Speaker 1This is the Commodity Culture Podcast, where we interview prominent investors, fund managers, analysts, and company CEOs to give you an edge when it comes to investing in the commodity space. Edward Dowd, great to have you on Commodity Culture. I want to kick things off with precious metals markets because we're seeing both gold and silver prices take quite a beating over the last few days, and at the same time, we're seeing government bond yields rise, continuing to rise. We're getting into close to 5% territory for the two-year, I believe, last time I checked. Five years now over five, 10 years over five. All of the bond yields are rising. Now, some people have pointed out as they came on this show that there's a correlation there, that the reason gold and silver are taking such a hit here and the reason that they may continue to rise is because of the gold and silver prices. The reason gold and silver prices continue to suffer ahead is because of rising yields on government debt. I mean, part of that theory is that if you can get these high yields on so-called risk-free investments, though looking less risk-free now, that why would you then hold gold and silver, which don't provide you a yield? I wonder what your thought is on that whole thesis and how you see the impact of rising yields on precious metals.
Speaker 2Well, you know, so we've been making a call for the better part of the year. It's been a long time. We've been talking about a looming risk-off trade generated by a weak economy and a bunch of risks that are going to take us into a recession. You know, that hasn't come to fruition. The war kind of threw a wrench into that. If you remember, yields started rising. Yields were coming down because things were slowing. Then the war hit, and then oil took off and yields took off. Yields in oil are not always, you know, correlated. Right now, they're about 70%. They're not as correlated in the short term, but long term, they're not as correlated as one might think. The yields definitely are probably an excuse as to why gold and silver haven't – when you say they've been taking hits, I mean, gold is still in the $4,000 range. It's been kind of consolidating for a while. So when you say hit, as someone who has been calling for gold to consolidate for a better part of a year and then resume its March trade, I think it's going to be a big hit. hurts 10,000. This doesn't concern me. And yes, yields are a concern, but we're of the opinion that we're getting close to an inflection point on yields because once the yields get to a certain point, they choke off the real economy. The real economy was already struggling. This is going to just contract business lending and loan making, and it's going to make the AI trade that much more expensive to finance. So we're thinking yields are going to top out here soon. Growth's going to slow, and we're going to have the Fed reverse course sometime in the next six months. They got one more hike in them. We think they should have hiked 50. The reason why they hiked is about two weeks before the Fed FOMC meeting. In the prior FOMC meeting, we made the call they weren't going to hike, and we were right. How did we know that? We follow a very simple tool. You look at the three-month T-bill versus the Fed funds rate. You look at the midpoint of the Fed funds, and if you get 25 basis points above on the three-month T-bill, it looks like they're going to hike. Well, about two weeks before the last FOMC meeting, the three-month T-bill took off. And I think what was going on is the market started to say, hey, you know what? There's going to be no peace deal before the midterms. The Iranians are not going to come to the table. And Trump even said that himself. So what the market was looking at is a not-for-profit market. That's not structural part of inflation. They started to worry it might become structural the longer this goes on. So the market priced in some structural potentiality. The Fed, in our humble opinion, probably should have held. They didn't, because Warsh is new, and he needs to have credibility. I think when we look back, in hindsight, this is going to be a policy error, because these high rates are not good for the economy. The economy, especially the financing of the AI build-out. And the AI build-out is already having problems. Yields are widening on neoclouds and hyperscalers. The private credit markets are in trouble. They're getting outflows. So it just feels to me the credit markets are starting to ask questions. And that's what usually ends the party. And the only party in town is the AI trade in the economy. Housing is stalled. And with mortgage rates where they are, that's only going to make it worse. We've got issues in China. China just reported weak industrial profits last night. It's all pointing towards a global growth slowdown, which will eventually bring yields lower. And I think gold and silver will be fine.
Speaker 1I want to unpack a lot of those topics you brought up as we go through this interview. First, I want to talk about that road to 10K gold and how you see us getting there from where we are today. You said you expected a consolidation before the next leg up. So gold's recent price action doesn't surprise you. What does that path look like? And what are the catalysts that you think will ultimately get us to that $10,000 price tag?
