mean burn almost literally uh when this gets going or step in and bail everything inside out at the cost of their currencies so that's that's the big thing we've got coming is this kind of sea change where governments lose the ability to bail everything out because their currencies are crashing um and yes that hasn't happened for a really long time either but um it's another one of those things that uh that that is inevitable and very possibly imminent now finally after decades and Decades of people being able to get away with doing things that they shouldn't have been able to get away with well now now the the uh the consequences are about to hit and yeah I think the next couple of years are going to be very different from the last couple but equally stressful you know what's so interesting about that too you know you've written as you've said about [Music] um how we've uh the Wayne with us is structured is um it's a process that sort of every every cycle of rescue uh comes at the cost of the currency and that uh you know in in the end uh they're going to be faced with that sort of binary decision of yeah you can nominally um you know save or rescue the The Leverage system um but if you do that it's really at the cost of your currency you're going to destroy your currency uh in the process and I think I think still for the average person that's that's not something that they can just really fully imagine like this is the US right we're not Zimbabwe right the us then I gotta wake up and the US dollar is going to be toilet paper tomorrow and and I agree with them I don't think it is it's not going to be an overnight you know situation like that but what is interesting is maybe for the first time um what's what's that old saying um oh God it's it's a something about not one man in a million can notice the the impact of inflation or something like that it's this Insidious thing that sort of slowly erodes at your purchasing power but sometimes it happens fast enough that you can start to see it and you know we've just come off the massive stimulus response from the pandemic and lo and behold you know we've had this massive inflation and so you know our dollars basically buy depending upon the good their service that you're looking at I mean they buy anywhere from 10 to 30 percent less than what they did just in 2019. right I mean if you're talking about food at the supermarket or you're talking about the gas you put in your car or a number of other things I could list through the rent you pay whatever like Health Care like those things are all up way more than 20 percent since the end of 2019 today so it actually isn't the sort of crazy academic you know theory that John's mentioning that oh the currency might get destroyed like we can look back at the past two and a half years and be like wow our currency took a pretty major hit yeah that's what's going to be different about the next round of gigantic bailouts is people are actually able to conceive of inflation now because you had to go all the way back to the 1970s to have unruly um inflation that was actually dangerous and scary and in the US I'm starting to interrupt but but we do have people watching from other countries who are probably saying hey buddy here in our country we noticed good lines but yes yeah that's true there are other countries who have experienced bouts of inflation but in general in the developed world um currencies have depreciated but not in a disorderly way so it was hard to um it was hard to conceive of a disorderly decline in the value of the currency in other words price is really spiking in ways that hurt you and and now we can conceive of that the last couple of years have showed people that yeah you can literally not be able to get toilet paper or eggs might be seven dollars a dozen you know right that kind of thing actually happened to people so it's part of their lived experience and it was you know it was the result of the governments stepping in and bailing out the economy in a really big way uh so the next time that happens maybe the um you know the banks or the insurance companies or whoever um start to run into trouble uh and the government has to step in and the number is five trillion dollars or something like that which uh they could have gotten away with back in the the housing bust of the um 2010s or the 2000s um now people are going to look at that and they're going to think instead of oh the government is going to save us they're going to think okay what will that do to inflation in other words is the dollar really just going to fall off a table now you know can I I'm just barely able to put food on the table for the kids right now and is this going to make it worse in a way where I have to choose between driving to work paying rent and feeding my kids you know is that what's going to happen now um and that's going to be a whole different thing because people will kind of see this coming they won't be blindsided by it they'll be anticipating it and if they act accordingly which is to say if they if they start converting their cash into real stuff because they're worried about their cash becoming less valuable um and they have perceived that real things hold their value in other words land um gold and silver energy stocks things like that that governments can't make more of you know if they if they perceive that to be the case and they start acting accordingly then we get this massive shift in capital that still leads to a declining currency but also leads to big jumps in maybe oil prices maybe uranium definitely gold and silver things like that so in other words there's an investment thesis in all of this it's not just uh oh my God the world's ending uh you know the thing that you draw from this is that there could be a huge mass um reaction to the next gigantic bailout and it could lead to Capital flows going in a very different direction and we could anticipate that by buying ahead of it so I I think that's what we should take away from this that there are some serious opportunities here you know I think uranium stocks just they've actually been doing pretty well even when everything else hasn't been lately um or in the commodity space things haven't been lately and uh I think there's a reason for that um well let's look folks are going to say Adam just dig dig away with