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Official Wealthion Podcast Feed. Learn about money and the markets from leading investors from around the world, and discover how to build a more resilient, long-term plan for your investment portfolio. Look for new episodes each week.
Steven Feldman pointed out that the AI trade is showing cracks in its capital structure, noting that bonds for the less-established company CoreWeave have dropped to 70 cents. He argues that this serves as a canary in the coal mine for a highly capital-intensive and leveraged business environment.
Steven Feldman discussed an $18 billion data center project involving Blue Owl and Oracle, where a pipeline energy permit was delayed and Oracle issued a force majeure notice. Feldman noted that while force majeure events happen in real estate, seeing them on projects of this magnitude is unusual.
Steven Feldman advised investors who have made money in the AI and tech trade to take profits and rotate out of hot names. He specifically highlighted that stocks like Hewlett Packard and Dell have surged two to four times and will not multiply at that rate again from current levels.
Steven Feldman explained that his row crop farmland asset manager, Goldcrest, is intentionally kept unlevered to avoid the risk of rising interest rates. He argues that farmland serves as a scarcity-based, long-term asset to protect against inflation rather than a play for short-term trading gains.
Steven Feldman pointed to Berkshire Hathaway's choice of Greg Abel—an infrastructure specialist experienced in railroads, pipelines, and power plants—as a telling signal. He noted that Berkshire is sitting on $370 billion in cash, positioning itself to grind it out in real assets and potentially bail out distressed companies if the market breaks.
Brent Rentmeister, founder and managing director of Windrock Wealth Management, discussed with host Maggie Lake how the 10-year Treasury rate at 5.2% represents a normalization following an artificial period of near-zero rates. However, Rentmeister argued this does not make debt instruments a screaming bargain or justify a massive move into bonds.
Brent Rentmeister explained that historical generational cycles, such as the 40-year rising interest rate period from 1941 to 1981, suggest we might be on the cusp of another long-term upward cycle in rates. He noted this environment puts pressure on traditional portfolios compared to the falling-rate era experienced by baby boomers over the last 40 years.
Brent Rentmeister highlighted the macro risks of having $40 trillion in official debt combined with rising interest rates, projecting that forward-looking interest expenses could reach $1.5 trillion annually. He noted this amount comprises about 28% of all tax dollars collected.
Discussing institutional failures under a fourth-turning framework, Brent Rentmeister noted that Social Security assets are projected by their own measures to be depleted by 2032, highlighting unsustainable government math.
Brent Rentmeister pointed out the disparity between official government inflation metrics and real-world costs by sharing that his small business faced a 22% increase to keep the same health insurance plan for the following year.
Chris Gallup, Head Market Strategist for the Franklin Templeton Institute, notes that the S&P 500 has risen 13.5% year-to-date, with four or five pullbacks between 4-9%. This performance occurred despite significant increases in long rates and oil prices, which Gallup attributes to strong earnings growth throughout the year and expectations for a good third quarter.
Chris Gallup argues that despite investor anxiety over headlines and potential Fed rate hikes, earnings growth is the most crucial factor for the stock market. He stated that earnings have been phenomenal and are expected to continue growing through 2028, overshadowing other variables like interest rates.
Chris Gallup anticipates one to two additional Federal Reserve rate hikes, believing the economy and market are robust enough to withstand them. He contrasts this with historical patterns, noting that markets typically crash due to Fed actions causing them to 'break something' or due to unforeseen 'black swan' events like COVID.
According to Chris Gallup, sustained oil prices above $100 for six months would be a concern, particularly for consumers at the gas pump and for core inflation due to increased transportation costs. He notes that even if oil prices drop, the effect on consumer prices takes time to filter through the system.
Chris Gallup highlights that emerging markets (EM) have shown the strongest earnings power globally for the past 1.5 years and are expected to continue this trend. In the US, small-cap stocks are experiencing the fastest rate of change in earnings growth, which aligns with their leading performance year-to-date.
Gallup identifies South Korea and Taiwan as primary drivers of emerging market earnings, largely due to semiconductor companies like Taiwan Semiconductor, Samsung, and Hynix. He notes that while the industrial and healthcare sectors are also robust, the significant gains in EM have been propelled by the semiconductor names.
