Longtime Bull Sees "High" Risk Of Market Correction Soon | Darius Dale

Are we selling the risk of a 1998-style correction market? It's still pretty high over the next one to two quarters. [MUSIC] >> Welcome to Thalphal Money. I'm Thalphal Money Founder and your host, Adam Taggart. And I'm very excited for today's discussion. It's with the great Darius Dale, who is now coming on the program with a greater cadence, which I think is fantastic both for me personally, but also for this whole audience here. Darius, thanks so much for joining us folks. Adam, it's so great to be here. Last time I was on the program, I was counting the video on your cheekbones, man. They look even more radiating, man. You look great, man. You look gonna go awesome way, and I'm really proud of you. >> Well, you're very kind and we spent a little bit of time before we turned the camera on talking about it. And look, I mean, you're an athlete. I mean, cheesy, you were college football stars. >> I think the lineman. >> Some people would say, yeah, yeah, we're reminded that we all think the lineman's difference. >> No. >> Now that's left tackle. >> Left tackle, okay, I mean, you're just a beast. And I've met you in person. You're clearly a great athlete. And it's really fun to be able to share that side of this and folks. And there is a commonality that I find here in the macro world is that the people who I think are, the sharpest minds on investing in finances tend to also be folks who are very focused on the important things in life to invest in, whether it's your health, whether it's your family, whether it's just living with purpose. And dare you embody all of those, my friend. All right, look, so we get a lot to get into and you've got your slides. We'll pull those up when it makes sense. If you don't mind, there's a lot we can talk about. But I'd like to start on a topic that we talked about last time you were on. Where you said that if the Kevin Worsh Fed decides to look through the inflationary impulse from the high oil prices caused by the Iran War, then you thought things were going to get really bullish for the markets. And we did have the Fed meet the other week. And Worsh did beat his chest and kind of deliver his Mario Draghi. I'm going to do whatever it takes, speech. But in this case, it wasn't around stimulating the economy. It was around doing hiking as high as he's going to need to to tame inflation. But he didn't actually hike. And I think a big reason for that was because oil had started coming down. But then a few days before the Fed meeting, the MOU between the US and Iran was announced. And I think that gave him the ability to say, okay, even though I'm talking tough, I don't need to hike right now. What is your interpretation of all that? Is that to you signaling that the Fed may actually indeed look through the inflation here and not end up hiking eventually? Yeah, excellent question. Again, always great to be here, man. Thanks for having me. So the first thing I will say is I think that Kevin Worsh and his colleagues on the FOMC made the appropriate choice to hold off on hiking a couple of weeks ago. And the reason why is because they want to buy themselves time to actually discern how much inflation is being driven by, let's say, the energy supply shock and the resulting price increase that we saw from that, which is obviously reverse materially in recent weeks versus how much of this sort of inflation pressure is being driven by, let's call it, non-energy related dynamics, more core dynamics that the kind of the core drivers of inflation. We've been making the case since a couple of months ago that the economy was, we'll let me take a step back. We authored our paradigm C theme, which is back in April of 2025, and we first saw it. Run it hot. Run it hot. Exactly. That's the run it hot theme. I thank you for bringing that up. The run it hot theme, we introduced that theme back in April, last year with the expectation that the combination of monetary easing, prosychical fiscal stimulus and a nationwide regulatory push, would ultimately create the condition for a nominally hot economy here in 2026 and 2027. So we're now in 2026 halfway down with the year, and we are living in a nominally hot economy. And so from our perspective, a lot of those drivers from a policy and monetary inflation side of things, and also with respect to how tight the labor market is and is continuing to get, those things are still there. They're true and they have not gone anywhere. So they are contributing to upside in inflation right now from a core and underlying inflation perspective. There's also this sort of orthogonal vector called energy supply shock that caused some headline inflation. We're currently annualizing it 8% on headlines, CPI on a three-month annualized basis. That's going to come back down and we're going to be off, you know, we're in the markets of appropriately priced if that's going to come back down and have responded very favorably to that. From my perspective, that's the peaking inflation trade, you know, the fact that we're still in a risk on market regime as a function of that dynamic. To me in answering your question, to me, the next trade, at least something the markets are going to have to debate is, you know, where do we set it up from a sticky inflation perspective? Because if the rate of disinflation is not acceptable to the policymakers on the FOMC, which are obviously moving in the auction direction based on the latest dot plot in summary, if you can have it projections, if the rate of disinflation is not acceptable to them, then we're going to have a totally different conversation about inflation in T minus, you know, let's call it two to three months time. Once we kind of get through the disinflation that we're going to see from the energy price desaleration. And so ultimately from our perspective, we think there is still material risk of the Fed tightening monetary policy over the medium term. Let's call it in the first, in the next one to two quarters. And in our opinion, we don't think the policy rate is the appropriate tool. And obviously, we're going to pack any of this with charts, but you know, let me just wrap up on this. We think there's some still material risk of the Fed's tightening monetary policy over the next one to two quarters. We think they more if they do that, if they like to do that, and they're more likely to use the balance sheet to tighten monetary policy because a lot of the eggless called excess demand that we see in the US economy is coming from the K top of the K. And we know that there are elements of, if you look at consumer durable goods, consumption, non-residential structures investment or residential investment, fixed investment, those sectors of the economy continue to be in recession. So we know that, you know, low tightening the policy rates are probably not going to be particularly effective at combating this style of inflation, this current, you know, these current inflation pressures. So ultimately, they're going to have to find a way to exclusively target, you know, the excess demand at the top of the K. So ultimately, we think what the Fed is going to do is they may tighten now to regain some credibility on inflation fighting ultimately so they can create the scope to ease policy much more than what's currently priced in later. So that's our current take on it. And if we're going to be wrong on that, where we're most likely to be wrong is the Fed does not tighten now. And they do come out with a pretty dovish bias towards the end of this year when they get the results of the five task forces and ultimately will be off to the races in that scenario. Okay. Let me ask you a couple of questions around that then. So if I heard you correctly, you think that rather than actually monkey around with the rates as much that they may actually use the balance sheet here. That's the thing that Warsh leading up to all this seem to say that he wasn't going to use. So I'm just curious. Do you think he'll kind of you turn on that or? Well, so I think I'll take a slightly different track. You know, we know Kevin Warsh's views on the balance sheet or that it's way too big. Right. So I think he would take any opportunity to reduce the balance sheet. You know, I think if the committee is on board with ending reserve management purposes. Oh, I'm sorry. Wait a minute. I'm looking at this the wrong way. Yeah, of course, tightening the balance sheet would be a total Kevin Warsh thing to do. I was thinking of it in reverse. So no, you're right. You're actually very polite and disagreeing with me. I would have said Adam you idiot. No, no, no, no, that makes total sense. Okay, great. Yeah, actually, I think that that's that makes a lot of sense to me because Warsh can definitely do that and still look extremely consistent and yet not have to necessarily high grade. So though, if I heard you write, it sounds like you think they might still as part of that tightening process just so they can lose some things up eventually down the road. Yeah, well, this is all of this is a game. You know, I've been calling it in our research reports in recent weeks. You know, the feds got to play action pass to set up the run. Right. If you think about a football game, you know, you try to go into the NFL football game, you know, and just try to run straight. You know, you're probably going to get stuff more often than not, right? You know, it's hard to move big angry 350 pound men out of the way when they in places they don't want to go. And so I think about like the the linebackers and the safeties, you know, in this in this scenario, representing this inflation pressure, we have to back off this inflation pressure to allow the AI cat-backed bubble to continue in a way that doesn't, you know, cause significant problems in the in the economy asset markets from a from an inflation standpoint. So they ultimately have to, you know, back the linebackers and the safeties off from the perceptive of play action passing, but ultimately and from our perspective, we think the the task forces that they outlined, you know, except that the June 17th FOMC, we think those task forces on a net basis are going to result in much more dovish policy than it's currently priced in. So from our perspective, we don't think it's appropriate for the Fed to just kind of start the game if you are going back to the analogy of just like running down the middle, running down the middle with easy monetary policy. And then there's going to run that keep running down the middle all game. Eventually, that's going to result in a situation much like what we saw in 2021 and 2022. We think it makes more sense from a sequencing perspective for them to play action pass, i.e. tight monetary policy or threatened tight monetary policy. and threatened to type monster and repost is some more to give them scope to tell us what we think they're gonna tell us at the end of the year, which is the net result of these five task forces are dovish. - Okay, and can I make another analogy? So my brother, who's a doctor, one of his first jobs out of school, he was a teacher and a teacher at a middle school or high school or whatever, and my brothers are pretty nice guy and I think he knows that. And so he didn't want to be seen as a pushover from day one. So what he always made sure to do in his first week of classes was to get one of those yardsticks that teachers use and find some reason to get angry and break it. (laughing) And so the kids are just being like, "Oh my gosh, we can't let this down." - It's nice. - But of course you'd be a nice guy the rest of the year, but kids were always, they remembered that, right? And this might be just Kevin Worsh, again, just trying to maintain some credibility as a hawk here, like I'm not gonna get pushed around. I'm gonna start being as hawkish as I can given the circumstances, but then that might actually let me be much more dovish down the road. - 100%. That is the best analogy I can possibly think of. It's even better than play action. - I don't know, I thought you were a footballer. - The set up the road. - Well, don't forget, I have for our clients who are in