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Speaker 3And we should be live. Welcome to Thoughtful Money. I'm Thoughtful Money founder and your host, Adam Taggart. Welcome you here for our usual special report that we do after every FOMC release and Fed Chair Presser. I am joined as always by Fed Watcher and CEO and founder of Merck Investments. And of course, everybody is Axel Merck. Axel, how are you doing?
Speaker 4Great to join you for this very nerdy session.
Speaker 3Very nerdy. Well, I'm glad you're giving everybody an early heads up on this. Yeah, I was watching Kevin Warsh's press conference live and you were live tweeting it, Axel. And a lot of the things that he was saying, I was thinking, Axel is really going to like this. So I know we got a lot to talk about here.
Speaker 4The reason I live tweet and the reason I started tweeting to begin with, which I think was 2008 or that around, is because that's how I keep notes, right? I can scribble it. The downside is I can't read my own handwriting the moment after I wrote it. And I might as well share it because I get feedback if I get something wrong. People say, no, you idiot, you can't do it, right? This is wrong. And so for me, this is my way of processing to just share it out. And anybody that follows me should be aware that when there is a central bank meeting, I start tweeting.
Speaker 3Yes. Well, there's a lot of people that are very interested in what you had to scribble down there. Yeah. And I just want to remind folks, for those that aren't familiar, Axel has had an advisor on his board for 20 years more, Axel?
Speaker 4From 2008, yeah, from the spring of 2008, summer of 2008 until a few months ago, Bill Poole. He is the former St. Louis Fed president. He was actually an economics professor of mine in the 80s, just before his retirement. I remember. And I reached out to him. Hey, do you want to touch base when you retire? And he said, it's not appropriate for me. And 2008, you might remember, that was a special year. He had been in the news for being very critical of Fannie and Freddie. That was before the implosion, that they didn't publish financial statements, that they were government-sponsored and whatnot. In any case, in the summer, he came on board as our senior advisor. And every other week, we had sessions, kind of having it. You're an in-house economics professor, very libertarian at heart in his view, very hawkish, a very clear and open encyclopedia about the Fed. He knew everything that happened in any Fed meeting in history. And obviously, he had strong opinions about the Fed and a few other topics. And through him, I, over the years, got to know other folks at the Fed and the like. But yes, it doesn't mean anything I say is right and anything stupid I say is not due to him. And he has helped train me to look for certain things.
Speaker 3All right. And a couple of quick things. Was he a professor of yours at Brown? Yes. Ah, I didn't realize that. So folks watching, Axel and I both went to Brown University. I was just a couple of years behind Axel and his wife there.
Speaker 4And fun fact, I was his very last student. And that's why he remembers me. And the reason I was his very last student, they just talked about scribbling. I'm not very good with scribbling. I forgot to put my name on the final. Exam. And so I got an F in the class because I didn't put in the final exam. So I had to chase him, but his assistant had just had a baby. And so it took a while to track him down because he had just left Brown then to move over to be doing something for the administration. And so that's how he remembered me. And I remembered him and I ended up getting an A. But that was from F to A, I think a lot
Speaker 3of people would have loved to be able to do that in college. But just to let folks know, so Axel has had a conduit to folks that have actually sat on the Fed and for a long time and you live near Stanford and have been in the orbit of the events that Stanford oftentimes puts on bringing a lot of current and former Fed officials to campus there. So I just want to let folks know that you're not just some guy sitting in the cheap seats opining about what the Fed is doing. You actually know some of these people and we'll talk about this in a bit. But you actually sat down recently with Kevin Warsh, correct?
Speaker 4That was made public, yes. And actually when we last talked, I had spoken to him as well. But at the time, I didn't think it was appropriate to mention it because it hadn't been published yet. In Jackson Hole, he at the very end when his speech, he said he had received solicited and unsolicited input. And I was honored to be one of the ones whose input had been solicited.
Speaker 3That is very impressive.
Speaker 4The context here is, as you point out, right, Stanford over the years has had many conferences on monetary policy. We once organized a discussion with former Philly Fed President Charlie Plosser and Bill Poole. But then I've been invited as a guest to have an annual monetary policy conference. In any case, through that, I got to know Kevin over the years. As you know, I've been lobbying for him. I believe. I believe that a lot of the initiatives he's undertaking are very much worthwhile. And just for those who don't know me, this is from a person who is very critical of the Fed, historically speaking, who's been very critical of Bernanke, Yellen, and Powell. But at the same time, I truly believe that it's important to support constructive people. In any case, in July, as you might recall, Kevin Warsh had a press conference that was somewhat confused. And so he had gotten a little bit ahead of himself. And so he was soliciting input from numerous people. And based on that input has been, I believe, more focused in his communication. And it also came through today. So, yes, I had the honor to talk to him. And I can't talk about the very specifics we talked about. But I will be glad to kind of circumstribe some of the things. And let that filter. Let that filter through in our discussion.
Speaker 3All right. Well, it says worlds about you, Axel, that the current chairman of the Federal Reserve solicited your input. And that's wonderful. I have opinions.
Speaker 4I have opinions. Anybody is allowed to listen.
Speaker 3Sure. But he cares enough about them to invite you out there. It's a huge honor for this channel that you choose to come on the show. Somebody like you.
Speaker 4It's a humbling experience. Yes. Well, I will.
Speaker 3I will dig with you a little bit to get you to share what you are. And what you were able to share about that meeting. And Warsh used the term framework several times in his discussion, in his presser today. And I couldn't help think that that's Axel's influence, you know, shining off on Mr. Warsh there. But we'll see. All right. So, folks, a lot to talk about here, even though the Fed didn't surprise anybody. Right. So, newsflash, they held the policy rate unchanged. There were two dissents this time. One was Lisa Cook. The other one begins with an H. Do you remember her name?
Speaker 4Yes. Beth Hammock.
Speaker 3Hammock. Hammock. OK. All right. So, you know, not unanimous. And it seems like there is some bias amongst some of the other folks around the table to the hiking side versus the cutting side. Why don't we start with your reaction to. What Warsh said and what you liked, what you didn't like. And then I've got some specific questions to bang on with you.
Speaker 4Let me let me start with something I didn't like. So now that I've had this love fest with Kevin, I did not like that statement. And as you know, I've been a longtime fan of shortening the statement. And the big reason which they have done, which they have done. And by the way, the criticism I'm about to give, if that's the worst thing that the Warsh Fed is ever going to do, I think we'll be just fine. OK. But. The statement is short and they changed a few words and one of the criticisms that I have had and you mentioned Bill Poole earlier that comes from his teachings, so to speak, is you only change words if there is a good reason to change them. And so one of the words that was changed is that the one sentence was in the statement economic activity and expanding. at a solid pace. to economic activity is expanding at a strong pace.
Speaker 3Just so you know, Axel, I'm pulling up the red line.