with John here on this so let's dig into this so let's let's start with uranium stocks so why are you so particularly bullish about them okay well first they fall into the category of hard assets real things governments can't make more of they emphatically can't get more uranium but over the past couple of decades especially since the uh the Fukushima accident in Japan governments have been moving away from nuclear power as their you know their green energy plans they didn't include nuclear in that in fact just the opposite they started closing down nuclear plants and and just mothballing um existing ones and and uh closing down plans on future plans and and that made the demand for Uranium go way down the price went way down uh but in the past few years it's been the case that a lot of the alternative energy sources the government shifted towards didn't work out quite as well for instance Germany went big time into solar and wind but it turns out that's a cloudy not very windy country and so those things didn't work nearly as well as expected and then the natural gas pipelines they contracted for with Russia we know how that went right right they also decommissioned their nuclear plants at the same time they were doing all this yeah they did that that's right uh and and so a lot of countries are perceiving that process to be a mistake now and so they're they're reversing gear and they're taking their new plants out of mothball and their um their building new plants and just China I think has 20 or 30 new nuclear plants on the drawing board that that are you know in the process one stage or another are being built um and there is no way that the current output from today's nuclear or uranium mines can satisfy all the demand that is likely in the next five to ten years if all of these plans turn out to be put into place so you've got the potential for a huge shortage of uranium out there so you've got a thing that's real the government can't governments can't make more of they can't inflate it away and the demand for it is rising dramatically faster than the supply of it right now so how do you get higher Supply in a situation like that well prices have to go up to lead miners to bring more properties online uh in other words you know if something is marginal at today's prices it's very profitable at twice today's prices so that's that's what we'll see in that space uh you know borrowing some kind of huge just discontinuity like a nuclear war or you know some kind of massive depression starting soon and those things are not impossible so that means uranium isn't a guarantee but um if you look at just the trends that are in place right now it's really attractive yeah and same thing with oil we're going to need believe it or not more petroleum going forward and uh and there's less and less of it around same thing with copper we need way more copper um to to build out the electric infrastructure that everybody is planning all the the governments of the world seem to think we can have 50 electric cars on the market or on the road in just another half decade or a full decade at least uh but where does the copper come from all that or all that because um an electric car takes several times as much copper as an internal combustion engine car does where does it come from well that's not clear you know it has to be at a much higher price to bring on enough new copper production capacity to make that possible so there's an you know another um highly likely uh investment pieces and a lot of stocks out there that are very cheap compared to what they will be if the price of the underlying commodity goes way up so you know there's a lot of great stories like this out there and gold and silver of course um we've talked about that every time you and I've talked I've talked we've talked about why and how gold and silver should be a lot higher than they are now and why they're going through the roof and nothing has changed in fact it's it's gotten a lot better lately for silver because silver has suddenly gone into um into deficit in other words the world's Silver Mines and the mines that produce silver as a byproduct aren't producing enough to cover demand and we're running through inventories but once those inventories are gone then we then we go from a deficit to a shortage uh in which prices have to rise to incent miners to find more silver or to um to cause users of silver to stop using it that's that's less likely right now at anything around today's prices so silver has to go way up to make this work uh and it hasn't even really started yet so so there's a lot of stories out there that are very exciting um in this kind of world in a fiat currency world that's falling apart you know you end up with a lot of things that that ought to do really well through that process and and the key to protecting yourself and your family and and maybe even profiting from all of this is just to position yourself so that you're there when these big price moves start happening and you know it's a very straightforward thing to do and on my sub stack that's one of the things that we do we're setting up portfolios of uranium stocks and gold and silver Miners and copper socks and uh so far so so you know some of them have gone up some of them have gone down but the the macro story or uh for those sectors still looks great all right great and uh yeah we've been working up in this discussion to ask people how they can take action on this and get ideas of which particular companies to invest in or ETFs or whatever however you're playing this um so we'll give a little preview um sounds like go subscribe to your sub stack and they can actually see what you're recommending there or recommending that people look at it's not personal financial advice on your end but it's it's you're putting these portfolios out there for people to consider um we'll tell people in just a moment exactly where to go to get your sub stack John um on the it got so many notes I took while you were talking I'm not sure if we're going to be able to get through all of them in the time we have left here but on the um precious metal side of things specifically um I know that you uh you know there's commercial uses so there's similar commercial uh demand elements like you had for some of the other assets that you mentioned but obviously they