Europe, rest of the road, you're in Asia, so I don't think they understand what I'm saying though this. And I say football to them, they're thinking, "Wall Cup." And so that's either or there, but that is a great, that's an extra analogy. That's exactly what I'm saying, is that the Federal Reserve will have a serious inflation problem in 2027. If they go from today to tomorrow, which is what we think they're going tomorrow, which is more easy. And so we ultimately think that they, they, they, they, they, again, I think it's, I think you have to have a differentiated view on the outcome, the net outcome is on the task forces to create the, to get the policy sequencing, ultimately the market sequencing right. - Yeah. - In our opinion. And I think we do have a differentiated view, if only because we haven't seen many views, percolate across global Wall Street, I don't know if folks are doing this summertime, CESTA or not, but you know, we have, you know, we, we, we, we take, you know, we take risks in terms of trying to keep our clients on the right side of market risk. And so if you don't mind, I could kind of walk you through what we're thinking in terms of those task forces. And why we think the Fed has to be, you know, more tight now, more, more hawkish now, so that it can ultimately create this goal for that, that it digs. - Look, look, look, look, look, look, let's actually do that right now. Let me just pull part of the punch line up here. We'll get the high level part of the punch line and you can give the details later on. But your, your earlier statement from last time, which is, you know, if and when the Fed looks through inflation and starts being more devish, you think that's gonna be really bullish for risk assets and, you know, you're gonna be a super bowl in the market. Does that mean right now, given you think that his perclivity in the near term is more towards hawkishness, that you think the markets are gonna have a rougher, less impressive, you know, quarter or so from here? - Yeah, we still think the risk of a 1998 style correction markets is still pretty high over the next one to two quarters. Does that mean it's a guaranteed outcome? Of course not, you know, I mean, we're in the business of probability and risk management and what we're essentially arguing right now is that the probability of a risk off marker regime is in fact rising in our opinion. And it's supported by the fundamental, the fundamental themes. And so ultimately, you know, if you kind of answer your question in reverse, if the Fed does not, you know, kind of back the safeties and linebackers off in a way that allows them to just, you know, run them all right down the middle with easy monetary policy, which is where we think this is ultimately headed, then we're going to have an inflation problem. And ultimately, the run's gonna get stuffed by the bond market. Right? So that you can't have that outcome either. And so in our opinion, we think the outcome that creates the best, the path that creates the best outcome from the perspective of monetary policy, from the perspective of the economy and from the perspective of the, you know, the Federal Reserve price abilities target and ultimately their dual mandate is the sequence of events in our opinion requires, you know, some regaining some credibility on inflation fighting. Because if they don't regain credibility on inflation fighting, like I said, the bond market's gonna stuff the run on inflation. And so that's, I think that would be a horrible outcome from the onset of a brand new Fed share who'll be within his first year of the job. And so in our opinion, we ultimately think that, you know, if the Fed does not back the bond market off, what you're doing is you're eliminating left-tail risk from the distribution of probable economic policy market outcomes for now. But you're gonna eventually pack that left-tail risk back on at some point six, nine, 12 months from now when the market starts to realize that inflation is a much bigger problem than they then they then then then what's currently priced in today. So you're ultimately, you're basically just swapping left-tail risk from, you're transferring left-tail risk from today, IE, they back the safety's off tomorrow. - That's why I'm not doing that. So if you remove left-tail risk from the distribution of probable economic policy market outcomes, that you're gonna have a median, median shift to the right and ultimately the market's gonna have to price that in in the positive manner. So that's answering your question, if they aren't hawkish, they were gonna bubble. We're gonna continue to bubble in our opinion. But ultimately, we don't think that's the highest probability outcome from this starting point because we, I think we have a differentiated view on inflation dynamics right now, which we can unpack. But I think we also have a differentiated view on the net result of the five task forces, which is pretty dumb. - Okay, great. So let's get to five task forces and anything else, task forces and anything else you wanna say. Let me just ask this one last question, which is, you talked about the dual mandate. Kind of the impression I got from Worsh was I only really care about one of those right now. Or I'm only gonna focus on one of those right now. It's all about price stability, price stability, price stability. I kinda get the sense that he doesn't think the Fed should necessarily be a two mandate enterprise. And from what I've heard from the Fed watchers that I talked to, the people who know the Fed much better than I. They think that he is of a mindset, which is shared by a number of people, that if you take care of price stability, then you will set the conditions for maximum employment. So you don't need to be focusing on two at the same time. And when you do, there are moments in time where sometimes they have opposite needs. And that's always been kind of a styming thing for feds in the past. And so their expectation is that Worsh is basically gonna say, look, I'm really not gonna worry that much about trying to monkey around with things with the economy. If I get price stability right, everything else should take care of himself. Do you have a similarly opinion or a different? - Yeah, I think what you're essentially arguing is that the jump balls, when there's a data point that comes out that is causing stress, causing tension in the mandate from a price stability and maximum employment standpoint, the pow fed, the yelling fed, the Bernacchi fed, always fell on the side of airing towards on the side of protecting the labor market and maximum employment, which you're essentially arguing which we agree with is the pow fed, the Kevin Worsh fed and Kevin Worsh himself is trying to shift that jump ball dynamic to if there's a data point that creates tension in the mandate, they're going to react to the price stability side of the mandate with the expectation that if we get this right, the labor market will fall. That's something I agree with personally that someone who is, you know, my background is someone who grew up, eating a government cheese and food bank food and then moldy bread from the food bank, I would prefer the fed get price stability, right? Inflation impacts everybody all at once. The labor market going, the unemployment rate going from 4% to 6% only in plaques, how many people? Obviously, there's a negative hit to the economy recession wide, but people would much prefer price stability brought by large and the unemployment rate that rises on a 200 basis point. Now, you know, big issue of the global financial crisis, that's totally different. I think that's been true forever. And for some reason, as you said, those past regimes, the fed for whatever reasons, still picked labor and labor is cyclical. So people kind of realize, look, it's a crappy job market now, but it's going to pick up in the future. With inflation, you never go back. Prices never come back down, right? Went to, so they're like, look, just keep prices stable. We can ride out a bad jobs market. It's so much worse for me if my cost of living just keep marching higher year after year in a way that I can't keep up with, right? So anyways. All right, so that's very useful validation on your end of that theory. And obviously we'll see if worse delivers on that, but I hope he does. Exactly. I hope he does too, as a proud American citizen. What I will say is he's got a lot of work to do in terms of convincing his colleagues to agree with that. Because 18 other members on the iPhone C that are used to every jump ball going to support the labor market. Exactly. We know why they support the labor market. That's the mandate that gets them to pay the bankers the most amount of money. Yeah. Right? That's the one that if we don't do this, it will lead to financial stability concerns. Right. And it's one of the questions from the politicians too, because in this short term, bad job market politicians get all the angry phone calls, right? So let's do something now, right? Yeah. I agree with you, but I think the Fed is much more in Cahoots with the folks who went down to Jack O'Allan and their descendants. I agree with that, my friend. And so to your point there about the fact that he inherited these people who are conditioned to the way things have been getting done there, this is now getting to the task forces. Is part of the task forces, do you think? Like, Worsh kind of has a sense of what he wants to do, but he needs the validation of the six-month period with the task force to kind of try to bring everybody along with him and say that I'm not just cramming this down your throats. We all talked about this for six months, and we came up with this conclusion at the end. You're your app spot on, man. Thank you. I'm going to borrow this as a CEO and hopefully future governor of New York, a Florida president of the United States. That's something I'm definitely going to do. It's a great leadership tool. There's three elements of power, right? There's coercion. Do what I tell you to do or something that will happen. There's influence. I display things that you would like, so therefore. or it might influence as you to to behave in the way I want. The most powerful element of power that no one talks about is framing. I will tell you what to think about. You're gonna arrive at the conclusion, but if I can restrict your discussion to this narrow sliver of outcomes, then you're eventually gonna pick something that you think is your idea that is ultimately my desire. And that is exactly what I think Kevin Worsh is doing from a leadership standpoint. So I applaud him on that. Obviously it's brilliant. This guy's been surrounded by a lot of really, really smart investors, a lot of really smart business people for the past two decades, two plus decades. And so I think he's taken that, those lessons into a very big task of reforming the Fedors are. - All right. Okay, so anything else on the Fed before we kind of get to just the general market regime and everything like that? - I think we gotta go really quickly through why we have this view that the policy, that the net result of the policy, the task forces are gonna be dubious. Like to me, that's, I think that has to be central to any investment case right now. What is the most important institution in the world and the global economy in the financial markets going to do from a regime change perspective? Right now we're peak uncertainty, or maybe not peak uncertainty, but somewhere near peak uncertainty, because most investors don't really have a sense of who's on the task forces, what their background is, obviously people is policy. So we'll start to learn more in the coming months and ultimately investors Wall Street will start to formulate more views on this. But in my opinion, I think it starts with the data. And you have to go to where the data are, the ultimate the data will tell you what the task forces are gonna conclude. And so let me kind of quickly walk you through each of those five task forces, kind of our summary thoughts in each five task force. We can slow down and speed up as much as you want, but let me just quickly walk you through what we're thinking