Global Debt: Only A Crisis Can Fix This Massive Disaster (Uncut) 05-01-2025

Global Debt: Only A Crisis Can Fix This Massive Disaster I Bill Fleckenstein

What we need is an epic financial crisis here in America, like we had in 08, only this time we at least have people in the Trump administration in the form of Besson and some of the others, not all of them, but some of them, who would know what to do. Look what we got out of the 08 financial crisis. The only way you can ever settle these big issues are in prices, right? So what did we get, what did we solve out of the 08 financial crisis? Zero.

Hello and welcome to Soar Financially, a channel where we discuss the macro to understand the micro. My name is Kai Hoffman, I’m the Edge AR Mining Guy over on Nexon, of course, your host of this channel, and I’m looking forward to welcoming back Bill Flackenstein. He’s been on the channel back in January, and as you can guess, we got lots to catch up on.

Lots of uncertainty in the market still, although I have to say, based on my gut feeling, it’s gotten fairly quiet this week in the markets. I’m not sure if it has to do with the Pope dying or anything, to be honest, but it seems fairly quiet and the market is just moving along. We’ll check in with Bill here in a few short seconds, see if he sort of agrees with me on that.

But before I switch over to my guest, hit that like and subscribe button. It helps us out tremendously, and it’s a free way to support our channel. Thank you so much for doing that.

Now, Bill, welcome back on the program. It’s good to see you again. Well, thanks for having me back, Kai.

Absolutely. Yeah, we’ve really enjoyed our conversation in January, and now the world is a completely different place, or is it, Bill? The world is obviously a bit more scrambled. I think, though, to be fair, what’s happened is, thanks to the angst and motion caused by the headline roulette revolving around tariffs, what’s happened is some of the problems that heretofore had been kind of ignored have been exposed.

Part of that is the Trump administration, I think, in a perverse way, what Doge has illuminated is sort of the out-of-control, irresponsible spending that has gone on by the United States government and the intractability of it. And that now matters because $37 trillion is a lot of debt to have to roll on a regular basis, and it keeps growing. So I think the world has now focused on that.

For a long time, it didn’t matter. I always thought that was kind of crazy, but the market focuses on what it wants to focus on from time to time and ignores other issues. Of course, the root cause of the United States out-of-control deficit spending was the fact that the Fed has basically allowed it to occur.

Had we never had QE, we would never be in this position, I don’t believe. It could never have happened. And so, in some ways, the root of a lot of the problems in America are a consequence of the Fed’s willingness to help kick the can down the road and monetize.

The Fed was never set up to do QE. That was not what it was there for. In any case, we have this massive debt problem.

And one of my concerns was, gosh, what if it turns out when we really get down to it, that what Doge is trying to do is occurring four, five, six, eight years too late. In other words, the problem is too big now. We can’t deal with it in anything remotely that would be considered a semi-painless way.

And that’s part of what is going on, I think. Then the other part of it is the noise and uncertainty created by the seemingly capricious nature of the tariffs. So, the tariffs are sort of the catalyst, but the root cause of the problem is our debt situation.

The Fed’s helped create that. And of course, the stock market has grown to bubble-like proportions for a lot of the big cap stocks that people own because of the passive bid. So, that’s an abomination in the same way Fed monetization is an abomination.

And the two of them have created a very dangerous mix. We started to see some panic in the market, which ended a couple of weeks ago. I suspect there’ll be more panic before the year is through.

And a lot hinges on how does employment go? Do we see more layoffs, which affects corporate America, which affects the 401k plans that send the money to Vanguard and BlackRock, which come in and buy stocks mindlessly every day. So, it’s a very bad mix. A couple of the issues, the passive bid, what the Fed has done in the debt, don’t necessarily matter on any given day.

But when they do matter, they’re about the only thing that does matter. So, you have to be aware of them and where are they in their gestation periods of becoming issues. So, there you go.

That’s my quick and dirty on the overview. Yeah, absolutely. Lots going on and lots to dive into.

A lot of little rabbit holes to jump into here, Bill. Maybe we’ll stay on the Fed. In the last conversation, you said that the bond market is taking away the printing press from the Fed here.

We’ve seen the bond yields, especially on the 10-year, move up violently when the tariffs were announced. But now they seem to be retracting. We’re at 4.18 or so on the 10-year.

How much pressure is the bond market still sort of, what’s the word I’m looking for, putting on the Fed here? Well, I think that the bond market now views the Fed with some suspicion, whereas for a long time it did not. And that’s somewhat what I mean when I say the bond market will take the printing press away from the Fed. If bond investors don’t trust the Fed to do the right thing, then they have in fact said, you can’t ease because we don’t trust what will happen.

We don’t trust your judgment. Therefore, if you ease, we’re going to be suspicious that we’re going to have more inflation problems down the road. So you’re on probation or we don’t trust you.

And that’s sort of been happening. Again, part of it is because of the size of the debt. I mean, so you need every marginal buyer you can find.

And now we have a situation where things have gotten, there’s enough angst about the economy that maybe people feel like, okay, the economic weakness might take the pressure off inflation. But by the same token, we have tariffs which are liable to be inflation producing. So you’ve got those two going against each other.

But in the past, if you look at any moment in time before 2022 for the last, call it 25, 30 years, the bond market wasn’t really worried about the Fed. The Fed could do whatever it wanted. It looked past all these problems.

So I think the days of the Fed getting what to do, whatever the hell it wants are behind us. It would be an interesting laboratory test if we could do it to have the Fed cut rates 25 basis points tomorrow and see what the bond market did. I suspect the short end would rally in seven years and now the bond prices would decline, but obviously that’s a thought experiment because we can’t do it.