have the monetary side as well and in the Fiat world where the purchasing power of of the Fiat currencies is being eroded due to higher inflation um obviously precious metals make even more sense as a monetary form in which to store the value of your money and protect your purchasing power um lots of ways to invest in precious metals from owning the metals directly to owning the companies that mine them Etc um and I know that you follow the mining space really closely and that's where you can have your biggest gains uh but I'm curious um right now uh you know gold has done pretty well um it was close you know we'd been talking a couple weeks ago it was right up near its all-time high now it's kind of sold off a bit by about a hundred dollars an ounce or so silver hadn't really quite done as well as gold did this year and it's now selling off a little bit a little bit harder but the mining companies haven't really been keeping Pace with the metal prices uh this cycle um like they have you know on average in past cycles and so I'm wondering are you seeing right now like a particularly good time to be buying into the mining space for the precious metals miners because they they're relatively underperforming right now yeah the the mining spaces is a really interesting story right now I'll I'll um hit the high points one one is that um when the underlying commodity in other words gold and silver versus the gold miners on Silver miners when when it starts to go up um it takes people a while to look Beyond just hey I'm gonna get some gold and silver coins or I'm going to buy this ETF that owns a lot of gold and silver to the miners because they're more complicated and a little bit forbidding to a lot of people so it takes them a while to get going but once they do get going and once for instance people have made a lot of money in in gold and silver bullion or that ETF that just buys a bunch of bullion and puts it at a wallet then they think okay I'm a genius I got this right now how can I uh how can I make even more how can I turbocharge yeah yeah exactly and so they they look around for other things and they find the miners which are generally referred to as um leveraged bets on the underlying metal in other words they have operating leverage so that if the price of what they're selling goes up by 10 their operating profits might go up by 50 percent um and so the miners can go up a lot more quickly than the thing that they're mining in good times but you got to have those good times go on for a while to get people excited so I think that's part of what's holding the miners back now but there's another more ominous reason that they're not doing well and that is that a lot of governments around the world are starting to um to view the extractive industries um as kind of pots of gold you know as as sources of revenue and they're changing the laws that apply to gold silver copper miners oil companies so that the government gets a bigger cut of whatever A minor makes within that country and that's changing the um the profitability calculus for a lot of these companies and you know it's especially true in Copper right now where copper mines are these big gigantic operations that are very visible and governments where they're where some of the biggest copper miners operate are starting starting to tighten the rules and ask for more money and that's changing the uh the potential profitability of these companies and that's something we really got to look into we've got to run the numbers and figure out how big a deal this is um and whether it fundamentally changes what how we should perceive these companies because it's possible that maybe the best way to play Commodities is just the physical ETFs in other words buy stock in something that just uh like the um the uranium trust that's brought runs where they go and they get literal uranium and store it somewhere uh and then you own a piece of that um that pile of uranium and so you just um you profit as uranium's price goes up you don't have to worry about government action and political risk and things like that with the miners so it's possible that um the best portfolio in the commodity space now is the best quality physical ETFs and maybe the um the streaming companies and the royalty companies because they aren't as directly affected by governments changing the rules right so so we need to think about this it's not a it's not a guarantee one way or the other but it's definitely a thing to look into and to come to a conclusion about yeah I've I've told people often on this program that if you're going to be investing in in the mining space unless you've got a ton of History yourself um it's much better to to you know sort of follow an expert and there's a lot of folks out there that have their own newsletters where they're you know they're the ones that are have relationships with these companies they're talking to the Senior Management they're experienced and looking through drill results and things like that uh sometimes you know they go and do the Mind tours themselves um like it's it's a it's a you know it's it's a complex industry to understand and you know there's a there's a lot of companies just aren't going to make it particularly down at the Explorers side right so you want somebody who's got a lot of seasoned experience being able to separate the wheat from the chaff there now you're introducing even more risks now onto the table here in terms of country risk and government risk and stuff like that and so um I think it's just you're just making that argument even more important in my mind which is hey you know if you're just a regular armchair investor uh you really want to be leveraging the people who are you know leading into the space 24 7 and really understanding what's going on here because it can be really easy as a regular person just to miss a lot of this stuff if you're just picking stocks on your own so one more reason for people to go check out your sub stack um which uh we'll get to in just a second John real quick um I'm just looking we're getting a little short on time so I want to do a little bit of a lightning round with you if we can just to sort of fully complete the context for people so much of what we talked about here um prior to talking about these these assets uh these opportunities and hard assets