on this, so that investors can kind of arrive at the same conclusion that we've arrived at, which is this is gonna be dubious. And if it's gonna be dubious, they gotta create some scope in the bond market, they gotta create some credibility with the bond market that they are serious about inflation fighting before they tell the world they're gonna be more dubious than what's currently priced in it, 'cause ultimately that's gonna cause some financial stability concerns from an inflation pricing perspective. So let me get into this. So on task force number one, there's academic research from the Brazil Central Bank from last fall that essentially said, okay, the Fed's been talking, producing 80,000 words every FOMC event, this is too much talking, basically. So we know that's true, and we all, I think we all kind of know that's true, but like they actually did a big, they created a very big, complicated and sophisticated model to determine that, hey, beyond the Fed chair talking, this is all negative net present value communication. So that's one, so we know they're eventually going to get to less communications over time, which should in theory inflate term premium. And why would that inflate term be with the less the markets know about the expected path of the policy rate, the more you have to price in a real term premium, and more importantly, the less the markets know about the expected path of the policy rate, the more you have to price in an inflation risk premium as well, because you don't really know that the Fed's gonna be serious about containing inflation. So ultimately we think term premium are gonna go up, right now we're at somewhere, I know this is from my couple weeks ago, but right now we're on term premium, we're somewhere around, you know, it's called 40, 50 basis points. That's, you know, it compares to a long run mean of about 190 basis points. And so ultimately you're talking about a 10 year nominal treasury that is a fair value of about, you know, five and a quarter somewhere about five point nine. So we're between five and five and three quarters to five point nine percent, not four, five. We're at a normal level of term premium, which we take as the mean prior to the GFC, you're talking about a, a bond market that could easily reprice to somewhere well north to five percent. So that's a risk. So ultimately that's a negative outcome. That's the only in our opinion explicitly, you know, very bad outcome from the perspective of the task force. If you look about the, if you think about the other task force is, we know that the fit, Kevin Worst think the balance sheet is trillions larger than it needs to be. So the balance sheet's gonna come down. The Fed owns currently about third, three thousand basis points of the market or a treasury bond market, which is obviously, you know, that he wants this thing to be zero. So we know the bond market's gonna come down, but we in our opinion, we don't think they're gonna, to cut the bond market in any material way. From the perspective of, they're not, in our opinion, we don't think they're gonna, they're gonna reduce the balance sheet, but pardon me, in any material way, without some offsetting regulatory, you know, easing that will create a much more positive dynamic from that perspective on a net basis. And so the reason we can kind of arrive at this conclusion is when you go back and you study these episodes of QE, in this chart here, we got the Fed balance sheet somewhere close to $7 trillion and the 10 year nominal treasury yield, we can see that historically, the market, the 10 year nominal treasury yield, typically rallied during these episodes of quantitative easing. You know, we got the COVID QE here, reserve management purchases here, and then QE one, two, and three here. So on a median basis, the 10 year nominal treasury will rallied about 59 basis points in during these QE episodes, but on a start to peak basis, 'cause obviously the market starts to discount the end of the program, on a start to peak basis, the median increase in the 10 year nominal treasury yield was 117 basis points. So keep that thought in the back your head as I go into the next slide. If doing QE makes the market price in a higher nominal growth dynamic, and this is partially a function of the, what we call the portfolio substitution effect, whereby the Fed is essentially doing performing an asset swap with the banking sector, they're taking securities, treasury securities, which have duration greater than zero, or onto the balance sheet and replacing that in the private sector balance sheet with securities that are not security bank reserves, that have a duration of zero. So you're essentially swapping low power money with high power money and pushing that high power money into the private sector, and ultimately that high power money gets levered up and spread around and re-hypocated around the global financial system and forces, invests to take risk, and ultimately forces nominal growth expectations higher. So that's how QE works. It's a portfolio substitution effect. In our opinion, we think they're going to deregulate the banks materially in a way that allows the Fed to reduce his balance sheet by trillions of dollars in the coming years, but ultimately offsets that reduction in the Fed balance sheet by increase in commercial bank balance sheet. So right now commercial banks, treasury and agency securities are currently annualizing at 0.0% through my annualized basis. They're growing below, trading at 4.1%. And so ultimately we got to get this number higher, but it's got to go higher in a way that doesn't crowd out loans and leases and just total bank assets. You don't want this to crowd out the banks. You just want to do regulate the banks in a way that allows the reduction in the Fed balance sheet and the reduction in base money to not cause a broad reduction in broad money and narrow money and broad money. So ultimately we think that's the most likely outcome is a, I wouldn't say a wash is probably going to be net negative at the margins, but not really as negative as investors fear, particularly when you look at the Bitcoin market or you look at the gold market. So I'll take you have any question. Are the banks hungry for this? Are they excited for this? Oh, probably not, no. But again, this is replay hot potato. I've been telling you how many times you talked about this for years. Our core research thesis since the summer of 2023 is that there is a gigantic game of hot potato being played in the US treasury market. And specifically there is a geopolitically driven supply demand and balance in the treasury bond market. On the demand, on the supply side, we know we have supply issues from a demographic standpoint. And just from a policy signaling standpoint, the Democrats can't stop spending money. The Republicans can't stop cutting taxes to support the incomes of their respective constituents. And so ultimately you have demographics and just terrible policy choices equals more deficits. That's pretty easy to solve. I think you don't need to call out to figure that out. But what you do need is, you know, sophisticated investors to understand is that the US government, the treasury market is currently owned right about 30% foreign investors. The US is a 90% international investment deficit, GDP, about two thirds of that is stocks. So about only about a quarter of that is about the treasury exposure. But it's a significant portion, especially you consider the size of the treasury market relative to the global bond market and global asset markets. And so ultimately this geopolitical dynamic whereby the world is shifting to a multipolar world, the U.S. criminal terrorizing may need their own money. Japan is lighting its own money on fire with inflation policy. And then obviously the end is at like a 40, 50 year low versus the dollar, which ultimately, you know, reduced the demand for for for for it makes it harder for for Japanese investors to to hedge a dollar, a dollar exposure. You have China obviously strategically decoupling with the US, you know, UK's light and its own money on fire with terrible policy as well. So you have all these dynamics globally from our largest foreign creditors of which again, the foreigners own about a third of the treasury market. All of our foreign creditors are changing policy in a way that reduces their demand, their marginal demand for these securities while at the same time we are accelerating the supply of the securities. And so that in our opinion is a core feature of global financial markets is why both treasury secretary Yellen and our former client, treasury secretary Scott Besson have rubber stamped this double SNP financing policy. It's what we've had an asymmetrically double reaction function by the Federal Reserve since the summer of 2023 or by their cutting interest rates with, you know, sticky well above target inflation and the labor market that is, you know, well below, Nehru and well below the long run mean. You know, so the Fed has just had this really double reaction function. So was the treasury and ultimately we think that's going to accelerate in the coming years and one of the ways in which they can do that is by financially repressing the commercial banks. - Okay. I'm just curious, away from the chart for a second, just in the long-term derives, where does this end up? You know, those trends you were talking about that basically lead to rampant, you know, continuous deficit spending here in the US and every country is doing it. But you know, where does it end up? Is there anything to do but to just try to keep passing that hot potato? And does it just blow up in our face at some point in time in a great global sovereign debt crisis like Luke Luhur, Roman Warren's about? Is there any way out of it? I don't know. I love Luke. I love us to analysis is brilliant. But that's, that's, that's, I can't, I can't say those things to our clients. Because it's just, to me, we're, risk management is all about sequencing. It's all about how we go from one market regime to the next market regime. What the factor rotations are that lead you from one market regime to the next market regime and so on and so forth. My job is to help investors stay on the right side of market risk from now all the way through the blowing up of the sovereign debt market. So I, I could care less about the destination. To me, it's about what is the sequence of market regimes that we have to take to get there and ultimately how should we be positioned, how should we position building positions and, and reducing positions to, to stay on the right side of market risk. Do I have to say it another way wherever it ends? The key is to not get killed on the way to that destination. Dingo. Yeah, Dingo. Absolutely. That's what, that's what skill risk managers get do is we, we prevent our clients from getting blown up regardless of outcome. And so in our view, we think the, the, the, the, the, where this all ends up is, you know, we're just all frogs being bored alive and a pot of monetary debatement of natural oppression. And so, you know, kiss it that we built kissing Dr. mode to stand the right side of market risk, you know, throughout, but it's not all linear. It's not always going to be, you know, for full burning stove, you know, on high. Sometimes they'll go to low, sometimes they'll go to medium, sometimes they'll go back to low, sometimes they'll go from low to high. It's all depend, it's all, it's all path dependent based on what's happening in the real economy. But ultimately we think this is the outcome. So going back to this financial oppression dynamic, if you go back in the, I think you and I've talked about this over the years, you go back to 2021, the private non-bank sector, the folks in the treasury market who want X anti units of return for the risk that they take in their portfolios, their share, our share was 36% of the marketable treasury market. It's now 58% of the market with treasury market and obviously the market's grown by trillions of dollars since then. And so this is an issue from the perspective of ever really truly seeing a structural decline in bond yields and truly seeing a