Speaker 4Exactly. So it's in the middle of the page here. So now, and you chimed in on social media, on Twitter there, what the heck is the difference between strong and solid? And I think Bloomberg asked Claude, and everybody seems to agree that strong is a bit more than solid. That's the sort of stuff you want to avoid because you want to simplify things, right? And you don't want to read the tea leaves as to the amazing little things. There was another guy, Craig Torres. He's a Bloomberg journalist, longtime Fed watcher. Respect him very, very much. He's an excellent journalist. And he had a problem with the other change that's in there. It says the accumulation of more information will help the committee determine the policy stance appropriate to ensure a timely return. Well, what the heck is that supposed to mean, right? Accumulation of more information? Well, what information? And so if you don't have to say something, don't say it. After the press conference, there are a bunch of folks on Bloomberg, Tom Keen being one of them, who said, oh, he didn't give any information. And he ended up giving a lot of information, right? So I disagree with that assessment. But you're just feeding those. And they say, saying, well, give us the information. What information are you looking for? And so I was not terribly impressed with that statement. That said, context is, of course, Kevin Walsh doesn't really like these press conferences. Kevin Walsh doesn't really like to have to issue a statement every six weeks. And so issuing a useless statement is in some ways just, hey, you want something. Here it is. And indeed, one of the news that came out of this was, that next year, one of those press conferences or one of those FOMC meetings, there's not going to be a statement. There's not going to be a decision on rates.
Speaker 3And then two the year after, right?
Speaker 4And the year after. And now, of course, some people say, well, why don't you get rid of it immediately? Well, it's because you're dealing with an institution that has an amazing inertia. It's very difficult to change things. By the way, Kevin Walsh had once been part of a, I use the word task force. I'm sure it was called different. It was called the Bank of England where he recommended that they have fewer meetings. And indeed, they had fewer meetings. It's something he had mentioned earlier. But changing the calendar, each one of these little things is a big deal. And so overall, the expectation was nothing is going to happen today. And indeed, nothing happened, except, of course, two dissents. And some people said, oh, my God, there is no information there. Well, there's a ton of information if you only listen. And I keep. I keep coming back to take a step back and be more constructive than have a gripe about the word strong versus solid. He said in September that he removed a dose of accommodation. Now, that actually gives you a lot of information. He talks about how he doesn't like the accommodative stance. So he. Does not like the accommodative stance. He says he wants to have a tightening bias. He says a small move is just fine, meaning he does not want to use a sledgehammer, which implies that there is no rush. And the best way to keep a tightening bias is by keeping a tightening bias. There are some folks and I'm sure some of you guys have said, well, why doesn't he just hike by a full percentage point, by a full hundred basis points? Well, if you were to do that, you move on from a tightening bias to an easing bias because you're done. So you want to keep it in the future, so to speak, and then one of the.
Speaker 3Yeah, I was just saying, sorry to interject, but you might want to address this in your answer. He was kind of pushed during the Q&A about whether this economy responds to higher interest rates and higher bond yields than previous economies because the big AI companies aren't that leveraged and whatnot. And he basically said, hey, make no mistake. You know, these these higher. Rates there, they're actually they're kicking in. And so it very much seemed consistent with what you're saying, which is like, let's just let this play out. Let's just let this gravity continue
Speaker 4to build, not just with what I'm saying, but with what he said he wants, he wants tighter conditions. And he also he said they doesn't want to kill this economy, but he wants tighter conditions. And then he said conditions are tighter. But they are not tight. Right. Which signals another rate hike is to come. And so I don't know why people don't realize that. Yes, that means the December rate hike, unless there is more information that's going to come, that's going to make us change our mind. So the folks who say he doesn't give any information, I think are just wrong. It says, oh, he doesn't give any data points. Well, the data point he's giving is he's looking at financial conditions. That's. That's a hugely relevant data point. Right. And those are clearly measurable in the markets. And and so it's kind of that context in which he didn't need to hike rates because what he wants and he's made that clear in September as well. He said when he was asked about the inflation goal, he said, well, it's not that you want to have X percent inflation at this particular point in time. He said, well, it's not that you want to have X percent inflation at this particular point in time. And so his target is two percent inflation. And what he wants is he wants a trajectory that gets us there. He wants tight conditions or tighter conditions to get us there. And so as long as we're on the path on that direction. And then he pointed out that inflation has somewhat come down. He said inflation expectations have somewhat come down. And so in that and in conditions are tighter. And so he's checked. In the boxes that progress is being made. He did not say I want the CPI next month to come out at this and this level for me to be happy. And there are a lot of Fed watchers that say, well, without that, we don't know what he said. Oh, he is very clear. If one just wants to listen to what he has to say.
Speaker 1You think, you know, a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50 page. Restoration block or finally break down that long article you've had open for weeks. Check responses set up required compatibility and availability. Various 18 plus.
Speaker 2You're ready to level up your business. But the pressure to find the right person to make that happen is intense. Get a $75 sponsored job credit at indeed.com/podcast. Hiring now? So part of this sort of seems consistent too with him
Speaker 3saying, "Look, we really want the market to be sending the signals here and we're really going to listen." Right. So part of this sort of seems consistent too with him saying, "Look, we really want the market to be sending the signals here and we're really going to listen." So it sounds like he's saying, you know, we're seeing some things trend in the direction we want. I wouldn't categorize this as tight yet. So to your point, at least leaving the door open for another rate hike or at least sticking to the market, you know, I'm not done yet necessarily. Going back to the word change that you didn't like, presuming as we were kind of going back and forth live on X, when Warsh was talking, you know, I think he might have done this because, you know, the magnitude of what's being spent on AI is massive. I mean, it's unprecedented and it's a juggernaut that as long as it's moving, you know, it's going to take everything in the direction that it's moving in. And my guess is he just sort of wanted to underscore that, like, "Look, the economy is down. The market is doing even better than, you know, when we saw it last time." And for the foreseeable future, you know, until that data changes, we've got to assume that economic growth is going to be pretty good going forward.