Chris Gallup emphasizes that many companies are integrating AI as a tool to measure efficiency and productivity, ultimately boosting profitability. He notes that in Q2, 25 S&P 500 companies provided a measurable return on investment for their AI use, indicating this trend is in its early stages and is significantly underappreciated by investors.
Gallup observes that management teams are consistently asked about AI deployment, and in the last four quarters, companies have begun to disclose the resulting margin accretion and net income. While approaches vary, every company is addressing AI, either proactively or in response to analyst questions.
John Williams, president of the New York Fed, outlined conditions under which the Federal Reserve might need to raise interest rates. He stated that if month-over-month inflation consistently exceeds 0.2%, it would be considered a problem. Conversely, if inflation remains at or below 0.2%, the Fed would not need to take action.
An argument is made that economists are currently focused on outdated inflation battles, akin to fighting 'last year's wars.' This perspective suggests that current economic strategies may not be addressing the contemporary inflation landscape effectively.
A prediction is made that inflation numbers will likely surprise to the downside in the coming months, contributing to a period of disinflation. This is attributed to falling goods prices since tariffs peaked, expected decreases in seasonally adjusted services prices, and a projected decline in rental inflation.
The discussion highlights that Core PCE inflation is being impacted by factors such as the stock market and flash memory prices. It is suggested that if this were considered alongside Core CPI, which is at 2.3% compared to 2%, it would be viewed more favorably as it is moving towards the Fed's target.
There is a strong critique of the Federal Reserve's current policy, which is described as absurd and tied to a formula increasingly showing a lagged three, four, or five-year average on CPI. This approach is seen as encouraging the same behavior that led to past policy errors.
Michael Green discusses Treasury Secretary Scott Besson's August intervention in the forex market and the announced Treasury buyback plan. He posits that the market for long-dated bonds is not lacking buyers, but rather the traditional buyer behavior has shifted due to algorithmic trading in passive bond funds.
Michael Green suggests that the Treasury's buyback plan presents an opportunity to shrink the US national debt. By issuing new bonds and retiring older, lower-coupon ones, the Treasury can reduce overall debt while potentially increasing the price of existing debt.
Michael Green argues that the current bond market is not being driven by traditional rational decision-making but rather by algorithmic patterns. He likens the current situation to the 'Cassanza market' of 2016, where market participants acted in ways counter to conventional logic.
Michael Green highlights the concept of 'convexity' in long-dated bonds, explaining that these instruments can offer a significant return, with the potential for money to literally double. He notes that despite this attractive feature, these bonds are currently being ignored by the market.
Art Berman, with nearly 50 years of experience in the oil industry, expressed skepticism regarding the official explanation for China's reduced oil imports. He highlighted that Chinese refineries are producing 3 million barrels per day less of essential products, which he believes is the more critical factor than import levels.
Art Berman stated that Chinese refineries are currently operating at 12 to 12.5 million barrels per day, a significant decrease from the pre-war rate of 15 to 15.5 million barrels per day. This reduction in refinery runs means less gasoline, diesel, and jet fuel are being produced for consumption.
Art Berman suggests that the significant drop in Chinese refinery runs, leading to 3 million barrels less product per day, is a key factor influencing oil demand. He contrasts this with the US shale boom 12-15 years ago, which took years to impact prices, implying China's current situation is different.
Art Berman posited that China's reduced demand for oil products could be due to forced rationing for citizens or a weakening economy, or both. He noted this is consistent with data observed in the rest of Asia.
An analyst suggests that silver's price could reach $300 to $500, noting that the precious metals complex is poised for significant growth. This projection is supported by the current undervalued state of silver miners, which are considered the most profitable sector in the US stock market.
The relative performance of silver to gold is currently at 1.6%, significantly below historical highs seen in 1980 (6.5%) and 2011 (3.1%). The analyst believes this disparity indicates a strong potential for silver to outperform gold, possibly reaching 10% of gold's price.