structural, you know, kind of, you know, decline in mortgage rates and all the kinds of things that'll get the bottom of the K-shape economy more active. And so ultimately the Fed, if they're going to take their balance sheet down, which is what Kevin Worsh wants from our price stability standpoint, then you ultimately have to pass this hot potato to another actor. Well, you know, the foreign commercial banks, or foreign central banks, their share is now down to 13% from a peak of 40% back in '08. They're not, we can't force them to buy, you know, they lost a genius act, but obviously it didn't work. And it's not working because, you know, there's a lot of reasons why it's not working, but it isn't working. They can't force, you know, the foreign central banks to accumulate treasuries like they had been doing. And so ultimately the only other place to go if the Fed isn't going to buy them and we have financial stability concerns associated with the private non-bank sector having such a high share, then it has to come from commercial banks. Their share at 15% is down from a high of about 33, 34% back in 2003. They can take this line way higher. They can absorb a lot of that potato, yeah. They will, they will be absorbing a lot of the potato and our opinion, we think this is the highest probability outcome, the overwhelming high probability outcome. And so there's a lot of different regulations we can see that they can, they can do to change this, you know, they can, they can, you know, allow treasuries to substitute for reserves in the liquidity coverage ratio and liquidity stress test calculations. They can exempt treasuries from the SLR, G-Cypse or charge calculations. There's a lot of stuff they can do to create balance sheet capacity among the commercial banks that will allow them to take down these treasuries from the Fed's balance sheet in a way that does not destroy narrow and broad money and cause a significant downturn in the real economy. So ultimately we think this is where they headed. And if this is where we're headed, then ultimately the biggest boogie man as it relates to peak Fed policy uncertainty is actually not really a boogie man is what I'm arguing. And so ultimately the markets are going to come to a realization at some point in the next let's call it two to three quarters that, oh my God, Kevin Worsh is not as hawkish in the balance sheet as we thought. Bitcoin and under, you know, 60,000 is a, is a stupid price. Gold under 5,000 is a stupid price. We got to buy these assets. We got it, you know, we got it, you know, get back involved on some of these more financial oppression, monetary debatement style trades. But ultimately we think those trades have appropriately paused because again, as we said earlier, the Fed is likely to play action paths before it sets up the run and this is part of that running game. Got it. And I just want to underscore this, you say this all the time, back to your frog there in the pot. In the long term, we know this is a game of financial oppression, monetary debatement, right? But in the near term, there are all sorts of different plays that can be called going back to your football analogy, right? And sometimes you want your offense on this, on the field, sometimes you want your defense, sometimes you want your special teams. So like you think, you know, people think of financial oppression, monetary debatement, oh, I'll just own gold, right? And that'll get me there. And maybe in the long run, you know, if you had to have a one single buy and hold strategy, maybe that's one of the better ones to choose. But there's going to be, it's going to be a wild ride, right? And you might get killed before you safely get to the destination. What you're doing is you're trying to tell people what plays to call, right? Gold is great for this regime that we're in. But now we're entering this new one. And this is one where stocks are going to do well or whatever, right? And that I think is kind of, is a lot of value that you guys bring at 42 macro. But to me, I see that as the key one, which is knowing when to be in what when 100%. That's that's the number one thing we do for our customers is, is help them stay on the right side of market risk to the lens of our markers. You now casting process. And then we fill it to those signals to retail investors via case. We you and I've talked about case at Nazim on this program. And then we filter those signals to, you know, sophisticated retail investors, family offices, investment advisors and primarily institutions via Dr. Mo Dr. Mo was essentially kids, but for 70 different, 70 different assets across equity sectors, factors, global equity, fixed income sectors and macro exposures being currencies, commodities and crypto. So, you know, kind of, you know, answering, you know, just piggybacking on your comment, which is, yeah, like at the end of the day, what we're talking about with respect to the five task forces and the end of the ultimate result of that being dovish. That is a, that is in our opinion, we think that is a reasonably high probability outcome. Therefore, we will have to price in right tell risk at some point in the future when that becomes true or becomes increasingly true to the median market participant. When that becomes increasingly true, there was right tell risk to price it. And so that means we're either going to be in a risk on reflation market regime or risk on Goldilocks market regime. But we know both of those are the regimes where you're going to get paid a lot further on the respect to capitalize assets. So we think that is coming, but to answer your, getting back to your comment on on Gold, it's like you don't, you don't want to position for tomorrow's trade today. You want to position for today's trade today, right? And at some point when today's trade sounds like you money, then you start positioning for tomorrow's trade. But today's trade you can last for one month, two months, three months, four months, five months. I've seen market regimes trend for six, seven, eight, nine, ten months. You will be out of a job on the global buy side if you're on the wrong side of market risk for more than a couple of months. Period, period. I mean, you can try this at home. But if you know, let's say you were short, semiconductors in Q2, that's only three months. So we conductors were up like 80%, 90% in Q2, right? That's the one that's the risk I'm talking about. But of course, none of our clients would be short, semiconductors. They'd be long semiconductors in a risk on reflation market regime, our market signal, our, our, our, the doctor mode pivoted to long tech. I want to say in the, the first week of April, maybe, yeah, I think maybe in the first week of April, second week of April. And you know, tech's probably up 30% since then, you know, and I mean, so that, that's the whole point of this risk management process is to be agnostic about the sequence of market regimes to be agnostic about the path that markets are taking to price in these structural risks because, you know, one thing I see when, you know, we have a large and growing community of retail investors, you know, I cut my teeth, you know, traveling around the world, servicing institutional investors and building models and, and risk management systems for, for, for buy-siders. But, you know, now that we have this large and growing contingent of retail investors around the world, one of the most important things that I have to coach them on is, you have to separate your research views from the risk management of the markets. Yep. Because the markets don't give a damn about your research views. Exactly. Exactly. Exactly. Exactly. Exactly. Exactly. And so, you know, like, and so your job is to count compound returns, you know, cross market cycles. That has nothing to do with your research views. Your research views can help you, you know, inform you on, on how the markets may have made out of all. But that doesn't mean you're going to be right about that. The only thing that's going to be right is what the price and the volatility put on the tape. That's, that's the truth. Well, and that's what I'm trying to underscore for folks here, which is, I mean, the, the, the logic of your approach, I think most people get, but there are people out there, there, some, sure, you've talked to them who are just like, I just want to play it safe, right? And, you know, gold safe and if the big trend is, you know, monetary debasement, I'm just going to own gold and I'm just going to hold it for the long run. And, and you may come out with a positive return at the end of that. I think you probably will, but your return is going to totally, it'll be a small fraction likely of what the compounding returns would be if you were to trade the right market regime at the right time, right? So there's a big difference between kind of surviving until the end and thriving through the whole process. And that, that's the light bulb I'm just trying to get turned on in people's heads here. 100%. I mean, you, I think we might have talked about this last time we were on, which is the sequence of returns is way more important than the, the, the average return or the cumulative return, right? Like your, your, your goal is to, at the end of the day, your goal is to have a good time. have more money, right? That's why we're investing. If someone raises their hand and say their goal is to have more money, then God help them, we can't help them. But from 99% of investors, the vast majority of investors, the whole point of investing is to have more money in the future. And so if you want to have more money in the future, one of the dirty little secrets that we've all figured out is institutional investors that are entirely sure is understood by the median retail investor based on decades of hogwash, you know, poppycock marketing, you know, the time in the market is time was that was that's that phrase, time in the market is better than time being the market, which by the way, I agree with, I don't think anybody should be time in the market. We don't market time at 42 macro market timing is a prediction oriented thing. We're a reaction oriented business where we observe changes in the markets faster than other investors so that we can put our buy orders ahead of their buy orders, you know, the things that need to be bought for the next market regime. That way that their buy orders can make us rich as opposed to our buy orders making them rich and or conversely for heading into a risk of market regime, which would be inflation or deflation in our risk management, no, my culture, we want our sell orders to go in and before they're sell orders so that they're so orders aren't making us poor. We want our sell orders to make them poor because we sold first. If you can just do that, what I just said for the last 30 seconds over and over and over again for decades, not only you're going to retire on time and comfortably, you're going to be so darn rich that you're going to be given away money to any charitable cause you can think of because you just made so much money in the capital markets and that's that's it's I have a legacy to leave that is it is to have as many people in the world, you know, retiring on time and comfortably achieving financial freedom to such a degree that they are so charitable and we're all fixing the world together. That is so great. I just want to underscore one thing you said to make sure people get it. 42 macro is not a market prediction service. It is what I'm going to call a super fast follower, right? Super fast market follower. So you're not trying to guess what the market's going to do. Your goal is just to see what it is doing faster than everybody else. 100% yeah, if I can kind of draw this, it's like, you know, there's a distribution of probably economic and market and policy outcomes. Right now we're in relation. So the market is pricing in right to risk. But as a research analyst, you know, obviously, this we're on slide 183 of 184 slide presentation, I understand that there is a left side of the distribution. You know, so at some point in the future, the market may decide to price in the left side of the