Speaker 4Yes. He said several things there, right? He talked about that the economy is growing. He talked about how the infrastructure investments are at historic highs, so that they're very high. He said he doesn't want to kill it off. He went on. He asked, is the economy running hot? He says there are no good gauges to actually measure that. But based on his assessment, there are productivity gains and those have been ongoing. These are not just happening in the last few months, but there have been productivity gains happening. Then one thing that as far as I can see, people completely missed, he made an announcement that there's going to be a conference on productivity on November 16, in which he is going to speak and so to back when he started, he said he's going to have all these task forces, which are all these areas in which he wants to reform it, fully aware that he can't just change everything at the Fed overnight, if it even takes two years to get rid of two meetings, right, at the Fed. And he needs to communicate for these task forces where he wants them to be. Now, he said he's there to learn about, from different people, about productivity and expanding it beyond the task force to other experts with varying opinions. But then, importantly, he said he's going to speak there. So to me, that means there's going to be a significant policy speech, how he thinks the Fed should look at productivity going forward, and he's going to use the November 16 venue to express that. And the reason why that's so important is because he's going to be able to do that. And the reason why that's so relevant is that this is a new Fed chair who is looking for his best way to communicate with the market. And he learned in the summer that being too open in the press conference creates confusion. And then he's gotten very focused, but it appears that he's using the format of that conference to give a speech on this topic. And he's going to be able to do that. And so I realized that this is very nerdy, but these details do matter for everything that's happening underneath the surface. And just before we get too nerdy on any of this stuff, when you and I talk, maybe a little less so, but when most people talk about the Fed, we care about what's the interest rate going to be next quarter. If you ask anybody at the Fed, of course, they have an opinion, but they'll be all right. If whatever they want to see happening is happening a month later, six weeks later, if interest rates are 25 basis points high or lower, they much more care about the process. And clearly, Kevin Walsh has a lot of views about changing, and in my view, improving that process. And so these little things in the background matter. And to jump to kind of the elephant in the room, one of the perceptions out there is that the president's tweets are jeopardizing the independence of the Fed, maybe not as much in recent weeks. My answer to that is Fed independence is not about a presidential tweet. Fed independence is about the Federal Reserve going back to basics to get out of fiscal policy. And I've mentioned this on your program before, but I'll mention it again. Monetary policy is about money supply, interest rates, the amount of credit in the economy. It is not about allocating that credit to a sector of the economy. So in my view, and that's my personal view, is that buying mortgage-backed security is not monetary policy, it's fiscal policy, because you're allocating credit to the mortgage sector. And that started happening in 2008. And then the Federal Reserve went down on a slippery slope to do ever more micromanagement of the economy. And it's that stuff in the background, what should the Fed focus on that helps get politics out of the Fed? And that will make monetary policy more effective. And when I say monetary policy more effective, it means interest rates can be lower than they would otherwise be, and growth can be better than it would otherwise be. Because when there is credibility in the Fed with no interference, you don't need to hike rates to tell the markets that you want to have tighter conditions. You just give a little wink and the market will react. Hiking rates is costlier, and directly intervening in the markets is much, much costlier.
Speaker 3Okay. All right. So just help me think through what you took away from Warsh on this, which is, and I think when asked about oil prices and things like that driving inflation, he gave the impression that a lot of the people I've interviewed recently on this channel have too, which is that these higher bond yields and stuff that we're seeing, they don't seem to be a function of significantly higher inflation expectations. It seems like the market is generally looking through inflation, and it's more of a function of economic growth. And so if economic growth is now upgraded to strong and stays strong for a while, and if it's not, then it's not going to be and the labor market remains tight, as Warsh underscored that it is, do you have to start worrying about wage price inflation? Or do the additional productivity gains moderate that a bit because you just need to hire less people?
Speaker 4Taking notes because you're mentioning so many topics here. So let me first start with what you didn't ask. The Bank of Canada had a rate hike today as well. Tim Macklin gave a, he's the head of the Bank of Canada, he gave a press conference. And the reason I mentioned him is that he mentioned higher oil prices as one of the reasons why rates were raised in Canada. And then he later qualified it while the consumer is also strong. And as a main reason, but then he also mentioned government spending. And he said, because there's more government spending, he's raising rates, he framed it a little bit differently. But that's what it meant, ultimately, at the end of the day. So yes, clearly, a very strong economy might warrant it. And he was asked, I mentioned him because he talks differently and more directly on some of these matters. He said, of course, when you have the high oil prices in themselves, the Federal Reserve or the Bank of Canada, they can't print oil. But what they can prevent is that the high inflation that's induced by high oil prices filter through the economy. And what Tim Macklin said is that we've had the war in Iran for eight months now. And those pricing pressures are starting to make their way through the economy. So in that sense, and, and translating that to the Fed, what I've seen the way that I see Kevin Walsh approach it is that he doesn't want to slam the brakes. But he also he wants to have a slight tightening bias, and just a slight tightening bias, so that you don't create excess demand when supply is tight, because then those sort of things do happen. Now, is there risk of the economy overheating? The risk is there, but he doesn't see it yet. And he doesn't seem to want to be preemptive on that. Now, the other part and part of the reason I started taking notes is, you started talking about oil prices, he said something else that was quite relevant for the price of oil, something I've been mentioning many times, not sure whether I mentioned it on your program, is that I have been following the correlation of oil and gold mostly, but also oil and bond prices very, very closely. And I want to wanted to see at some point, the market will move on from the war in Iran. And there have been a few attempts to for that to happen the summer to a little bit. And of course, the like to be some recency bias, even that at the Fed, right last week, we had this risk off environment. And, and bond prices rallied in that while oil prices went higher. And so there was a clear decoupling, at least for, for the short term remains to be seen whether that persists. And wash went back to that two or three times. And I think the reason is that that is super encouraging, that that the market might be moving on. Now, I say might, because who knows what's going to happen a few weeks, tensions could escalate again, and, and, and the like. But at some point, the market will move on. And, and so that is super relevant for their thinking. And when the when the Fed says there's going to be a boatload of information coming. And interestingly, the statement says information, not data. I think that's an interesting one. Because information can return refer to the midterms can refer to the refer them to a war in Iran can can refer to oil. And so it could be a whole bunch of things. But I would think that a lot of people agree that that's assumed for a moment, there might be a resolution for the war in Iran, a lot of the concerns induced by the high oil prices will will go away. Right. Now, the other concern might come that the economy might be overheating. But I'm sure you also talk to other guests who think that the economy is going to go down into recession. That is, that is, of course, another scenario that can happen. And that's why central banks in general, and the Fed in particular, just want to have the slight tightening bias, saying, Okay, we don't want to be getting ahead ourselves. Let's have a little bit of a tightening bias. And let's see how this unfolds.