Speaker 2Well, it will be born in the next crisis. So once growth slows and we have credit problems and credit contraction, the economy will roll over, risk assets will sell off, and there'll be pressure put on the central bank, especially the Fed, to print money. So the catalyst for gold is the eventual printing of money as the disinflationary, deflationary scare hits, which is what happens. And it happens quickly. During the great financial crisis, people forget oil had a tremendous. There was no announced oil price shock, but oil went from something like 80 to 146 months during the 2008 time frame. It peaked in June of 2008, and that destroyed what was left of an already struggling consumer and put a nail in the coffin of the economy. I see a similar. And yields rose too then. The long end of the curve rose up, and then the Fed didn't hike during this time frame, but they talked about it. The EU did hike in the spring of 2008 on the oil price spike. Oil is a tax, and it's a supply shock. It's not a demand shock. In the 70s, there was a demand shock. We had a very different demographic outlook. We had baby boomers entering the workforce, and we had COLA, cost of living adjustment, built into the unions, so wages were rising. Wages are now rising. So demand destruction is coming, and eventually. I know it's hard to see it right now, but when this happens, it's going to happen fast. And I think gold is going to benefit from what happens during the crisis.
Speaker 1Let's talk about the FOMC meeting. And that error that you said you thought Warsh made by raising 25 basis points. You pointed this out on a recent article in your sub stack. Why do you think that is, and what's causing the Fed to miss the mark here?
Speaker 2Yeah. So a little known. It's kind of a dirty little secret. The Fed usually follows the money markets, the three-month T-bill. But there's different regimes. There's a rate hiking cycle. There's the plateau. And then there's the rate cutting cycle. We're in a rate cutting cycle. And there's been false positives before where the three-month T-bill spiked up. And the Fed usually followed it, but they didn't always have to. And sometimes they didn't. I think, again, this is a very temporary supply shock. And the other side of this is demand destruction. So if Warsh had already been in there for three years and developed a lot of credibility, he probably would have stayed pat, but he didn't. And I think also, they're also looking at AI inflation. They don't seem to understand that the AI inflation is created by easy credit. So in many ways, they just choked off a lot of the easy credit for AI. And AI, the easy money party seems to be ending already. A lot of people, a lot of investors are questioning the ROI. There's been a lot of controversy around open AI and anthropic. There's this game of wanting to go IPO their company. But to IPO the company, you have to provide an S1, which is financials. And the financials are atrocious. So there's this game going on. It's almost like if they do go public, it's like the game's over, because people see how bad the profitability is of these frontier companies. And I'm of the opinion this is a commodity business with tremendous amounts of CapEx. And then once people realize that, and that the ROI is not going to be coming for you, and that the ROI is not going to be coming for you, and that the ROI is not going to be coming for you, a lot of the CapEx is going to be ended up being stranded and wiped out, which usually happens in an infrastructure build anyways. Happening during the railroads, the utilities in the 20s, the fiber build out in the 2000s, and now the AI compute build out. And it's not a bad thing. It's a good thing. I think we repriced everything and AI becomes very abundant and very cheap.