distribution. And it risk off market regime. And so it's my job to understand how the shape of this distribution is evolving right now. I would argue based on our fundamental research summary, the distribution is pretty normally shaped from this, you know, it's pretty normally shape distribution. The green words on this page, you know, which we update, you know, we don't update it every day, but we feature it in all of our research reports. You know, the green words on the page correspond to the right tail risk, you know, dynamics in the economy and policy. The red words correspond to the left to risk dynamics in the economy and policy. And then obviously the orange words are neutral. You know, right now I'd say we have a pretty normally shaped distribution. I would say about a year ago, we were talking about, I think in June of last year, when we're saying, Hey, I think that's the first week investors are starting to get on board with paradigm C when I was on your program in June last year, we had a very positive, skewed, you know, distribution that is terrible drawing, but very positively skewed distribution in, you know, at some point in the future, maybe the distribution is negatively skewed once the market starts to get on board with the fact that there is core inflationary pressure that is separate in apart from what's happening in the Middle East. But ultimately we still think we wind up in a better place, but you know, just kind of landing the plane on all this. It's not it's not this right here, this arrow here, the one I'm kind of redrawing. Yep. This pet like that's not your job as an investor. Like you're never going to be able to consistently predict exactly when the market stops pricing in right to race to starting to price in left to race. Conversely, you're never going to be able to predict exactly when on a consistent basis across multiple market cycles of which there are about two market cycles every year. You're never going to be able to predict when you go from right left side of the distribution to pricing in the right side of the distribution. So all you can do and what we figured out on global Wall Street is all you can really do is understand how the shape of the distribution is evolving over time and understand, okay, we're starting to get to a place where we're, hey, we're still pricing in right to risk, even though the distribution has gone very negatively skewed. So ultimately we can start to anticipate these net left to events. And then that's when we layer on our quantitative expansion overlays, Kiss and Dr. Mo to actually pinpoint with precision that moment in time where the market switches from on a net basis pricing and right to risk to left to risk. And that's the fast following element of what we produced. Great. And again, just to fully drive this home, you have a whole bunch of indicators you look at that might let you might convince you that a regime shift is coming, but you're not positioning ahead of that. You're just sitting there on the starting line like wait, wait, let's wait till we see it, let's wait till we see it. And then the moment you see that that regime has shifted, then you move. Correct? 100% my friend. You just nailed it. We use our global macros matrix, some outcasts, the market regime. And you have to understand that it's basically going back to what I just said. If you are, if you're if you're not positioning for the market regime, that means you're taking the other side of the market regime. That means you're exposed to that portfolio to type two errors. Type two errors are false negatives. That means in a bull market, you didn't buy because you think it's going to go down or in a bear market, you didn't sell because you think it's going to go up. Those create the biggest negative outcomes in investor portfolios. If you have a bunch of you have more than a couple of type two errors in your investing career, you're probably going to be out of money. You certainly won't be on the buy side. You can't work on the buy side committing type two errors. Obviously, the whole buy side primarily with the exception of all funds and stuff like that. Most of the buy side is figured out that they need to optimize their risk management process for only committing type one errors, which are false positives, which are, hey, we just went to a new market regime. It didn't trend. So we got to go back to the old market regime, kind of a false alarm type dynamic. That's more acceptable negative outcome than the markets pivoted to a risk off market regime. And I stayed long because I'm still bullish. And so it's about understanding, you know, going back to drawing this distribution of outcomes, if you sort of drew it into, broke it up into four different quantiles, you know, let's say this is be one, two, three or four type one errors false positives sort of live in this quantile. If this is, you know, beyond this is zero negative, this is negative and this is positive. You want to stay, keep your errors kind of contained in this quantile. You don't want to be in this quantile because that's when you start to open up the downside in your portfolio. You know, so that's, that's what I mean by type one versus this is type two versus type one errors. You want to stay, keep your errors contained. And the best way to keep your errors contained is to always be positioning with the market regime when we use the system called our global macros matrix 42 different markets, both studying the volatility, adjusted momentum signals of each of these 42 markets in a way that can sort of, you know, kind of signal what they're trying to price in. Like for example, right now, the S&P of 100 is bullish. The markets don't know if it has to be five billion in isolation. Doesn't know if we're in Goldilocks and inflation, the two bullish regimes. So it's just going to give a point to each that bullish signal. Today's bullish signal is going to give one point to each Goldilocks and inflation. You know, conversely, if you look at let's say 10 year break even and tips break evens, they're currently bearish. So the market is giving a point to Goldilocks and deflation. And so today, and so we run this process on a daily basis. And so ultimately, at some point, the model will say, hey, you know, inflation or deflation which are the risk offer streams have more conforming markets right now on a trend basis from the set of their own independent 42 independent volatility just one minimum signals. You know, this, the one of these risk offer streams has more, you know, essentially getting shown more love. So therefore, we got to pivot, kiss and Dr. Moe to, you know, being positioned for those dynamics. And so this is this is the fast following element of our process. You know, this is very much optimized to be, you know, kind of the first in the first investor in a confirmed trade as opposed to being the first investor in an unconfirmed trade, which is a type to error. Yeah. Okay. So it really helps you understand better the process that a great technician and risk manager looks at here. Definitely not a technician. I don't know anything about technical analysis. Well, I'm sorry. I should have said analyst analyst because it's what you do is a ton of analysis there. So, you know, again, the whole thing is designed to basically help give you the greatest probability of being in the right place at the right time. And then that had that compound over time. And this is a huge reason, you know, Darius, one of the reasons why I was happy to spend so much time going through all that is because 42 macro is the endorsed DIY solution for DIY investors by thoughtful money. And if you are a DIY investor and you don't have a structured process period behind your investing, gosh, I think you're flying blind then. But obviously I want you to see what I consider to be an exceptionally good structured process looks like. All right. So, Darius, this was a good segment. You kind of context for my next question for you, which is, again, if I followed you correctly, you think that the likelihood of a worst fed in your term is to be more hawkish, probably relying on the balance sheet, reducing the balance sheet more than hiking, but TBD. And so therefore, the risk of a, I can't remember what type of market correction you gave it some 1998 style market action. There you are. Not an 88 style market action is elevated in the next quarter or two. So you think that would translate from an investing standpoint to a de-risking process, but obviously you're not going to necessarily de-risk until your model tells you to do so. So where are we in that right now? Yeah. So we're, you know, with full deference and respect to our paying clients, you know, I want to say too much about exactly what we're doing. where we are today and where we might be in the coming weeks and months. I'll leave that for you guys. Just talk about your process of how you play. Yeah, exactly. So I'll leave the actual details for our members, but just in terms of what we're highlighting and focusing on in our fundamental research, which is the left side of the distribution. We've been in a risk on market regime every day, since at least according to our process since April 11th. Recall that the market's bottom, I think, at the very tail end of March and really had the first big up move on April 8th, I want to say. So a couple of days after that, our market's, our market regime now casting process confirmed that we're in a risk on market regime go out on the risk spectrum, take more risk. Which got you in early on in that face ripping route. I mean, history, face ripping route. You guys rode that whole thing, right? Which again, is the whole purpose of why you do what you do is to catch those waves early, right? Of course, of course. We're never going to catch the exact bottom. We're never going to sell the exact top, but that's not the whole point. Again, in order to buy the exact bottom of a market cycle or sell the exact top of a market cycle, you have to be willing to commit a type 2 error. Right. And you guys are unwilling to commit type 2 errors. We have thousands of folks, you know, 50 plus, 60 plus years old around the world. You know, subscribe to our service. I'm not going to commit a type 2 error and cause these guys to lose, you know, 10, 20% of their lifetime earnings. Right. That's a ridiculous outcome. You know, because I'm just letting you know there is a thing. I know from talking to people who watch these videos, the vast majority of folks that are watching right now are the type of people who. Would much rather catch 75 to 80% of a confirmed trend than catch a 100% of a type 2 error. 