Speaker 3Okay. Is this a good analogy? You've got to be driving a car. It's picking up speed, right? That's the strong economy. I mean, some people are worried that the car could get going too fast um and you know saying hey the fed should be really pressuring on the brakes harder but right now warsh is basically picking kind of like a feathering the brakes strategy right just kind of every so often you know tapping them a little bit just just just keeping the car from getting too much of a head of steam up but he's not he's not jamming the
Speaker 4be careful if kevin is listening he likes analogies so he talked about looking out of the window all the time and i'm sure he's going to create a bunch of memes but your car analogy the way i would if you use that one the way i would think is on some cars when you have cruise control you can set the distance you want to have towards the car in front of you and so i think he set it to to increase that distance and have it set to softly react as you get closer to the car in front of you and so you so that you don't have to get too close and brake harder you have a little more of a distance and you slightly touch the brake as needed to keep that distance and keep that distance and you can set the distance you want to have towards the car in front of you and make okay slight and subtle
Speaker 3adjustments okay um well let's get to the word framework so that's something that you have long criticized former fed chairs uh of not having right they've taken kind of the the i've got to come up with a better way to say this but they've taken the pornography approach right i'll know it when i see it right you know um i'll know what to do when i when i when i i i see the the situation on the ground and um kevin warsh is much more saying nope we're going to be a lot more data driven um we're going to try to restore the price uh message of the markets um but also we're going to follow a framework and i believe you know he really wants to communicate that framework and he's already started to but of course the the committees are going to be helpful in really flushing it out for people because he largely wants wall street to be in in the other financial markets to be able to anticipate fed action with it with a high probability rate right like he doesn't he doesn't want to be out there surprising the markets he wants the fed action to be seen as sort of obvious because of the framework that the fed is very publicly communicated am i getting this right and do you if i am do you think he's doing a good job
Speaker 1this episode is brought to you by google chrome you think you know a browser but gemini and chrome that's new it can help you with practically anything on the web storing a vintage motorcycle from a 50-page restoration block or finally break down that long article you've had open for weeks gemini and chrome is here for it ready to make anything online make sense there's no place like chrome check responses set up required compatibility and availability varies 18 plus this
Speaker 2episode is brought to you by indeed you're ready to level up your business but the pressure to find the right person to make that happen is intense indeed sponsored jobs can help carry the load it boosts your job post to help it carry the load and it reach quality talent fast cut through the chaos with indeed sponsored jobs get a 75 sponsored job credit at indeed.com slash podcast terms and conditions apply hiring now then this is a job for indeed sponsored jobs now asking a
Speaker 4difficult question because while i would say yes others watching this might say they're in the wrong movie because there are a lot of people criticizing him for not doing that so let me try to untangle that maybe a little bit um first the the powell fed in particular i mentioned to you many times on the uh that it was just reading tea leaves um i don't think i called it pornography but i think i was calling it reading tea leaves yeah um but it's still
Speaker 3similar right it's the i'll
Speaker 4know it when i see it yeah yeah the um the the point of that was the criticism of that was is that the fed had taken away all the gauges um because they were so much in command of what was happening um the forward guidance being the kind of the poster child of that that they didn't have any information really to make reasonable decisions um going forward and so the and part of the reason why some people might think they're in the wrong movie when they hear you say this is because some people have criticized kevin walsh for not giving forward guidance for surprising the market and and it's because they don't understand the quote unquote framework that he has and the framework is of course that he wants to provide the market opportunity to express a view that is not imposed by the fed now right um i think by now kevin walsh has the right balance on how he communicates that um in i think it was in september where he he said well of course the market is going to react to what the fed says but it's how much of a thumb do you want to have on the scale right you the fed will never be completely an outside observer um it's it's just that's just not going to happen but you are able to to get more information from the fed and there are many initiatives he has and balance sheet is one big item which we can talk about but the the other part of it is kevin walsh comes originally from the rules-based camp at the fed and so some people there is that two camps at the fed the discretionary the tea leaf camp um and the rules-based camp in practice all fed officials maybe want to have a rule in theory but be able to be discretionary in practice but the point is he hasn't published the reaction function and the reason he hasn't done that is in my view that in order to publish a reaction function you need to have everybody on board and uh he is hurting the committee's right yes he's hurting the cats and uh and so this takes a while and so he's doing the best he can within his framework of thinking to use that term um by telling people okay i'm removing a dose of accommodation hint hint hint this means a few things just listen to what i have to say um he is saying i'm not going to listen to the next cpi report um but i want to see proof that this and this is happening so he's telling people what he's doing um and if you're willing and able to listen he's very very clear um it's just that people don't like it because it's different um and and so what he can do is he can explain it and then those who want to listen will listen he's you're trying to get through to people who are who are willing to listen and and ultimately at the end of the day if you look at at the market reaction i think this market somewhat gets it what he is saying i think the i was a little bit surprised how after the september meeting um there was an october rate hike priced in that came down somewhat slowly but by the time the meeting arrived um people got it where where i believe that that he wanted to be and so yes i do believe he has a framework yes i do believe he communicates as well but there are people out there who would strongly disagree with uh that that
Speaker 3assessment okay um all right i've got one or two more questions i'm going to ask you and then um i've got some questions folks have already submitted and also we are here on the live stream so folks watching you can submit your questions to axel and i will do my best to get through as many of them as we can um axel i have to name these things before these live events before we hop on them um so i gave i gave this one kind of the um you know the intriguing uh topic of is the fed making a policy error here and um you know i do hear people argue on both sides um you know some saying look inflation is is untamed um one one woman had asked um you know uh paul said out of both sides of his mouth one um inflation has been above the fed's inflation target now for over six years uh and he said but i still want to wait until the end of the year to see if there's anything that i can do to fix it so i'm gonna wait you know i still want to get a couple more months of data before i decide whether to hike or not right and she's just like if it's been over your target for over six years freaking why not just hike here right um so some might say despite all his intent on looking at you know more data and stuff that he's just coming away too late to the party um and then there are others you know that think that a lot of this is is transitory um and that uh you know the fed really should be preparing for cutting um maybe not quite quite yet but but laying the groundwork for that um in your perspective is the fed largely charting the right course here or or is it in danger of making a policy error
Speaker 4so first to address the thing about creating titles before that's just a generic comment to anybody reading any newspaper article any blog um in the top publications the journalist writing the story rarely ever writes the headline um and so there's often a disconnect and so forgive any journalist about the if you read the financial times was the journal bloomberg these poor journalists never wrote write the titles to their to their stories and so i have i i have learned also not to react too strongly to to any come on any title i think it's very fair i think
Speaker 3it's very fair of you to say to those journalists i will say here on thoughtful money folks if you don't like a title you know who to blame it's this guy
Speaker 4right here yes um but the uh and then the the other thing to say right when we have this discussion that the idea here is to be a little wonky and to get into the weeds um i get into a lot of trouble with my beloved gold investor friends that i don't just trash the fed um because the fed should be abolished and we'd all be better um i we are we have the fed and i try to help people understand what the fed is up to because i think it matters the fed has the bazooka it influences asset prices um and that doesn't mean i don't want to have some more radical changes but one of the things to think about is and i do believe that kevin walsh is in that campus you want to change the institution within the confines of the existing law think about having to go to congress and having to do more radical changes what do you think the political sausage making is going to be like to give a to turn let it be a good idea into something else right and so it's in that context that i'm kind of trying to frame what kevin is doing how i think the fed could be governed better would i be happier if the fed was radically different by all means i could imagine many radical changes that that would be much better also on the fiscal side right um it's much easier to complain but i'm not sure that's the case but i think it's a good thing that the fed is doing what it's doing and i'm Kevin Walsh pointed out, right, conditions are tighter. But the thing is, Fed policy acts with a long and variable lag. And so we don't know what's going to happen. The Fed doesn't know what's going to happen. It's also why the Fed shouldn't be rushing. Now, being faced with a supply shock is one of the most difficult things that any central banks can do. And we saw the major screw up that obviously happened during the pandemic. And so the best that a central bank can really do is to prevent an overheating through excess demand. And if that causes a recession, well, too bad. But then you can cut rates again. But yeah. And let me
Speaker 3just let me just say this, you can include it. Like, I think even Powell said this, which is sort of like, we have the tools to deal with deflation. Like, we know how to ride to the rescue with a ton of stimulus. Some would say if you're faced with an inflation or deflation dragon, you kill the inflation dragon
Speaker 4first. The biggest risk, yes, the biggest risk with a supply shock is a heavy handed fiscal response. Think price controls in the 1970s, because politically doing the right thing when faced with a supply shock is usually economically a bad thing to do. Yeah. But that's kind of out
Speaker 3of the Fed's hands, isn't it? Because it's fiscal?