Gold and silver miners are presenting an attractive investment opportunity due to their significantly undervalued status relative to gold. Historically, the XAU index (representing gold miners) averaged 25% of gold's price, but is currently trading much lower, suggesting a potential for substantial gains upon a technical breakout.
Despite a lack of public recognition, gold and silver miners have been outperforming gold over the past few years, moving towards the top of their historical valuation range. The analyst anticipates a significant shift in market dynamics when this spread breaks out, which historically leads to net price gains for both metals and miners.
The analyst predicts a dramatic change in market tone and advance, driven by an expected explosive breakout in the spread between miners and gold. This is seen as a massive, textbook-based technical pattern that, upon breakout, signals a significant upward movement for the entire monetary metals complex, potentially occurring within a couple of quarters.
While both gold and silver miners are expected to perform well, the analyst personally favors silver miners. This preference is based on technical analysis suggesting that silver has already broken out above a 10-year range relative to gold, despite still trading at historically low levels.
David Rosenberg highlights a significant surge in margin debt, which increased by 50% in the past year to $1.5 trillion. He likens this to a bubble, stating that 'every bubble pops' and suggests this could be a surprise factor heading into the fourth quarter, with the labor market being a key area to watch.
David Rosenberg clarifies his role as research advisor for a new ETF, 'Rosie,' launching in September, developed with Corton Capital. The ETF will be premised on his research team's views and aims for high single-digit returns over a cycle, focusing on risk-adjusted performance rather than gross returns.
David Rosenberg's model portfolio, launched in early 2023, has gained 55% with a low beta, despite his 'perma bear' reputation. He describes it as a low-to-moderate risk strategy focused on capital preservation and cash flow, acting as a hedge against riskier assets.
The ETF's mandate emphasizes low to moderate risk, focusing on beta, Sharpe ratio, volatility, and standard deviations. Historically, it has outperformed in bare markets by at least 10 percentage points, acting as a risk management tool designed for consistency rather than home runs.
The ETF's current allocation is 50% equities, 35% bonds, and 15% hard assets like commodities. It is diversified across asset classes and geographies, not being US-centric, and avoids being heavily concentrated in tech, despite some emerging Asia exposure which includes semiconductor regions.
David Rosenberg argues that market bubbles are driven by investor behavior and leverage, not solely by valuations. He points to soaring margin debt, high bullish sentiment, and portfolio managers being nearly fully invested as indicators of herd mentality and potential excess.
Historically, after mid-term elections where the party in power loses legislative control, economies tend to slow down, inflation decreases, and Treasury markets rally. Rosenberg predicts this pattern will hold, leading to fiscal gridlock for two years.
David Rosenberg believes the Fed would intervene to prevent a destabilizing stock market decline, especially if it coincides with problems in the credit market. He notes that while the Fed has a longer fuse, a severe, destabilizing drop would prompt action, similar to past interventions when credit markets showed stress.
David Rosenberg emphasizes the labor market as the most crucial indicator for the fourth quarter, suggesting the Fed has been neglecting it. He warns that repeated negative non-farm payroll prints, combined with a stabilizing labor force and rising unemployment rate, could signal a recession.
David Rosenberg notes that slowing nominal wage growth suggests more underlying slack in the labor market than the current unemployment rate indicates. He believes the U3 unemployment rate is a lagging indicator and that deeper analysis, like looking at nominal wage growth, provides a clearer picture.
From Iran's perspective, they aim to rapidly increase oil prices, with a target of $100-$120 Brent crude. This objective is also intended to cause a 10% decrease in the US stock market, potentially pressuring political leaders. The strategy involves leveraging proxies like the Houthis to disrupt key shipping lanes.
The market is currently experiencing a deficit in oil supply, which has been cushioned by inventory drawdowns from both strategic reserves and private stockpiles. However, once these inventories are depleted, the market will face a genuine shortage, necessitating price increases to reduce demand.
The Strategic Petroleum Reserve in the United States has been drawn down to its lowest level since 1983. This depletion of inventory is occurring alongside drawdowns in private inventories, exacerbated by disruptions to key shipping lanes like the Strait of Hormuz and the Red Sea.