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Speaker 2Well, look, there's never one thing that pops the bubble. It's a host of different factors. I think one of the things that's going on is the circular financing. And we started to see cracks because the private credit markets were supposed to fund 50% of the AI build-out. That's what Morgan Stanley said in the fourth quarter of 2025. Private credit markets have their own issues. The general economy is causing them to see the default cycle. And they're getting outflows. For three quarters in a row, people have been wanting their money back. They're getting gated. And so it's becoming increasingly difficult for private credit to finance the AI build-out. So that tightens credit. You saw that. You see CoreWeave, which is not a private credit company. It's a public company. Their bonds have exploded out to 13%. That's junky. You see NVIDIA expanding its balance sheet to finance their companies. You saw that. it's a lot, not only just across different asset classes to both credit and equities. And the SPY, which is the S&P 500 ETF, is basically an AI ETF. I mean, when 40% to 45% of your market cap is AI or AI adjacent, you're basically making an AI bet in the S&P 500. If that unwinds, I suspect volatility will go up and we'll see something similar to what happened in 2000. And I'm not saying the indices can't go to new highs. I mean, they might. I mean, until this thing breaks, it can continue to go. But at this point, if you're patient capital and you're not watching every day and you want to set it and forget it, we've been recommending high levels of cash to take advantage of discounts when they come, like Warren Buffett. When the bubble bursts, AI and AI adjacent will not recover. There'll be a new leadership group that takes over. I don't know who it's going to be, but a lot of people are suspecting there'll be the commodity trade because once the Fed starts printing money, then commodities will rise. We'll have to see what the tape tells us. But definitely, the sector that gets smoked will not do well for five to 10 years. It'll base. After the tech bubble, tech was kind of an underperforming sector for five to eight years after the bubble burst. So we'll have to see what new sectors rise from the ashes. And also, there'll be new AI companies that rise from the ashes that take advantage of what I suspect will be cheap compute. People forget most of the market cap we see today in tech was not even IPO during the dot-com bubble. Google didn't IPO until after Facebook. Apple didn't IPO until after Facebook. They took advantage of the cheap broadband with its smartphone that it rolled out. Without just cheap broadband, there'd be no Apple. You know, Amazon was the only one that survived and thrived. But, you know, most of the market and, you know, NVIDIA reinvented itself as the AI GPU guy. But most of the wealth that we're going to see will come after out of the ashes. So watch for new companies. Watch for some of the, you know, the current players to take advantage of it. Apple sat out this AI race because I think they realized smartly that the initial wave of CapEx will be stranded. I think they'll take advantage of, they'll become an AI player on the other side because their balance sheet will be okay, relatively speaking.
Speaker 1And do you think we'll see a shift to where valuations start to matter more in the aftermath of this AI bubble bursting with the value investor approach perhaps becoming more in style? Because so much of what's been driving these investments, obviously passive inflows from ETFs, but this is all based on promises of expected future cash flows that in the case of these AI giants, it seems like you think will not materialize. So do you think we'll see that mentality shift perhaps by market participants at large to more of a value investor trying to buy assets for cheaper than they're worth?
Speaker 2Yeah, you know, value has been a hard category to own for years. Because of the growth momentum, Trey, and the passive flows. The passive flows kind of feed on themselves and become a self-fulfilling prophecy. It'll be interesting to see what happens in the aftermath. I suspect value investors will have a good go of it. I mean, during the dot-com bubble, people don't realize this, but if you were a value investor and very cheap stocks going into the dot-com bubble, you actually made money in 00 and 01. They didn't take the hits that everybody else did in the broad indices. So I can't predict that'll happen again. But, you know, buying companies that are below intrinsic value that at least have an ability to, and there's a reason they're cheap. There's always a reason they're cheap. That's the problem. So there has to be a catalyst to change that equation. But value investors may get a reprieve here, but, you know, I don't know what's going to happen in this next downturn because it seems to me that we've kicked the can down the road so much. It's going to be pretty epic to watch what unfolds.
Speaker 1Let's talk about China. Very polarizing topic. I speak to many people who believe China is going to be the next global economic superpower. They have all the leverage when it comes to the global economy, pointing to their large trade surplus. It's been $806 billion year to date. However, you've been warning that China's situation is actually going to be a big problem. It's actually quite dire. Is this positive trade surplus not that significant in the great scheme of things? And are there other factors that people are perhaps misunderstanding about China's position economically?