Speaker 4Yes. But that doesn't mean the Fed won't be blamed for it. Right. Because it's not going to be a good thing. It's going to be a bad thing. It's going to be a good thing, because it's, you're going to blame the Fed all the more for all the things that go wrong. And so and in many ways, while there have been policies around the world that have been counterproductive, nothing as extreme as the 1970s. Right. And so in that sense, we are all suffering from the high fuel prices. But that's just what it is, right? There isn't enough oil around, especially not refined fuel. And so it has to be more expensive. So there's less consumption of it. Right. And so that's the only way to deal with it. And because if you subsidize it, not only is it going to cost an arm and a leg to subsidize it, but it's going to create a host of other issues.
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Speaker 3I'm going to get to some audience questions here. And folks, again, ask them here in the live chat and I'll pull them in.
Speaker 4I admire you for being able to read that live. I read earlier that Adam has a Pornhub account now. I know. I know.
Speaker 3I was going to be skipping that one, but thank you for mentioning it on there. But last question here. I'm going to ask you a question. You just talked about the dangers of fiscal irresponsibility. And I think you would say we are in an era of fiscal irresponsibility, not just here in the States, pretty much everywhere else, right? Where our politicians are spending far more than they should be. And certainly on a relative basis, when you look at things like deficit as a percent of GDP, it is very high now on a relative basis. And we're at heights that we've traditionally only seen before in crises, right? So that makes us very vulnerable here to, well, what happens when the next recession arrives? Our debt to GDP, if we don't get our house in order, could go ballistic, even more ballistic. Do you think he is building the bona fides to be able to push back more on Congress to say, you know, in the past, the Fed's been your great enabler? Don't count on me for that. You know, I'm going to do my job. I'm going to do what I'm supposed to do. But you guys, A, need to give your house in order, get your house in order, and B, not necessarily count on me to come clean things up when your mess needs to be cleaned up.
Speaker 4Well, what you see is what you get, I would say. And maybe we're going to see more. But if you look at recent weeks, I'm sure you have talked about the fiscal mess with many of your guests. One of the noteworthy things that I have seen in discussions is people talk about Iran, people talk about Besant making comments about the bond market. The Fed was mostly out of those discussions. And that's good news, right? That's part of the goal of this Fed. Now, this is not a fun time to be Fed chair. But Walsh was very critical of 0% interest rates, egging on Congress from spending too much. Well, he has withdrawn that accommodation, and he's letting that debate play out. And yes, spending comes from Congress. Yes, of course, it does. But politicians love to blame the Fed, right? And that's going to happen. And the more trouble the economy is, the more-- of course, it's not my problem if I'm a politician, right? It's the Fed's problem. And so that will always happen. But I do think it's a very positive sign that there has been a discussion about what's happening. The operation twist that Besant talked about, the focus was on Besant, not on Walsh. And there is political accountability with the Treasury secretary, where there isn't with the head of the Fed. And so that's where the discussion should be. And of course, it's a-- it's a-- it's really bad news that nobody in politics appears to want to tackle the deficit. And the deficit is quite tremendous. But at least there is a starting point that this discussion can at some point happen. Now, whether Kevin is going to go in his testimony and tell Congress to get its act together, I don't know. Greenspan used to say that. Kevin Walsh has invoked Greenspan many times. So we'll have to see whether he's going to repeat those words or not. Remains to be seen.
Speaker 3OK. Let me ask you this. Somebody here says-- this is in the thread talking about should we blame the Fed, should we blame Congress. Someone says, we've got a psychotic president problem. And I don't mean to make this question about Trump specifically. But I guess my question, Axel, is just how much can you really blame presidents for the situation we're in? How much do they contribute, if much at all, right? Does the-- I mean, I mean, I think that's a very good question. Does the executive have much control over what the deficits end up being?
Speaker 4Well, a few things. So first, on Fed independence, I mentioned that earlier, right? Fed independence is not about a tweet by the president. Every president has wanted lower interest rates. Trump has just a very unique style of expressing that.
Speaker 3Yeah, he just speaks more loudly about it.
Speaker 4Yeah. And on the influence, it has changed over the years, right? You mentioned Stanford earlier. A lot of those discussions happened at the Hoover Institution. President Hoover was somebody who had the hardest time working with Congress. And same with his predecessors, Coolidge, for example, whereas modern presidents tend to work with Congress more closely. It may change after the terms, if the balance changes, changes. The president, of course, has veto power. And so through that, the president can have significant influence on the budget.
Speaker 3Meaning you can prevent things from getting spent because you can veto the projects.
Speaker 4Yes, but leadership matters, right? And now you can blame Congress as much as anybody, right? Because it's the job of Congress. That's the spirit of my question.
Speaker 3They have the power of the purse, right?
Speaker 4Yes, but it's the same, of course, with giving the president the rights to impose tariffs. The taxing power is not with the president, but it's Congress that gives the president the power. And so the balance across the three branches of government is shifting over time. And it's for any branch the role to assert themselves. And it was Neil Ferguson who just a few days ago again said the the beauty of the system we have here is that in the midterms and the second term, usually you become a lame duck, right? For all those to kind of use the words that were just using that question, right? The reason why we don't have a dictator is because the Constitution is making sure that while we have a powerful executive, at some point that power fizzles out. And so you can, if you can have a system like you have in Europe, where you get absolutely nothing done. That's the alternative, right? When you have a strong executive, of course, there will always be people that don't like it. And that's why we have election than to go down a different path. And we all get very excited. Now, how much does it matter for the deficit in the medium term? Not clearly a war has an impact on the deficit, right? I do think the leadership matters. The leadership matters because you set the tone as well on the spending, right? So President Trump, amongst others, said he's not going to touch Social Security. And so that's not exactly the leadership you need to reform Social Security. But it's, of course, a political hot potato. And so why would you touch it if you don't have to?