100, amen. Yeah. Adam, you just said that better than I use weight to the words when I talk. You just nailed it, brother. Thank you for saying that. And I'm, you know, as someone who's first generation rich, first generation wealthy, I'm right there with you. I'm not going back to sleeping in vans and homeless shelters. I'm not letting my family go back to sleeping in vans and homeless shelters. So I might be young, you know, relatively young. I have some great ears, but you know, I certainly am aligned with my clients and wanting to avoid, you know, significant left-toe events in my portfolio. And so, you know, this is to me is why you got to keep the, you got to keep your research and your risk management separate. So going back to answering your question, we've been focusing, well, not because I'm doing an on purpose. It's just the data are evolving in a way that that I think is underappreciated by financial markets. And if that's true, then the risk of a fed tightening monetary policy with its balance sheet in a way that is very hazardous to the S&P 500 is also very true. And so we've been focusing on that a lot in our research in the last couple of months. But that doesn't mean we've, you know, I'm manually overriding a quantitative systematic system and emotional system like kiss or Dr. Mo. I'm just, you know, my portfolio is always kiss at 100% my liquid, that worth is always mirroring the kiss amount of portfolio in any given time. And so I haven't made any changes in my portfolio. I assume our clients haven't really made material changes in their portfolios as well to the extent that they're following kiss and Dr. Mo. But when they do get those kiss and Dr. Mo, if we're right on this fundamental research theme that we are going to have a risk off market regime at some point in the next one of two quarters, then when that, when that, when you get that first signal, you've got to be a fast reactor to that first signal so that again, you can put your cell orders ahead in ahead of the by side cell orders. You don't want the by side selling before you, you know, the by sideers who are willing to commit a type 2 error will sell before you. But you don't want the rest of the by side selling before you. The ones who are unwilling to commit, the most of the by side is unwilling to commit these type 2 errors. You don't want them selling before you. And so you need to have a process that spots these critical inflections in asset markets in real time so that you can actually make these changes in your portfolio to stay on the right side of market risk. You want to know why we do this? You don't know why we do this, Adam. I think I finally found a just saying this out loud. I think I found a very distinct way to describe this. Actually, no, let me go back to that slide 183. Actually, no, it's go into this presentation because we go back to it. You can see it better if it's not drawn on. Here we go. This is why we do this. Let's say you want X amount of money here. You want to retire with, oh, sorry, not X amount of money. You want to retire with why amount of money. You need to get to this level of money over time. And then so this is just that you know, you're investing lifetime. Yep. But this slide does, and I think I've explained this last time, but what this slide explains is that if you do this, it takes you longer to get to why amount of money than if you just did this. Absolutely. Right. This is what our 42 macro is designed to produce this outcome. Yeah. I look at it now just because you could use it with real strings. If you did it with real strings, you could see that the highly volatile string is just two or three times longer than the non-volatile one. Bingo. Bingo. This is a geometry problem. This is a calculus problem. You know, this is this is this is math. And so ultimately if you manage risk and and and and and sacrifice that incremental that that you know, incremental upside, you would get by taking being willing to take a type two error and being right on that being right on that trade, you know, to to to top off the left side of the left, tell the distribution of portfolio outcomes. And ultimately you have a shorter distance between the amount of money you have today to the amount of money you want to have tomorrow. That is what this slide confirms. You know, in terms of in terms of, you know, both of these strategies, the blue bars and the red bars have identical 50% average annual returns. Yet after year three, the blue bar has way more money than year two. Yeah. You know, I just said they have identical 50% average annual returns, but so why does one have, you know, 40 50% more money or not 50% 40% more money? And the reason is because the blue ones manage risk. They don't have big draw downs. They don't have big, wowed up swings, you know, like you would see an investor for folio, that's more like this. The red bars is this. The blue bars is what we've optimized our entire risk management process for 42 macro. And you know, we have thousands of investors across the institutions, family offices, pension funds, insurance funds and obviously retail and investment advisors all, you know, bought in on what we're trying to build here, which is, you know, because it creates fantastic results. Okay. People watching are like, yes, I want that. So I got to start landing the plane here just time wise, derrious, but a couple of questions as we do. First one is just what kind of year is the 42 macro portfolio having versus what kind of years it's having? Oh, pretty good. Kisses up mid single digits right now. So obviously trailing S and P, but don't forget 40% of Kish is gold, 30% and sorry, 30% of Kish is gold and 10% of Kish is Bitcoin. So the fact and I think gold is probably down about 25% from size, Bitcoin's down about 60% from its high. They have had hard year. Especially Bitcoin. Yeah. So that is, that is the risk management. That is the risk management. So, you know, we're actually participating in the equity upside. You know, Kish has been maxed out in equities for a few months now or at least since early April. And, you know, not participating in the downside in in gold and Bitcoin. And so ultimately, you know, this, you know, this is, this is coming off of phenomenal year last year. I think we were at the match that I performed the equity market last year in Kish. So, you know, the key takeaway is that, you know, there's no, right now we don't have the financial impression and monetary debatement enough of it to create positive outcomes in gold and Bitcoin. Therefore, if you only have a 60% allocation to a stock market, that is a 100% allocation to itself, you're naturally going to lack the stock market. But ultimately, we think we're going to catch back up for two reasons in the coming year. One, if we have a drawdown in the equity market, we're obviously not going to, we are our downside capture on that drawdown. It's going to be much, much, much less than zero percent of that full max drawdown. So we'll catch up there. And then secondarily, if we're right on the outcomes of these five task forces, then we're going to get more monetary debatement and financial impression at some point starting in two to three quarters based on our current expectation. That's the fact that it's more dovish. Higher beta assets than S&P will start to go up again. And so you think about where KISS would be a year from now, it's going to be, in our opinion, it'll be Dimash Vyap performing the S&P again. Okay. Like it did last year. Yeah. And I'm just curious. Dr. Moe is kind of KISS's bigger, bling-y, or brother. Just because it takes a whole bunch more, well, it produces a whole bunch more factors where people can invest in different things off of the results. Did the performance of the two portfolios typically tend to be pretty tightly correlated? Or they differ much at times? No, no, they never differed. What Dr. Moe is, it expands, you know, KISS into 70 different factors. So let me pull that chart up here. Sorry. There we go. Yeah, there we go. Yeah, so think about what KISS is right now. KISS is, you know, look, this will use Dr. Moe as an example. So what Dr. Moe's designed to do is create proper trade signals across 70 different factors for people who are sophisticated enough to not need to follow KISS. Right? Or if you want to follow customized version of KISS, say you don't want 30% of your portfolio on gold or 10% of your portfolio in Bitcoin, you can maybe do 70% stocks, 30% fixed income, or, you know, there's obviously an infinite number of machinations you can produce. And so what we use, what Dr. Moe allows our clients who don't want to be in that standard KISS portfolio to mix and match, change their target allocations, you know, and get exposure to different asset classes, particularly from the set of our regime discipline. And so what KISS is is basically the, the, sorry, we don't use S5, use VT global equities. It's the global equity signal. It's the Bitcoin signal. And it's the gold signal from Dr. Moe. That's what KISS is. So just to get us to underscore that for folks, if you're this is your first time listening to Darius, just keep it simple and systematic. students do. It's designed to be kind of like the easiest portfolio that you can manage and still capture, you know, the upside that they're trying to capture here. So it's It's harder to think of a different, of a portfolio that could be any simpler than this. 100%. Yeah. Well, it's designed to compete with 6040, which we think is a terrible idea based on a variety of economic and policy dynamics. You and I have talked about this at Dozzy. I'm recall that we pivoted a kiss to out of core, fixed income aggregate in, in October of 2024, into gold. We replaced the 30% target allocation to core fixed income with the 30% target allocation to gold. I think we booked like a 65% gain in gold earlier this year from the time when we had that added gold, replaced gold, fixed income with gold to the time where we booked the gain, that gain in gold earlier this year. That was a 65% gain on gold and gold is just comfortably at 0% of its maximum exposure of 30%. It's going to be at 0% of its maximum exposure of 30% into we either pivot to gold starts to perform better from the set of outfits, followed by just a momentum signal. Bitcoin has been at 0% of its maximum exposure of 10% since late May. I think we had a couple of coffee being long, Bitcoin in late May that was a false positive. It was a type one error. I think it was down by maybe we lost probably that 3% on that Bitcoin trade, but the reality is. But you were in and out very quickly. In and out very quickly, type one error is a false positive. So, Bitcoin is down 20% since we sold in late May. It's down 42% since we sold in late October early November of last year. So basically we have half, not half 40% of the portfolio is just clipping the coupon. I'm sure it's the treasury curve sitting there in your cash. Exactly. So if investors wanted to take more risk, which we coached in the due via Dr. Mo, if they want to take more risk and sort of keep up, quote unquote with the S&P 500, then they can just expand this 100% of its maximum exposure to stocks to 100% of their portfolio. That's not if they're willing. If they want to do that, that's totally fine. And we obviously that's what Dr. Mo is. If you want to take that risk, take that risk, you don't have to be confined in this kind of 60, 30, 10 stocks, go Bitcoin portfolio. So, let me just interject because I think I asked my question the wrong way. It's not too competing models. It is, Dr. Mo is sort of your customization kit for KISS. And Dr. Mo is telling you at any particular time, hey, these factors are doing well. The model is liking them or the model is not liking these. And so you can use those to customize and trick out your KISS portfolio if you want to. If you're sophisticated enough to do that. But I think for the average investor, KISS gets you a lot of the way there with an incredible amount of simplicity. 