Persistent inflationary pressures are expected to continue, regardless of oil price fluctuations. This outlook suggests that food prices will likely keep rising. The speaker also notes that efforts to support the bond market through money printing are inherently inflationary.
The speaker argues that adaptation is not a viable solution for managing supply constraints or deficits. Instead, the default mechanism for market clearing in such situations is demand reduction, which can occur through significantly higher prices or logistical limitations.
Major US banks like JP Morgan, Bank of America, and Goldman Sachs have consistently reported that the consumer is in better shape than widely perceived. This trend, observed for the past six quarters, shows improving credit quality and stable spending patterns, according to bank management teams. They also noted that AI integration is focused on productivity and profitability, not job displacement.
Leading investment banks, including Goldman Sachs, have indicated that their internal use of Artificial Intelligence is primarily aimed at enhancing productivity and efficiency, rather than leading to job losses. Management teams have stated that AI implementation is not material enough to cause widespread unemployment.
Despite prevailing negative narratives, the US consumer remains strong due to sustained full employment over the past couple of years. Additionally, a significant increase in consumer net worth, driven by stock market performance, 401k plans, and housing values, continues to support spending.
An analyst suggests that the primary historical cause of recessions—the Federal Reserve raising rates too high or keeping them there too long—is not currently a threat. This is because the Fed is not seen as breaking the credit or money market systems, thus reducing the likelihood of a recession in the near future.
The establishment of five new task forces by the Federal Reserve, including one focused on data collection, is seen as an encouraging development. The goal is to improve the methodology and timeliness of data used to inform monetary policy, addressing known issues with the current arcane collection methods and low sample sizes.
An analyst asserts that stock market movements are primarily driven by corporate profitability rather than geopolitical events or political developments. While these factors might cause short-term fluctuations, they are immaterial in the intermediate to long term, as markets rapidly re-price risk based on known information.
First quarter earnings significantly exceeded consensus estimates, with reported earnings at plus 25% compared to a projected 13-14%. This strong performance, supported by initial insights from bank earnings calls, suggests a positive outlook for corporate profitability.
Steven Enders, an expert in exploration and production, projects a significant deficit in copper supply by 2050, stating that current and planned projects will be insufficient to meet demand. He suggests that the market may need to rely on price increases or potentially substitution, though he believes copper is a superior metal.
Steven Enders emphasizes that the quality of management teams, rather than geological resources, is critical for the success of mining projects. He advises investors to scrutinize a management team's experience, track record, and strategic fit for the project's stage.
Steven Enders views AI and other new technologies as valuable tools for the mining industry but cautions against seeing them as a 'silver bullet' solution. While AI can aid in targeting and efficiency, it will not fundamentally change the entire mine life cycle or solve all industry problems.
Steven Enders notes an increasing government interest and support for critical metals, particularly in the US, Canada, Australia, and Europe. This public sector funding into private ventures is seen as a significant encouragement for the mining industry.
While acknowledging the importance of talent in the mining sector, Steven Enders believes the market will ultimately supply the necessary skills, potentially from non-traditional engineering backgrounds. He stresses that the quality of people, not just their technical expertise, is what truly drives project success.
Steven Enders observes that mergers and acquisitions (M&A) are often an early indicator of a maturing cycle in the mining industry. He notes that while M&A activity has occurred, it doesn't preclude more, and that the industry experiences significant volatility and the emergence of speculative projects in later stages.
Chris Casey of Windrock Wealth Management describes a phenomenon of states implementing financial repression tactics aimed at the wealthy, such as wealth taxes and taxes on unrealized gains. He explains that the dire fiscal situations of these states are driving these measures, which are financially restrictive and disproportionately affect high-net-worth individuals.
Chris Casey highlights the dramatic increase in California's state budget, with expenditures rising from approximately $150 billion in 2019 to $250 billion. He questions how this two-thirds increase in spending over a seven-year period is being explained, suggesting it's a key driver of financial measures targeting the wealthy.
Chris Casey contrasts the federal government's financial capabilities with those of individual states, noting the federal government's ability to print money as a key difference. He also points out that stricter constitutional safeguards may prevent the federal government from enacting certain measures, like a wealth tax, that states might attempt.