Speaker 3Right. And I guess my question is, is, you know, you get a lot of people that, as you said, feel very strongly about whoever's sitting in the president's chair. But for the past bunch of administrations, you know, people were like, look at all the debt that was taken under Obama. You know, it was more than all the other presidents before. And then Trump, one, was more than that. And then Biden was more than that. And then Trump, too. It seems that the real core of the problem, yes, the president can influence. But the more core of the problem is more Congress and the Fed. And these days, perhaps even more so towards Congress.
Speaker 4There is a great book called The High Cost of Good Intentions, which goes through the history of entitlements and describes how it's a pendulum. But it's not an even pendulum. But whenever we have a kind of a political crisis, it's a pendulum. And it's not an even pendulum. back to cut entitlements a little bit so that the deficit gets better. It's just cut a little bit and then it swings out the other direction more. And I increasingly believe in or subscribe to what Milton Friedman has said is that you just got to deprive government of any tax revenue because whatever they get their hands on, they'll spend. And he is actually critical of the folks who are lobbying for fiscal discipline because he says that's only an excuse then to launch the next spending program if you're actually successful with that. And so the only solution he has is to just don't give the government any money or give them much less money. And so it's a difficult problem. And yes, we like to blame the politician who is in charge at any particular time.
Speaker 3Um, on that point, we don't have a ton of time left, but I'm going to- I'm going to squeeze this question. And, um, California is considering a quote unquote one-time wealth tax, right, on the very wealthy. Um, a bunch of people saying, look, all that's going to do is, is cause the wealthy to increasingly flee the state. And sure, they'll be able to raise taxes on who's ever left, but whatever they're going to get is going to be a fraction of the wealth that has left the state because wealth is mobile. Um, do you have a strong opinion one way or the other on what's going on there?
Speaker 4I have a very strong opinion on the wealth tax. I think it represents everything that's wrong with the tax. And then the, the, one of them is I think a good tax should be very broad. If not, most people are affected by a tax. It's not fair to use that most abused word in, in politics. Um, taxing only a tiny group is absolutely not acceptable in my view. Um, a retroactive tax is absolutely a bad idea. Um, the, obviously the, the amount of 5% is expropriation. So that's absolutely not acceptable. The fact that it is extremely disruptive also signals that some people are willing to be extremely disruptive to attack, um, in imposing a tax. obvious and it shows an attitude of voters right and so it matters a great deal of of what sort of support that sort of tax is going to have um incidentally the the surveys say it's somewhat even the polling markets say it doesn't have much of a chance to pass but it's it's what this tax stands for that bugs me even more than the tax itself um i'm not in the lucky situation to be a but i i don't like it um for kind of all those reasons and then then some more all new holiday
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Speaker 3auto renews tnc apply estimate based on average combined walmart plus and sam's club plus savings among members of both for one plus year versus non-member or club member pricing slash fees excludes membership fees see walmart plus terms and sam's club terms for more info all right um i'm trying to find the question here in the live chat um i'll post it if i can find it but uh i know what they asked um and it's a little bit tangential to what we've been talking about but they said i'd like to know what axel thinks will happen with house prices by 2030 do you have an opinion here we go um yeah where does actual see home prices on in 2030 um it's not really what you look at on a daily basis but do you have an informed opinion i have an
Speaker 4opinion whether it's in the form there's another question as a homeowner of course prices always go up um i i monitor home prices in various areas and i've seen several notifications of price cuts um was the journal had an article that um 270 park avenue jp morgan building costs six billion dollars twenty five hundred dollars a square foot to build that seems ridiculous um it really depends if we if we were to what we need is we need a reform on on construction and the like but for the time being we have a frozen housing market right um because interest rates are reasonably high um people are not moving jobs actively they they are um partly because cost of living is so high you're not mobile you can't just move to a new area um because if you're unemployed you can't afford to just go to new york because it's too expensive to stay there um and so you're kind of stuck where we are um it's a we do have this economy where the wealthy seem to be plenty able to to afford their lifestyle although they continue to be locked in into low very low rates and if if you were to move you get much less for your money right not only do you have to pay taxes unless you get some sort of tax exchange um you're going to pay higher property taxes because your home price has appreciated in recent years if you have a need to pay a mortgage you pay much more so only people who can pay cash are likely moving um interest rates are reasonably high i don't think interest rates are going to go down the problem is we we had low interest rates for such a long time that a lot of future sales or transactions were taken out of the market and and we need to go through a normalization i don't know how long that process will last i don't think we're at the end of that is it going to last to 2030 i don't know um usually forecasts are difficult to the next year so 2030 might be very very difficult to predict now overall right purchasing power is eroding further um as much as i like what kevin is doing um and that means uh home price homes are real assets and uh everything else equal they should probably be okay but um that's about as good an answer as i can give you but otherwise you have a bunch of housing experts that are one and a little more knowledgeable
Speaker 3than i am all right well just to munch two points we made um a lot of folks are asking me why i bought a house here in reno nevada um and it's in some ways because of what axel just said right that houses are real assets but two it goes back to my previous question about wealth tax in california there's a lot of wealthy californians that are fleeing the state and california just seems to give them more and more reasons to do so
Speaker 4so and and dandy the point i we've talked about this before my view is that any investment is about the risk you can afford to take and if you can afford to take the risk then it's a lifestyle choice if you rent you're at risk of being kicked out every year right um and if you can afford it now obviously the moment you buy it you have a stake in it and you've tried to preserve the value and and and the like but um in any investment if you can afford the risk the goal in life is usually not to beat the s p 500 but is to have a safe retirement in the sense that you're not going to run out of money maybe you have some money left over for your children or or whatever it may be and so in that sense real estate can play an important role and it means different things for different people
Speaker 3yeah okay um scott here and i know from some of scott's previous comments on videos um you know he he has a bit of an extreme outlook on where he thinks things are headed he asks what happens when the world completely avoids dollar-based debt um i'm going to let axel react to this anyway he likes but i'll just put my two cents on it very quickly first axle which is you know we hear this all the time um dollar's going to lose the world of currency status nobody wants to own dollars any more foreigners are dumping treasuries uh bricks is going to come up with its own competing currency the dollar is going to be trash and there is a high high unlikelihood of that happening any of those happening anytime in the in the near to mid future in my opinion and if you want a good explanation why just go listen to any of the interviews i've done with brent johnson he does a a much better job of explaining this than almost anybody else out there um i just want to and then I'll let you talk here. For all the headlines that you might see and all the hand reading that's out there, here is the latest chart of US treasury debt held by foreign and international investors. It's still climbing. You can argue that the trajectory isn't increasing as much as it has the past couple of years, but you'll see plenty of times in the past number of decades where it flatlined for a while and then picked up. But there is no apparent weakness here that the world is going to be weaning itself off of dollars and off of US debt. And the sad reality is not because the dollar is perfect. The sad reality is just that everybody else has even worse problems. Every other currency has bigger shortcomings to take over as a world reserve currency than the dollar. And everybody else is being essentially as profligate as we are worse. And so when it comes to holding a quote unquote safe asset, they're just not. competitive on a relative basis to US debt. Now there's things going on there at the margin. Axel, I don't know how I've talked about this with you, but at the conference, we've had a number of folks talking about how in markets like Japan and some other markets, domestic investors who used to get a much better relative return on US treasuries versus their local debt, that difference is shrinking. And so now they're buying less of our debt because they're getting just a better deal at home. And it's not because they hate treasuries, it's just that they're getting, again, a better deal than they were on their domestic debt. But all in all, like I said here, the trend of the world buying and holding US treasury debts is not changing materially now and not likely to in the near future, in my opinion. Axel, I'll let you chime in.