100%. I mean, this is exactly what we built. It's incredible amount of simplicity. Again, you're 0.6 here, 0.3 here, and 0.1 there. But again, we have thousands of clients around the world who may think that that's not appropriate for them. So, I don't know, let me erase that. Maybe they do 0.7 here. None of this, none of that. And 0.3, you know, 0.3, you know. We're essentially given in the risk management tools. These are institutional grade, MRP, and very high quality institutional grade risk management tools because I know for a fact, because I designed the systems that several of the large market neutral player hedge funds use systems like this to manage risk in terms of comp combining ball targeting and position sizing in a regime oriented manner. And so, you know, based on how you want your portfolio to perform and the kinds of risk you're willing to take and your investment preferences and ultimately your strategic investment objectives, you can mix and match any of the 70 factors to create a portfolio. You know, you don't have to be 0.6 VT, 0.3 gold, 0.1 Bitcoin. You can be 0.2 anything here. And that's the whole point. We're telling you exactly what to do at every factor level. Right. And so, Brad Sheet, any given moment is telling you which of those factors are worthy of considering and which aren't, right? Yeah. Like in this case, hey, energy right now, not a great time to add to your portfolio. Financials? Yeah. Exactly. So, let's say you wanted your entire equity exposure in your own portfolio and your own customized version of Kiss to Be energy. Well, you would have 0% of your max exposure of whatever that, you know, that target exposure is because Dr. Most tell you to have no position right now. Got it. Yep. Okay. All right. Awesome. I hate to start lending the plane even faster, but that's just the nature of timing here. So, I've got one last big question I want to ask you as you wrap up. But before I do, what sort of your parting advice to the viewers here in terms of what type of mindset they should be adopting for this regime you think we're going to have for the next couple quarters? Parting advice was just to be nimble. And that the distribution of probable economic and policy and ultimately market outcomes is evolving in a negative manner and has been for a couple of months now. This is on the yield. You know, this is while the markets are still pricing and right to risk probably speaking. So that is that's creating, you know, that's creating risk from the side of the position cycle. Right. We have a pretty, you know, pretty, pretty, pretty extended position cycle. You know, I think we're in the 83% out of implied crowdables positioning according to our positioning model. It's the major secular bull markets tend to peak, you know, lower than that. You know, they on a media basis, they peak it around. I want to say 78% out. And so we're modestly above the level we tend to peak at from an implied crowdables positioning standpoint while we're building up left-tail risk from the perspective of the distribution of probable economic policy and market outcomes. That doesn't mean the correction or crash has to happen. It just means that the risk of that continues to rise in a way that might, if you get one data point, and we're saying the fat, I think if the balance sheet could be the data point, you get one data point, you're going to start a rush for the exit. And this is exactly, you know, I've seen this a million times in my career. And it works in both directions, you know, you get a build up of right-tail risk from the side of the distribution of probable economic market and policy outcomes. And then you have this implied, you know, really low level of implied crowdables positioning. And then you get one data point, i.e. quantitative easing or fiscal policy dynasty. You know, it's some big data point that says we got a rush for the exit to rush into the building, rather. Right. And so ultimately we just, we're flagging that risk. The risk may not materialize, if the risk doesn't materialize, then we're going to stay in a risk-on-reflation market or a gym and continue to, you know, compound returns on the long side of the equity market and maybe go to Bitcoin, start to recover. If they don't recover in the next, you know, one to two quarters, that's totally fine. We don't have to lose sleep over that. But what we would lose sleep is if, you know, this thing really just started to bubble and left gold and Bitcoin behind because that would be very, very concerning from the set of the longer term outlook for financial markets because it ultimately means we are, you know, in fact, getting deeper and deeper into the AI bubble and ultimately the second of the market size probability outcome on the other side of that. So hopefully we don't pull that forward. I don't think we're going to pull that forward. I think the Fed can definitely land this plane back in the linebackers of safety's off with the quote unquote, "play action past game." And ultimately so they can kind of start hammering the run game, which is again more monetary debasement, more financial oppression in a way that will benefit gold and Bitcoin durably over the long term. Okay. So obviously whatever happens, you and your system will be tracking it daily in great detail. Again, kind of high level takeaway, correct me if I'm wrong on this, but as sort of, there's a note of caution in your outlook in the next quarter or two. But then the expectation is that it's going to be a really bright green light for assets after that if it plays out the way that you think it's going to. Yeah, I think 27 would be a very positive year for financial markets that are probably the end of the bull market. And then we're probably going to be heading for a secular bear market heading into 28. That's kind of our core. That's our current thesis based on all the dynamics we can observe today and the data. I'm going to ask you in a no-bow at this time. So we'll revisit this along the way. Let's say that happens. Let's say there's a bear market in 2028. Most bear markets that we've had in people's lived memory have been pretty darn short. You know, there have been, you know, lost decades in a fair amount of them in the 20th century. And a lot of people forget we kind of started with a lost decade here in this decade, this new decade, sorry, new century. Do you have any gut feel? Hold on, I'm just asking you to totally just guesstimate here. Do you gut feel that this will be another kind of, yeah, it'll be painful, but it'll be over relatively quickly because of the reaction function of the central planners and blah, blah, blah, blah. Or do you think we might have a more garden variety bear market that investors in the 20th century were used to having? Oh, no, we have very strong views on this. All right. I'll be quick because I know we were going long on time here. We can talk about the sex month, obviously, I'll see you in a few weeks, but no, we strongly, history shows that cat-x bubbles always end in secular bear markets. There's usually a couple of reasons why cat-x bubbles tend to be transformative for the economy. And so typically you have a real acceleration and wealth concentration that ultimately requires wealth redistribution and trust busting, et cetera, to kind of offset that. So we think that's a high probability outcome, especially in the context of everything we've been coaching our global investor community to understand from the perspective of Neo House for turning framework, rate allios, a big cycle framework, and Peter Turchens, a lead over production framework. With those three frameworks together, I would argue the probability, well, you know, wealth taxes and trust busting is high to begin with. But on top of an AI cat-x bubble that's going to accelerate all the need for those offsetting policies and our opinion, we think that's a real high probability outcome. And then secondarily, investors are going to want their money back. They're giving, they're basically allowing companies to burn cash by selling AI at a discount to customers to acquire customers. Eventually, they're going to have to, the AI companies are going to have to change the pricing in a way that allows them to pay back the investors. And when they change the pricing in a way that allows them to pay back the investors, that may or may not come at a time where we're seeing significant ROI across the world. the real economy that may or may not come at a time because again there's a timing mismatch. I think we can all agree they are going to be transformational from a productivity standpoint. But if they have to raise the prices in a way that slows down customer acquisition or in a way that you know, perpetuates inflation throughout the real economy and do or causes significant job loss because corporations will have to choose between more AI and more employment, then you're going to have a significant mismatch between return, you know, or our expectations well to the lenders of this capital needing their money back. Okay, so let's earmark to talk about this again in more depth and one of your future appearances. That's why I have to be the next one, but as we get closer to this and you maybe have even stronger opinions as we get closer, it'd be great to really dig into that. But the key takeaway is right now, given what you know, best estimate is that when the next bear market occurs, and right now your best guess is 2028, it's likely to be pretty prolonged. It took six years to recover the ice in the GSE, it took 16 years to recover the highest in the dot combo. I think we're going to be somewhere in the middle of that. Somewhere in the middle of that. Okay, so one of the reasons why I underscore this is as I'm sure is true with most of your subscribers at 42 macro. Most people watching this video are 50 or over, right? And they're either retired or they're hoping to retire relatively soon. And if there is a prolonged period like that, somewhere in the middle of what you just said is kind of eight to 10 years, you know, they just need to have that on their radar that that's a possibility and they should be factoring that into their forecasts, right? You know, what would happen to me in my wealth if that were to materialize, right? It's not a possibility. It's the highest probability outcome. It doesn't mean it's a 99% probability. It's just an inarping and based on all our research and again, we're on slide 134 of 184 slide monthly presentation. And so ultimately, you have to be respectful of any risk management system that tells you to take down risk because I could be wrong on the timing. I think we're going to, you know, correct and recover sharply and have a great year next year. What if I'm wrong on that? What if we start correcting and the markets get very concerned about hyperscala capex in a way that forces them to cut their capex in a way that causes earnings estimates to go down materially and the bear market is already starting. What if that happens? That is a legit, that is not the highest probability outcome, but it's certainly a reason, I wouldn't say reasonable, it's a moderate probability according to our risk management of agriculture. So if that moderate probability turns out to be the outcome, then you got to respect any risk management signals, you know, between now and the next 18 months that tell you to take down risk because we're heading for a second of the bear market and that's the highest probability outcome. Right. And if you, if you share that outcome and folks who watch this channel know, you know, I talk about that as, what I consider to be the biggest risk factor out there, right, is something that compromises the AI capex forecast, which then has to bring down the earnings forecast, which brings down the price of those stocks, which brings down all the indices and everything like that, right. If you, if you share that concern about that risk and you realize as Daria is saying, that could not just be like a, you know, a quick market correction and then we're off to the next tie, it could be the start of a real bear market, a pulling bear market. Then risk management becomes incredibly important. And that's the thing I just wanted to deliver to folks here, which is if you are not prioritizing risk management right now in your portfolio, you should really take key to what we're saying here. And if you don't know how to inject more risk management in your portfolio, get yourself to an expert who can guide you on that. And Thalphamoney has a bunch of financial advisors that come on this channel all the time. And if you would prefer to outsource all this to, you know, a financial quarterback that understands all the stuff that Daria is now talking about, just go fill out the very short form at Thalphamoney.com and talk to one of those advisors. These consultations are totally free. There's no commitments involved or anything like that. They just service their offering to be as helpful to as many investors like you as possible. If you are going to do this yourself and be idea a DIY investor, which surveys show me like 80 plus percent of you watching right now are currently managing all this on your own. Again, if this is something you don't have a lot of experience and confidence in already, get yourself to an expert and Daria's 42 macro system, I think is a great one. And that's why I've officially endorsed it from Thalphamoney. If you think you found a better one, great, but just don't go naked, don't go it alone. It's really important right now to focus on risk management for all the reasons we talk about. So anyways, if you want to go, subscribe to Daria's Service, learn more about it. Just go to Thalphamoney.com/DIY, do it yourself DIY. And that's a fantastic solution to at least seriously consider folks. Daria's you've been nodding through all this. So I'm guessing I'm singing from