Speaker 2Yes. So China has an internal consumption demand problem. It's been imploding since 2020. Their demographics started to decline in 2020. And that can currently happen with their real estate bust. And they're trying to do what Japan did after their real estate bust and demographic bust. So two similar situations. Japan tried to export their way out of it. That, to some extent, was successful, but they still had several lost decades. China is 10 times bigger than Japan, so it presents a problem to the world. So that's why we're seeing all these trade wars. And they're trying to export their way out of there and keep the factories running so that they can keep their people employed. And trade wars certainly don't help. And it's getting-- we put out a piece on our website, financetouchchallenge.com, called China enters the acute phase of its real estate crisis. And what we meant by that was they had a lot of long life projects that were kind of keeping the lights on in that sector. But those are all rolling over. Their net fixed investment, which is the whole-- you know, everything went negative growth in the fourth quarter of last year. Recovered a little bit for a couple months, and now it's trailing. It's trailing down. So they are in trouble. And that will have, unfortunately, contagion effects to their partners, Japan and South Korea, which will then impact us as well. So you know, the global growth situation is slowing. The markets haven't figured that out yet. But when they do, this will happen fast.
Speaker 1And what do you make of both the United States and Canada seeming to kind of be reversing their stance as a little bit on China? Now, who knows how much of this is political theater. We saw Trump visit China recently and seemingly got along very well with Xi. Supposedly, certain initiatives were agreed to. I mean, we never really get anything really concrete that moves forward out of these meetings. But at least it looks like, for the time being, there's not a hostile relationship there. And then, of course, Canada seeming to be moving away from the United States and trying to lean more into a relationship with China when it comes to trade. Is this all theater? Is this an actual geopolitical realignment happening? And how could it impact the big picture, in your view?
Speaker 2China is-- again, the China narrative is that China is taking over the US and we're no longer a superpower. That's actually false. China started to-- right before COVID, China's GDP price in dollars was 80% of that of the US since 2020. Their GDP price in US dollars is 60% of the US. And their growth price in US dollars since COVID has been zero, even though they've been posting 5%. This is price in US dollars. So much like everyone said Japan in the '90s was going to take over the world economically, they're already in decline. So the decline's already begun. They are in deep trouble. And the US-- it would behoove the US to help them because-- if they can't employ their people, they fear their people, then they need a boogeyman. So as bizarro as this sounds, we should work together to help them develop an internal consumption economy. That would entail them giving up some power and creating a safety net like the social security system we have here because most of their population saves. And they're such savers, the velocity of money is well below that of the US. The velocity of money in the US is 1.4, 1.5, something like that. In Japan, it's well below 1. It's a disaster. They don't spend their money. So-- I mean, in China, it's well below 1, right? Yeah, in China, it's well below 1. That's what I meant. And so they need to develop an internal consumer economy. That's always been the hope and the dream. They haven't done it. But to do that, they'd have to give up some of their power and their wealth. So it's up to the Chinese Communist Party. The 7 million card carrying members that control billions to do that. So that's where Trump and the US should be talking to China, working together. Because if we let China go into a deep economic spiral to protect themselves, what do you do with a bunch of men that can't find jobs? You put them in the military. What do you do? Then you saber rattle. And Taiwan is right in the crosshairs. So it would behoove us for Trump and Xi to get along. I don't know whether this is Kabuki theater we'll see what comes out of it. You know, Canada is a basket case. You know, they, they, they love China or at least Carney loves China. They love the EU. They're in North America. So like, what are they, I don't know what they're trying to do. It seemed that also seems like Kabuki theater as well. I'm posturing, but who knows?
Speaker 1I want to get into the AI is going to kill us all rhetoric that's been bouncing around out there. Interestingly, one of the biggest proponents of this has been the CEO of Anthropic, which really blows my mind because there's no other industry I can think of where the CEO of a prominent company in that industry comes out and says, well, the product we're making, it could kill us all. It could take over the world. There's a ton of danger here. Speculation of course, is that these big AI companies are trying to get regulation passed by the government that would be favorable to them. And that would create a moat to act as a defensive position against the issues you were talking about at the beginning with other AI labs, being able to build themselves up. I'd love to get your thoughts on, on what you think's behind this.