um you know it sounds like you're pretty pessimistic about where both the economy and the markets are headed from here um in terms of the economy um what what sort of odds do you give us of going into a recession in the next year uh and if so um if it's if they're good how severe a recession are you expecting this time around um as the everything bubble you know really starts to unwind here is this is this going to be a mild recession a moderate recession or maybe a severe recession uh I think it's highly likely that we get a recession in the coming year just because so many things have already turned down with nothing on the horizon to make them turn back up again um and as for how bad it is the numbers are horrendous I mean we're just so insanely over indebted and over leveraged at this point but uh um there's a lot of things that can just blow up and then be the first Domino that that knocks all the other dominoes down so it could be really really bad um and part of the the near term um decision-making process that'll determine what happens is what will the governments of the world do when things start to roll over and we saw what the US did already here with uh you know a couple of banks uh went not even went bust it's just that they they had runs because their bond portfolios didn't do so well with higher interest rates that that caused um paper losses on some of their bonds and they had to report that and that scared um depositors and you know it wasn't even anything that serious but the government had to step in and offer a guarantee for basically all Bank deposits which is several trillion dollars right that's that's a that's a very big uh backstop that is a very big backstop yeah and and uh and now we're you know taxpayers are on the hook for the stuff if more Banks start to fail but then you've got insurance companies which own massive amounts of for instance commercial real estate and bonds both of which are are in bad shape right now and and they're not going to be doing as well and and a lot of big insurance companies well at least they used to own a lot of derivatives I don't know if that's still the case but the big money center banks in the U.S have massive derivatives folks which are derivatives are very um obscure opaque bets that Banks and hedge funds make with each other in order to generate fees um that um in total notional value are looking at like half a quadrillion dollars yeah yeah it's just so huge so something like that I mean already in 2009 if the government didn't step in and bail out the derivatives books of the big Banks they all would have ceased to exist JPMorgan Chase Goldman Sachs City Group they would not be here today if the government hadn't stepped in and bailed them out with trillions of dollars of at least guarantees and things wouldn't it be a better world today if that if it allowed that to happen you know a world without Goldman Sachs and JPMorgan Chase would be a much saner world but um we're still looking at that or something similar we haven't fixed anything but uh that was involved in that last crisis so all of this stuff could happen again so uh I think that the most likely scenario is that some of this you know some of these possible crises become real they happen the government steps in and bails them out and then the question is what does that do to the currency market and the global bond market uh and we'll have to see I mean I think it's completely possible that it Spooks the uh the financial asset markets um in a way that is uncontrollable and that that leads us to some kind of a big crash that leads us to the big Currency Reset that we've been talking about for such a long time so it's completely possible that that's the the next stage of this process and it could be if they get it wrong I mean if they if they make things worse with government responses to these things then then it could be the worst things worst thing we've seen in our lifetime certainly it could be something like a combination of the Great Depression and Weimar Germany or something like that very easily based on the numbers wow um okay that's a big statement um uh to the person who says um hey well so this things start going off the rails the government just comes in yeah they do an even bigger rescue than they did before um what's the big deal John they'll just keep doing that every time they need to um what's your response to that I mean presumably every time that they have to reinsert themselves they have to do an even bigger type of rescue and of course that makes an even bigger hit on the currency so um I don't want to make the argument for you but but I I guess my question is how many times do you think they can rescue this system uh using the Playbook that they've been using before we have this currency forced reset that we've long talked about well I I thought the the Great Recession was basically the end of the road for the fiat currency system so I was wrong about that they managed to buy us another decade um but it it was at a cost of rising inflation in the last year or two and now that was partially due to the pandemic lockdowns too but um but the last big set of bailouts led to a serious currency issue and if the next big set of bailouts is even bigger than the last then it follows that the currency consequences would be bigger too uh and it would also be something that people are looking for they're not blindsided by it anymore because that's what happened last time so they're looking for the same thing that happened last time to happen this time so you get a market reaction at the same time the government is doing things that may or may not screw up the currency so I you know I think it's completely possible that um the inflation that we saw in the last couple of years could recur but on a bigger scale and the you know the shift in asset prices that uh or the shift in capital that we saw in the 2009 to 2011 time frame when everybody piled into gold and silver uh that can happen again but on a much bigger scale so uh I think a lot of what uh what is likely to happen is going to be stuff that's already happened but bigger and the question is is it big enough to completely break everybody's fave in the system itself and I I think that's conceivable I think we get something like the crack up boom from the Austrian School of Economics