Speaker 4All right. Maybe I should speak to one of your conferences one day, because I can give you a 10-hour answer. I think your conferences are 12 hours, so I can.
Speaker 3So you can fill 10? Great. Do my job for me.
Speaker 4So some of the things you said I agree with. Others, I think you're wrong. So I would love to just touch on some of that. And so one I agree with, the BRICS are not going to come up with a competing system. Any one country can't agree on anything internally. Do you think like five, six countries can agree on anything? And so I'm not criticizing you, I'm criticizing the ones.
Speaker 3Many of whom who have been adversaries often over the past decades and centuries.
Speaker 4It's the same with, we're not going to go back to a gold standard in the US, because you can only have a gold standard if you live within your means, and nobody wants to live within their means, right? Folks that believe in these things don't trust the government, but think somehow the government is going to fix it with a new system. It doesn't work. But where you're wrong is, and many are wrong, people that say that the US cannot lose its status as a reserve currency because there's no good alternative. And I think I've talked to you about that.
Speaker 3Let me just be specific about my position. Yet, to my opinion, there's just nobody that seems prepared to take that anytime soon.
Speaker 4It's the wrong question. There does not need to be an alternative. The alternative is fragmentation. The alternative is that there is no world reserve currency. That is the alternative, right? And we see that as part of the de-globalization theme. One of the things I've said, and I think also as a guest with you, is that let's take tariffs as an example. Tariffs don't just impede the flow of goods. Tariffs also impede the flow of currency. And so all else equal, and of course, never everything else is all equal, when you have tariffs, you have less financing of US debt coins than when you have tariffs. You have less financing of US debt coins than when you have tariffs. Now, of course, it doesn't mean foreigners will dump all their debt tomorrow, but it means that the cost of borrowing is higher than it would otherwise be. And we have seen the long-term yield in US debt going up. More broadly speaking, you can think about the US, and I don't know all of Brent's views here in detail, but you can think about the US debt, or the US as either a bank, or a hedge fund. You borrow cheaply in the US for larger returns abroad. And because of the liquidity of the safety of our regulatory environment, as much as we might complain about the details, the US is a very popular place to borrow money. And so when that happens, and especially if foreigners use that money to invest abroad, it's basically a short on the dollar. And that is the key reason that when you have a risk off environment, people de-lever, which means they're taking down their leverage, which means it's a short squeeze on the dollar. And that's why in a risk off environment, including last week, which was more classic risk off, the dollar tends to bump higher. Now, when you have tariffs, you're putting some sand into this machinery. But it's not like it's a switch that you turn on and off. It's just a less efficient machinery. And when you have de-globalization, your you're threatening that machinery. And part of the reason the machinery was built is because the US was kind of the superpower that reigned the world, kept global seas safe and everything. And so everything that happens that takes us back a few steps in that and creates a splintering. And it makes that exorbitant privilege less effective. Now, one reason why I think you're right in the dollar is going to continue to be dominant for a while is that never underestimate the ability of policymakers to kick the can down the road. We saw that in the Eurozone debt crisis. The US has deeper pockets than Europe has in getting things done. And that doesn't mean people may demand a higher price for the debt. And that can, of course, create some sort of crisis at some point or another. But I think you're right in the dollar. And I think you're right in the dollar. And I think there is a lot of pressure on policymakers. But for the right price, people will want to hold the debt. The question is, is that price going to get too high to finance the daily operations of the business and to move along? And of course, what I think is happening in politics is that you're creating an unstable dynamics. And that is part of the reason why we are electing more populist politicians, because they have quick fixes that, of course, don't fix anything. But don't underestimate the power of the system to move forward.
Speaker 3I'm sorry to interject, but I would add to that and be curious to get your reaction, is don't underestimate the power of the system to want to do everything it can to perpetuate the system.
Speaker 4Yes, but that doesn't mean society will be recognizable necessarily. Just think about how Latin American societies have adjusted over time. Or take an example I like to bring up sometimes. Like in the 1950s, very few women worked, right? Whereas nowadays, most women on the working world have contributed to society. Two decades ago, a 65-year-old would retire. Nowadays, you're proud that you can still contribute to society at 65, right?
Speaker 3Necessity-- Or the woman has to work, or the 65-year-old has to work, too.
Speaker 4But I was being fascist here, right? The fact that we are embracing necessities as virtues and say, we will-- President AOC is going to do rent control throughout the country, and we'll a good portion of the population will embrace it as nirvana type of thing right i'm not saying that will necessarily happen but whatever it's going to be a society has an odd way of adjusting to to the circumstances now um central banks ever since we weaponize the dollar have an incentive um to de-dollarize but they can't do that overnight gold is a beneficiary in a trend but it doesn't mean they dump all the dollars and put everything into the dollar and into gold right and so there are lots of cross currents there and then brent of course focuses very much on the cross part of the cross currents um that that can happen um but at the same time there is underlying damage done that i i fully agree with um it's just that it happens so in a in a in a complex system and in the meantime while we're kicking canada can down the road the rest of the world has much much bigger problems i mean look at the the population decline in china right um or look at the mess in europe and so the the issues we are facing here i'd much rather have than than many other countries yeah that but does that mean that just because we're doing better so to speak of course doesn't mean that the dollar will preserve its purchasing power i think there's a reason right you mentioned earlier well wait that's a different
Speaker 3story you just mentioned though there's the total difference between dollar maintaining its purchasing power versus dollar being used somewhat
Speaker 4somewhat somewhat right it's not completely they're not completely independent just to be clear because
Speaker 3as brent says and i totally agree with the dollar can still remain king for a long time but still depreciate versus real things in person
Speaker 4exactly but they they are linked but they are not the same that's that's exactly it yeah
Speaker 3um okay well look we could keep as you said you have 10 hours of material on this and actually i think it would be really fun to have you and brent on and just have a discussion around this not not a debate but just a just an exploration of this because there's some other things i know that if i could put on my brent hat that i think he would say but we're going to start wrapping it up and i have not asked you about a question that i'd get killed if i didn't which is gold so um actually in addition to all your other talents and hats you wear um you run some pretty large gold mining funds uh you have uh been involved in the gold industry for a long time you you developed the etf ounce ounz um so you know a lot about precious metals uh they have been having a rough year i mean they they had the the very obvious blow-off spike at the beginning of the year um the big question has been okay so where's the bottom and we are getting very close if not at uh all uh sorry um uh year lows right now um and uh i was just looking at the charts i mean gold and silver have have almost for all intents and purposes they've deflated pretty much every day for the past two months um they're just you know they just can't quite seem to catch a break here yet they can't quite seem to catch their feet what's your general outlook right now um do you think that we're like ronnie stifferly um from in gold we trust um he's written that he thinks the capitulation low is is like imminent days away at this point um so i'm just looking at the charts so i'm just looking at the charts i mean gold and it's always a tough thing to call do you agree that that's more likely or do you fear that we break through these year lows and then you know that technically opens up much lower prices ahead