Speaker 2Yeah. So this is also another clue that perhaps the AI bubble is closer to the end than, than, you know, we think right after labor day, literally the day after labor day, September 8th this young kid, whistleblower puts out a post that from an account that never had posted before there was a wall street journal article queued up. And then all of a sudden, you know, Congress went off and everybody started talking about the AI doom death March that we were going to see. And then the companies came out and said, we need to pause AI. We need to work with government. I'm not the only one who wrote about this in my sub stack, David Sachs, you know, Trump even called, it out SNL this weekend's called it out. It's, it was, it was an attempt to scare folks into letting a open AI and anthropic be regulated by the government. And of course they would write the regulations and then ice out their competition, the open source models. And that, that speaks volumes because that's a desperate move. You do that. If you're not profitable and you're not profitable, David Sachs: because the open source models are eating your lunch. So that was very telling. Uh, and, uh, a lot of people called BS on it. Uh, and it's, it was a bizarre messaging scheme. It seemed way too coordinated. The MSM blasted it everywhere. Congress, uh, people immediately jumped on it. It was just, even Elon said this, the messaging seems a little suspicious in the timing, especially from an account that basically didn't. before. And then this young kid was blasted on every MSM show. And he claimed that he hadn't been working with anybody. And now there's investigations into him and his affiliations with NGOs. It's a mess. But the good news is the PSYOP, what breaks the PSYOP is the awareness of the PSYOP. And, you know, it's just not the dark corners of the internet talking about it. It's lots of people. And so I think I think the PSYOP is dead on arrival personally. And but it also shows you how in trouble open AI and anthropic are.
Speaker 1Yeah, very telling. Now, it seems like on the Democrat side, they were a little bit more willing to jump on this bandwagon. So I wonder if we do see the Dems, whether they get the House alone or the House and the Senate, I think they're projected to get the House and potentially, the Senate at this point, if I'm not mistaken, do you think they could start enacting some of these supposed rules and regulations that could give the big boys in AI a leg up here?
Speaker 2Well, Trump has veto power. What we got to remember is, pre Trump, Marc Andreessen went to the Biden administration to talk about AI. And he was told, basically, don't even bother investing in startups, because we're going to work with one or two players. And it's going to be a state, backdoor state run monopoly. And that's why he went to Trump, because he thought that was a disastrous idea. So that was the plan then. The thing we got to watch for is the Dems definitely want control of, they want a marriage between the state and AI so they can control the narrative and keep their fraud system going. So it's going to be a battle. And I wrote a piece, The AI Game of Thrones. It's also a bit of a false dichotomy. We got the monopolists on one side that want the state and the government to step in there and run AI. Then we have the accelerationists, the Trump and David Sachs. There's something in the middle. I mean, there needs to be some sort of regulations. There needs to be an awareness that you can't bully people in the accepting data centers. There needs to be the average Joe, six-year-old Joe, six-year-old average Joe, six-pack getting a seat at the table so that, you know, like the citizen has a say. So there's this false dichotomy. Either you're supporting the Dems or you're supporting GOP. There's a middle ground to be had.
Speaker 1Now, a lot of people know you're great at breaking down markets and a great analyst, but you've also been pushing back against the COVID vax narrative. From the start, you wrote recently on Exit, the only question that matters is after all the revelations of the COVID vaccine, what is the answer to that? Well, the answer to that is, after all the revelations of the COVID vaccine, what is the answer to that? Well, the answer to that is, the revelations that authorities knew how harmful the COVID shots were early on. Why was it so important to get this shot into everyone's arm across the globe? You also wrote a book on this, Cause Unknown, which I recommend people check out. But what answers have you mulled over in your head about this? And how much credence do you give to the darkest angle here of a globally coordinated depopulation operation? Well, you know,
Speaker 2I wasn't in the room. And over the years, people have asked me a lot of questions about COVID. I've been in the room for a long time. I've been asked me, what do you think? And I said, look, I wasn't in the room. But clearly, there's a cover up. Clearly, the numbers suggest harms happened. But as we roll through time, you know, the question needs to be asked, why was it so? Because they knew about the harms. We're discovering now, it wasn't just that they, you know, were incompetent. They knew and they made the decision to go forward. They made it in Israel, they made it in the US, they made it in other countries. So the question we need to ask is why? What was the intent? Was the intent just greed and stupidity? Or was there another more nefarious agenda play that, you know, you know, we do? It's dark. So that's the only question that matters right now. And I think a lot of what we're seeing is Kabuki theater. We need to ask these questions. If you if you knew it was harmful, why didn't you? Why did you keep pushing? That question needs to be answered. And somewhere, some, some, someone hopefully comes forward and details what the rationale was for knowing there were harms, but yet continuing forward. I'd love to know what what those conversations were like, because that's a decision. That's a that's a decision that was made.