where uh things just kind of spin out of control and people give up on the currency and you know we weren't that far from that when we were having toilet paper shortages in Costco people were just buying everything they could think of in other words they were handing their currency over to buy real stuff because they didn't trust their currency to be able to buy them real stuff three months into the future or whatever that that was on a very small scale compared to what could happen when people just um take that idea and extend it across the board in their lives and eventually that's what's coming so it could be this time the numbers were big enough um or it could be that they buy us some more time by doing some really extreme bailout and that I don't know and at the same time that's happening regardless they're going to be using the crisis to Institute a lot of things they couldn't get away with otherwise because that's when the Central Bank digital currency becomes mandatory right um and uh and who knows if they're you know there's another pandemic and they decide that vaccine mandates just become Global law or something like that there could be a lot of things that that happen um because there's a crisis and people with the power to um to impose their will decide they want to use that crisis in order to get some other things done so there's going to be that added complication which is inherently unpredictable but will add to the stress that everybody's feeling at the time so yeah see hopefully we're all feeling that stress we're always what we're all watching this crazy stuff happen but at the same time we're online looking at our brokerage account and saying oh okay my oil stocks are up another 20 this week you know and so we're getting that kind of psychological compensation of being right about our investments while the world is getting more and more stressful so that that's what we have to hope for I mean I don't think we can hope for a non-stressful world because the the money that we've borrowed makes that out of impossible but we can hope for some offsets um because of the good decisions that we made leading into the next big bout of societal stress and I think that's what we should be shooting for we want to be doing things right now um that either make us immune to what's going on or in some way allow us to profit from it all right well really well said I'm going to disappoint people by not digging into a few of the things that you mentioned there like cbdc's just because we were over time at this point so we'll have to tackle that next time you come on John but to your your point there which is right in the bullseye of wealthyon's mission right which is uh helping people position prudently today given where things may head um you've given us you know a great detailed and and somewhat you know concerning frightening scary picture of where things may be headed from here um for folks that want to be positioning themselves prudently um in in potentially in many of the things that you mentioned more in the hard asset space there um where can they go to follow you and and and be able to you know continue to see your evolving thinking on this sounds like that's your sub stack yeah my sub stack is rubino.substack.com and there are different ways to sign up you can um get a free subscription and you get most of what I publish and then a paid subscription which covers a lot of the actionable stuff like the portfolios we're setting up and in specific ways to short the market and things like that um and um I guess that's it all right all right well look um it's it's been wonderful to see so I mean John I followed your work and known you for ever now I mean it's it's but definitely over a decade since we first met uh it's crazy that that the time has gone that fast um but obviously you know huge big fan of you and your work um it was fun that you announced basically your sub stack on this channel earlier this year and it's great to see how quickly it has grown uh in just a few short months so kudos to you on that entirely well deserved uh and anybody who's enjoyed this conversation with John uh and is potentially interested in following his insights I I can't recommend enough going to the sub stack and subscribing um all right John well look this has been wonderful um folks watching uh in addition to going and checking out John's substack uh if you're relatively new to this channel you know one of the things I talk about in almost every video is the wisdom of working under the guidance of a professional financial advisor who understands all these macro issues and risks and challenges that John mentioned and to be honest there are relatively few out there that do that are even willing to admit them and and think about them but even fewer that then put that information as inputs into their portfolio management highly recommend you find one who does uh and can build a personalized financial plan for you and then execute it for you and if you've got one who's doing that for you congratulations you should definitely stick with them but if you don't or you'd like a second opinion of one who does consider talking to one of the financial analysts sorry Financial advisory firms that Wealthy on endorses I have a free consultation with them to set one up just go to wealthyon.com uh it's totally free it doesn't cost you anything um there's no commitment to work with these guys it's just a public service they offer to help as many people as possible position smartly given what might be coming down the pike and John has given us you know a lot of things to consider that may be coming um all right John well look this has been fantastic folks if you'd like to have John come back on again soon and get into some of the other topics we didn't get into today like the cbdc's do me a favor and support this channel by hitting the like button then clicking on the red subscribe button below as well as that little bell icon right next to it always find John you're welcome to come back on this channel anytime you want to thanks for so much for coming on this week it's been a great discussion thanks Adam talk to you soon foreign

Channel: Wealthion

Views: 141,525

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Id: ARW-Kvq9XF0

Length: 72min 29sec (4349 seconds)

Published: Tue May 30 2023