Chris Casey explains that wealthy individuals have advantages in protecting their assets, including the ability to move their companies and establish legal structures like dynasty and revocable trusts. He notes that these options are generally not available or practical for less wealthy individuals.
Chris Casey advises that individuals should focus on the root cause of financial repression, which he identifies as the debt situation of the states. He predicts this will ultimately translate into an inflation problem for the United States, impacting expectations for social security and necessitating inflation hedges.
Chris Casey recommends diversifying retirement assets not only in type but also in account titling, suggesting a mix of 401(k)s, IRAs, and taxable accounts. He advises against having all money in one type of account due to potential law changes and UBIT issues with leveraged assets in retirement accounts.
Regarding existing 401(k) plans, Chris Casey urges individuals to review their plans and consult with administrators about options like partial rollovers into an IRA or contributing to a Roth component. He believes many people overlook these possibilities and stick with limited, often suboptimal, investment choices.
Steve Hanke believes the bond market is currently complacent about significant economic risks, which are not being priced in. He argues that the bond vigilantes have re-emerged, leading to rising bond yields and falling bond prices.
Steve Hanke states that the inflation genie is out of the bottle and not likely to be put back soon. He links this to a steady increase in the money supply over the past 18 months, with the M4 measure growing at 6.7% annually, which is above the range consistent with a 2% inflation target.
Steve Hanke identifies President Trump's tariffs and the U.S. involvement in the Iran war as factors contributing to rising bond yields. He notes that these factors, along with inflation, are beginning to be priced into the market, leading to higher mortgage rates.
Steve Hanke explains that disruptions in the Persian Gulf have been cushioned by drawdowns in oil inventories, including the Strategic Petroleum Reserve. He warns that if the conflict continues and inventories remain low, it could lead to a significant price increase.
Steve Hanke warns that sustained high interest rates could lead to bubbles popping or deflating. He explains that rising discount rates used to calculate the present value of future cash flows will lead to a decrease in those present values, affecting asset valuations.
One speaker revealed they have sold all their gold and silver stocks, despite facing criticism for the decision. They cautioned against confusing what is inevitable in markets with what is imminent, suggesting a need for careful timing.
A speaker observed that current market conditions in the gold and silver sectors bear a resemblance to past peaks, which is concerning. While their base case remains a consolidation followed by another leg up, they are monitoring data that suggests a potential downturn, drawing parallels to 1980.
One speaker advised against being dogmatic in market analysis, emphasizing the importance of observing data rather than adhering to rigid beliefs. They drew a parallel between market religion and the need for flexibility, urging listeners to pay attention to warning signs.
A speaker cited historical market events, such as the 1980 stagflation and the period after the 2008 financial crisis, to illustrate how unexpected downturns can occur despite seemingly supportive factors. They recalled being bullish in 2011 with mentors, only to experience a prolonged bear market.
Jesse Felder believes the US is experiencing a slow-motion debt crisis. He is critical of Federal Reserve Chair "Warsh" (Jerome Powell is likely meant, but the transcript is unclear) for not clarifying the Fed's reaction function to inflation and nominal GDP growth, leading to a lack of market confidence.
Jesse Felder identifies the 10-year Treasury yield as the most critical chart in the world, serving as the baseline risk-free rate. He suggests that strong nominal GDP growth and the Federal Reserve potentially lagging behind inflation indicate that yields are poised to rise.
Jesse Felder asserts that the stock market's reliance on the AI economy makes it dependent on the health of the bond market. He believes that rising interest rates could pose significant problems for financing the build-out of data centers and the broader AI infrastructure.
Jesse Felder suggests that the current situation points to a slow-motion debt crisis impacting developed sovereign bond markets globally. He cites Japan's massive debt-to-GDP ratio and the ripple effects of its currency interventions and Treasury sales as contributing factors.
Jesse Felder observes that the strong move in gold prices over the past 18-24 months is a leading indicator for other commodities, which in turn lead interest rates. He believes technical indicators have long suggested that the 10-year yield is too low and is likely to break out to the upside.
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