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Speaker 4so you make this sound very dramatic i mean gold is down less than six percent year to date minus yesterday had an amazing day uh a very volatile period right um what i have been yeah but silver's
Speaker 3down what year to date
Speaker 4it's still silver's down significantly yeah um 24.7 percent i see right and
Speaker 3down like 55 from from its yes but but of course
Speaker 4it surged up quite dramatically before that right that's uh that's that's also part of it silver is just notoriously volatile right yeah um the one reason why i monitor the correlation between gold and oil so much is because i see that as a sign to for the market to be ready to be moving forward rather than being a hostage of the of the war in iran and then just for context um the war in iran is priced in as a shock rather than as a structural change and it implies a higher real interest rates and i don't want to get even more nerdy than we have been but all else equal that's a headwind to the price of gold and it's it's usually only if policy makers have a strong reaction to the the stax legendary impact that this causes that then then precious metals do very well um the reason why i like my precious metals holdings is that i do believe there's going to be a resolution at some point any resolution should be a positive for precious metals take the extreme that u.s says okay we've had our fun iran you control the straight now they would impose a toll system i would think oil prices are going to be low on that it might be terribly geopolitically in the medium term um terrible in the medium term geopolitically but oil price would come down if iran fault us that would also be presumably good for oil prices if we muddle through the world has an amazing way of adjusting so if if we're going to be in this limbo forever um there will be some there will be investing and refining in canada and the like right there there will be a way that we'll learn how to deal with that um so i'm not too concerned that that's going to last forever the other thing i'm we we talked about this booming economy that kevin walsh likes well we haven't put on our bearish hat oh my god how much debt there is an ai right um so that is of course there and how do you how do you hedge that how do you protect yourself for that if we ought to have a a slow down because there's too much of a debt binge on the ai train um different from the late 90s i do think that the fed will react to that because this debt burden is gonna needs to be buffered right when when that that that implodes um and so how do you diversify and precious metals including the miners might be a path to do that um the other thing is on the on the physical gold side the it's the i always look at different types of investors the speculators have pulled back but the long-term investors if anything have continued to add to their holdings so that's encouraging on the mining side the margins are phenomenal um that these miners have one of the things i think i mentioned in your program the last time we had a boom mark andreessen in 2011 came out his essay that software is eating the world um there was an industry that was low barrier to entry super high margins and that was just when we the beginning of a bear market in gold now gold is competing with ai which is very high cost investment uncertain margins and so suddenly industrial investments in general and precious metals mining in particular because of the high margins are becoming quite attractive and so it's a much more level playing field and as far as valuations are concerned i think they're very attractive now as you point out right they're down here to date this entire sector is not for the faint of heart and i said earlier you've got to afford the risk to invest in these um and so if you can afford it i i like to be there i can't give specific investment advice but um it's it's a very volatile market it's very volatile market and it's a very volatile sector and of course last year the gains were quite dramatic right and so it's uh it's not too surprising that there's a pushback the other one reason that also gets me more positive on miners and gold than it would otherwise be we're not we're in a tightening environment at the fed but we're not in a higher for longer environment that accumulated in 2022 um at which point powell finally went away from that it's not that there is super high inflation that the fed needs to beat at any cost we're removing a dose of accommodation that's a very different environment we are pricing in another rate hike in in december and then the next rate hike is priced in in march and another one is priced in then in july next year. And all that will change based on how the data come in. But that to me is not a super tight Fed. We also, by the way, off the peak in the yields. I was going to ask about that. Yeah. Notably on the long-term real interest rates. And again, I get a lot of pushback when I talk about long-term real interest rates, because nobody has a clue what long-term inflation will be. But there are market measures on these, and they are mostly confidence measures on the Fed on what they will be able to achieve. And so to me, those all sound like it's all right to be there. Now, of course, there are scenarios where it couldn't turn out well. But if I look at my balance of risks, I do like my allocation. Okay. All right.
Speaker 3Great. Well, look, we're going to have to end it there, because I've gone over. Axel, thank you so much for continuing to do these. Folks, if you would like Axel to continue to appear, to offer his. Thank you. absolute expert perspective and outlook in these live streams after every Fed FOMC meeting and press conference going forward, let us know both here in the live chat. If you'd like it to continue, same thing in the comments below. We always like to do more of the things you like and less of the things that you don't like. But please thank Axel for me by hitting that like button and clicking on the subscribe button below, as well as that little bell icon right next to it. Axel, for folks. Thanks. that would like to follow you in between now and your next appearance on this channel, where should they go?
Speaker 4We have a free newsletter at Merck Investments. You can learn about what we do there. I'm on Twitter @AxelMerck, and with you at some point at the next Fed meeting, if things work
Speaker 3out again. All right, my friend. And if there's enough interest in folks, let me know in the comments section. If you'd like to see an engaged discussion between Brent and Axel, I will do my best to make that happen, should you want it, and they be willing to do so. So, Axel, thanks. Thanks. Bye. Bye. Bye. Bye. And, again, this is one of those highly polarized times, Axel. And, you know, I get a lot of people saying, "Well, I'm not going to vote because the candidates are both terrible," or whatever. Or, "I haven't done the research yet." I just want to read this. I'll see if I can actually share it, but I guess I'll just have to read it, given the time constraints here. Let me see if I can pull it up here. All right. It says, "Dear undecided voters, if there's 10 people on the bus, and three vote to drive it on the bus, I will not vote for you. I'm going to vote for you." If there's three vote to drive it off the cliff, and two vote against it, and the remaining five people don't vote, you're all going off the cliff. Your reminder is that not voting is literally the dumbest choice. Go vote this November. So, again, a lot of our forebearers fought and died and bled so that we could have this inalienable and essential fundamental right. Go exercise it. Make sure you cast your vote. That includes you, Axel.
Speaker 4Don't drive off a cliff.
Speaker 3All right. Axel, again, thank you so much. We'll see you at the next FOMC meeting, which is in mid-December, correct? December, yeah. All right, great. If not before, but we don't have you on before. But thanks so much. All the best to you. Please give Mr. Morsh our best the next time you talk to him, since you're on his speed dial. And everybody else who's watching, thanks so much for joining us today. We'll see you next time. Thanks so much, everybody, for watching.
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