the same song sheet as you, but anything you want to add to this like, hey, if that's what if you think that's the most probable development in the future, you got to start prioritizing risk management now, correct? Hey man, absolutely. I have very little things to add, especially if gray hair. I mean, I'm almost 40 years old and I've decent amount of gray hair and I'm very concerned about this outcome because the problem is you get a lot more when you turn 50 in my friend. Yeah, that's good to know. Most the people I age in financial markets have never seen a secular bear market. I'm happy with it during the financial crisis. And so like, I personally have never risked managed a secular bear market. I've helped investors stand on the right side of Mark. There's none of my clients that have been on the wrong side of a 10% correction in the near two decades. I've been on the global all streets. So that's something I'm proud of. And so obviously, we built systems that help the global buy side. Obviously they help the same systems help retail investors around the world. But the one thing I'll say, just on the DIY side of things, you know, if if your DIY investor, you know, maybe you lack trust in financial advisors or something, you know, there's usually an element of that for most people, especially people your age, GNX, you know, you guys like trusting pretty much every institution. So if you're one of those, we don't trust anybody. Yeah. Exactly. If you're one of those folks, we can we certainly going to make it easy for you to participate in this fall when we launch our KCTF. So stay tuned for more announcements on that. Can't wait for that. And just a reminder, when that does, when it's getting close to launch in your appearance near then, let's have you tell everybody all about it and how to go get their hands on it. All right. So last question, there is. And this one doesn't include any slides. So we've got the July 4th coming up and it's the nation's 250th anniversary. And I've been talking to Fairmount Wiesling on this channel that yes, America has problems and yes, as as good patriots, we should be vocal about what those problems are and do our part to try to address them. But there is an awful lot that is good in this country. There's an awful lot to celebrate. We spend I think way too much time complaining about the problems than we do feeling gratitude for the phenomenal freedoms and benefits and protections that this country offers. It's been wonderful to have the world to come here and get to see our country through the eyes of all these foreign tourists who are traveling around saying, oh my god, America is so much better than I had been told. So that's been wonderful. But you're somebody who I think does appreciate a lot of the benefits of this country. I was in in many ways your life is the American story. It is the literal rags to riches story. The opportunity that this country allows somebody to change their station. I don't think there's another personal personal opinion, but I think a lot share it. I don't think there's another country in the world that gives people the optionality to change their station. They got to do the work for it. But we offer way more potential to do that than I think really anywhere else. And you, my friend, have done it. So great. Good to see you. I just want to I mean, I'm going to mix this in with some other comments you made, which is, you're a guy who's very mission driven. So not only do you want to take care of yourself, you want to take care of your family, but you also want to take care of as many people around the world in helping them improve their lives and change their station. And so financially, you're doing that through 42 macro. I think you've shared that you have some political aspirations at some point in the future. And if you do, you totally got my vote for that. But just talk for a minute about, you know, how you sort of see the role you want to play in helping people appreciate what we have here in this country and make the most of it for themselves. That's a thank you for thank you for this opportunity. And I'll be quick, because I know we've been going along. So one, I wholeheartedly concur with you that this is the only country in the world where you can be darey as Dale. Someone who's lived in many a homeless shelters for a decent percentage of his life who slept in vans, who's two drug addict crackhead parents, one dive of drug and alcohol abuse. You know, my stepdad died of drug and alcohol abuse. My abuse, sorry, let me say again, my abuse of very abusive stepdad died of drug and alcohol abuse. After my also very abusive stepdad, who was also a drug and alcohol abuser, was murdered. My brother has a bullet in his spine. I've seen many friends get murdered by gang violence. You know, this is the only country in the world where you can be, you know, at the epicenter of thousands of institutional and retail investors around the world, keeping them on the right side of market risk. The only country in the world with this can actually happen. And so, you know, I think about the legacy of Jackie Robinson, who our company's named after. And, you know, I want my legacy to be similar, not because I'm a, you know, ego driven self-angrandizing person, but because I feel that God has put me here right here. to change lives. Why in the hell would I, why would he have me accumulate that such a long list, laundry list of horrible outcomes, having no food, no lights, trying to do homework with no lights on, didn't have the internet the whole time I was in elementary middle school in high school, had to go to the library to use the internet. Why would he have me accumulate, accumulate all those experiences and take me out of that mess and put me here in front of so many thought leaders and so many important people, capital allocators around the world. And in my opinion, the only thing I can surmise, my daily studies in the Bible and my weekly church attendance and my philanthropy around the community and the world, the only thing I can surmise is he wants me to help other people change other people's lives in the way that I'm committed to it. And that's the only way I can do it. And so, I don't have any strong desire to be a politician. It seems like a terrible job. But to me, to me, it's a bigger megaphone than just sitting in this box, doodling on charts. And so ultimately, my core goal in life is to help change as many people's financial situations as possible and change as many hearts and minds as possible in a way that fixes the problems of this country. And so, the final thing I'll say is, there's a belief out there amongst people my age that the solution to our problems. And we have a lot of problems from an inequality. And really, it's not the inequality that's the problem. It's the K-shaped nature of the economy. That's the problem. It's the fact that we have people like us getting better while people more than half the economy population is getting worse. That is the issue. The solution to that issue is not socialism. It's better capitalism. Exactly. I've been saying that just so you know, I've been saying that a lot in recent days. So, couldn't agree more. So, my policy platform will be to unite the country, all wrongs of the country into an E-shaped society, not a K-shaped society, an E-shaped society with better capitalism. And that's going to take, that's a big last, a big lift. But you have Jesus Christ on my side. And I believe in what I'm doing here. I actually love that E-shaped economy. I'm assuming the middle leg is the middle class. Like it's not a, it's okay. There's always going to be rich. There's always going to be poor, but we got to make sure we fight and defend the middle income part of portion of society. But, ultimately, we want to make sure that we're, the policy, the regulatory policy, the country, we know what someone talks about, which is incredibly K-shaped. The monetary policy, the country, which since Greenspan, I would argue, has been the incredibly K-shaped. The physical policy of this economy since the Bush since the, the Clinton administration has been incredibly K-shaped. We have all three levels of the government, which impact the society. There's only four ways the government touches the population. It's fiscal policy, it's monetary policy, regulatory policy is criminal justice system. I would argue all four of them are, are, are, set the dials to produce K-shaped outcomes. And so my job with our research and my political platform in the future, decades into the future will be to turn those dials as much back towards an E-shaped economy, as possible. All right. Well, God, first off, Darius, you, you're such a good guy. I think that just is blatantly obvious to everybody. And the world needs a lot more Darius dials, but, but Kudos, and thank you for the role that you're playing here. And I got to say, I know you give a lot to sort of divine guidance here. And there's probably a ton of that going on here, but you had to do it all in your own. And it would amazes me about your story. It's not just that it's an amazing story, but that as I understand it, you know, you didn't have any models, right? You didn't have any good models showing you the way you had to figure out. And I'm sure you found mentors and stuff like that. But that all had to come from you. That's a very hard thing to, to do on your own. So, all right. This is, this is why sports is so important. Get your kids in sports, changes lives. Wow. You know what? Let's make that a topic. One of the next times you're on. I'll let you go deep into that one because I actually think that can be really helpful to people, especially parents of children and giving them some details on how their kids can maybe benefit the way that you do. Okay. But anyways, I couldn't agree more with you. And I guess I'll just wrap up by saying, I am end everything you said. And I wish you the best of sports in your family. I hope you have a great time. As do I for everybody watching this. Like as Daria said, we got, we got tons of issues. But they are fixable. And let's focus on fixing them because it's a system that we know works. And in many cases worked better than any other system in economic history beforehand. Human history. And on the other side, you know, the folks that are saying, no, we should really go to socialists route. That is the one system we know has a 0% success track record, right? In size of zero on success. Exactly. So when it comes to risk management, just there's no reason why you would, you would want to go down that other route. All right. Well, look, Daria's such a good guy. I'm so happy and proud to call you both a partner and a friend. Look forward to having you back on again, the program soon. Folks as a reminder, if you want to follow Daria's and follow his kists and Dr. Moe models, just go to ThawfulMoney.com/DIY. Please let Daria's know how much you appreciate it. We went real long today, Daria's, but you gave us a ton of great material. Please thank Daria's for that folks by hitting the like button and then clicking on the subscribe button below. All right, buddy, that's it. I'm talked out. Have a great fourth. Have a great fourth. And then happy Independence Day to everybody out there. America is an amazing country. If we can all just put down the partisan BS, stop voting, Democrat, stop voting Republican, stop, you know, putting yourselves in these silly tribes that the media wants you to be in so that they can continue to siphon power and keep that K-shape wealth pump on. You can just take a step back from this and just think about little Daria sleeping in that van and about the things we need to do from a regulatory standpoint, from a monetary policy standpoint, from a fiscal policy standpoint, and maybe even a criminal justice reform standpoint to get a little more little Daria's is out of that van and into right here where we are today. So thank you Adam for allowing me to embellish and all that and thank you for inviting me on your program, brother. I really appreciate you. It is a privilege and honor, my friend. Take care, everybody. Everybody else. Thanks so much for watching. [BLANK_AUDIO]