Speaker 1Last time I had you on, we talked about Fauci potentially facing the music. It doesn't look like that's happening. That story seems to have kind of fallen off a cliff. What's going on with Fauci now? But overall, in terms of accountability seems to now be dead in general, as we've seen things unfold, politicians are getting more and more brazen and in your face with their obvious corruption. I mean, so many shady deals now being done no longer through the back door, but right out in the open. And it seems to be a situation of what are you going to do about it when it comes to those in power and the citizens that they're supposed to be representing in this environment that we're in? How how is it feasible that that anybody is going to face any type of justice? You have these weird things where people are going to face any type of justice. You have these weird things where people claim, well, in the Netherlands, Bill Gates is being, I don't know, accused or in some courtroom somewhere. I mean, this is never going to get anywhere. I want to get your thoughts on that.
Speaker 2You know, it continues to be a local fight, local jurisdictions, local lawsuits. It's one state at a time. I had high hopes that the Trump administration would, you know, have a covid reckoning that doesn't seem to be occurring. You know, I don't I can't speculate on to why. I just know it hasn't. And you're right. A lot of a lot of the people that, you know, would have shown up for the midterms. One of one of the reasons is no accountability. That's low on the list. What's really hurting Trump in the midterms is the economy. You know, the real economy, the average Joe not doing well. Consumer sentiment is in the tank only seen during recession. So I would say we're we're in a recession for 80 percent of the population. We're just waiting on this CapEx boom to roll over to officially call on. You know, I I'd love to see accountability. But, you know, what we're just going to keep doing is like, you know, as the harms continue to roll forward and more and more people get sick and injured and disabled, you know, we're just going to keep, you know, drilling it into their heads to look at this. This topic is potentially number one reason why they were injured or disabled. And, you know, it's it's it's a battle. It's a war just continues. So it's it's it's I know it's it sounds disconcerting and hopeless, but you got to keep fighting. I mean, I was hoping to not be talking about COVID at this point, but I now have a sub stack. I developed a sub stack. to talk about two issues, the fake economy and the COVID issue that continues today. You know, I wish I didn't have to write a sub stack, but I'm doing it because the battle needs to be continued.
Speaker 1Well, that's a great segue. Tell us about beyond the narrative, your sub stack, as well as finance technologies.
Speaker 2Yeah, so I'll start with finance technologies. That's where economic research is. It's available for purchase at financetechnologies.com with a PH. We have reports on China, real estate, and the U.S. economy. My sub stack at Dow Beyond the Narrative, I launched it in July, and I'm happy to see the feedback that I'm getting. I'm writing on COVID, COVID denialism, continue to post relevant data when it shows up, like disabilities. And I'm also talking about the markets, AI, private credit, interest rates. I try to write it in a fashion that gives you the real narrative and in an English that's plain for most people to understand. I try not to bore you to death, and I write, you know, anywhere from 800 to 1,200 words per post so that you don't have to read a lot.
Speaker 1Great. Well, I'm going to put a link in the description below to both finance technologies and beyond the narrative. And as always, thank you for coming on and sharing your insights. Thanks, Jesse. Good to be here. Thank you for joining us today on Commodity Culture. Earn up to a 4% annual yield on your paid in gold ounces through monetary metals. Go to monetary-metals.com slash commodity to find out how to put your gold to work for you. Link is in the show notes below.
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