No, absolutely. It is an interesting experiment in general because the bond vigilantes have been quite loud, especially when the tariffs were announced. And maybe that brings me to the next part of the mandate for the Fed is sustaining growth or inflation and employment are the two main mandates, obviously.

But the underlying mandate perhaps is just making sure that the economy runs in a stable fashion. But now the IMF came out with a lower growth forecast and even the Fed said we’re expecting 4% inflation and lower growth. Not using the word stagflation yet, but it seems like we have to be realistic about that scenario occurring.

And in that case, if that happens, what should the Fed do? It seems like they’re caught between a rock and a rock, as a guest said on this program before. Well, they have a problem of their own making. That’s like saying, look, I just had 20 shots of tequila.

I’m thinking about shooting some heroin because I don’t want to deal with the hangover. What do you think? Was there an easy way out of this mess for me? The problem with analyzing these issues is at any moment in time that they become a problem. They’ve been building for, in some cases, 25 years.

That’s particularly the debt issues. But you have to understand how we came to be in this position and to understand what it’s going to take to get us out of it, if that’s possible. We’re stuck with the Fed.

They’re unlikely to make good decisions. They generally don’t. I think they don’t like Trump, so they’re going to be less likely to want to ease, which might be the prudent thing to do for once.

Having said that, they’re a little bit trapped, I think. The equity market can’t feel good about the Fed being trapped, considering where valuations are. But again, the stock market doesn’t think.

It gets voted on daily by the weight of the money that comes in from passives. The market has become much more of a voting machine than a weighing machine. To use Warren Buffett’s analogy, in the short run, it’s a voting machine.

In the long run, it’s a weighing machine. The voting machine has got lots of votes. Would you say the Fed is a tool for the government to implement their agenda, meaning lower debt payments and things like that? No, no, no.

I’m not going down that route. I don’t believe that. I believe that we’ve individually had serially incompetent Fed chairmen.

Greenspan had a huge ego, and he did things that got this process started because he loved seeing his name in lights. When there would be the Fed meeting, they had this dumb briefcase indicator and all that. Then we got the idiot Bernanke, who said subprime was contained about six months before it metastasized and nearly imploded the entire banking system.

One of the Fed’s jobs was to regulate the very banks that nearly took everything down. He was completely incompetent, didn’t understand anything. Janet Yellen was a complete joke.

And now we got our private equity man, Jay Powell, who was completely irresponsible, perhaps maybe not in the very start of COVID, but staying at zero rates and monetization way, way, way, way too long. We’ve had a series of incompetent people making decisions that affect everybody for quite a long time. Unfortunately, we’ve got a lot of people in various capacities of government here in this country that are completely incompetent and don’t understand that you can destroy something quite quickly if you’re dumb or an ideologue for some goofy thing.

Rebuilding that and fixing that is very painful and takes a long time. We’re discussing the Fed a lot, but it’s a microcosm of some of the things that are wrong in America. Not to say that the EU or other places don’t have issues.

I don’t want to make it sound like we’re the only one with a problem. But since we’re talking about this, that’s the topic. I’ve come to the realization that I prefer talking about the US because I’m German.

It’s easier for me because I’m so ashamed of what’s happening in Europe that it’s way easier to talk about something else. You guys are in trouble because free speech is still under assault the early way it was under the Biden administration here. So you got that and your immigration issues are worse than ours now.

So anyway, that’s part two of our conversation today, Bill. But let’s talk strategy out of the White House. We talked about the Fed.

Let’s talk strategy of the White House, especially for the next, let’s say, 21 months, first two years. We’re 100 days now into the new presidency here. What is the strategy? What are they trying to achieve? I’ve been asking guests before.

I’m missing a bigger picture conversation. Somebody’s walked around the White House with a five page PowerPoint presentation. Hey, guys, this is the plan for the next five years.

Do you see that? I’ll be generous and try to put an optimistic view on what they’re up to. I think both. I mean, Besson has been pretty direct about what he thinks needs to be done.

Look, if we said if we got everyone in America online and said, OK, you got to listen to this. You need to understand we are. We are.

We’re not broke, but we’re going to be broke and we might we might actually be broke. We don’t really know what we’re because we have all this debt to finance. We’ve got out of control spending.

We need to fix that. Well, the person that stood up and made that speech wouldn’t get elected. So we have this intractable problem and we got a Congress where, you know, 90 percent of them are probably corrupt or grifting in some way.

So we’ve got this huge problem. And what what what I think Besson would like to do is he would like to see if we can figure out some way to grow our way past this insurmountable debt problem without the bond market freaking out about growth and inflation so they can finance the debt at, you know, four to five percent across the curve instead of some bigger number. I don’t know that the bond market’s going to cooperate, but what they’re trying to do is they want to they want to try to unleash the competitiveness in America, the capitalism, get rid get rid of the regulations.

I mean, you know, some of the some of the energy policies that were pursued in the Biden administration and other administrations that were at let’s ask the Spanish how they like being totally green today. You know, so we need adults to try to do things. So they want to they want to you know, they want to have, you know, some energy independence and maybe have make oil prices a little bit lower, longer term.

I don’t know. But they want to try to grow. They’re trying to take a page out of Reagan’s book, which got belittled as supply side economics, but actually it’s just capitalism.

And it worked. They brought down tax rates because tax rates were pretty confiscatory when Reagan got elected. And so I think they’re trying to take a page out of that book now.

And I think that they actually think they can, you know, bring manufacturing back to America. I don’t know if that’s possible. I remember I’m trying to spin what they’re trying to say.

I’m not saying this is what I think or that they’re going to be successful at it. But you asked me to give their power. That and they’re going to bring back manufacturing and we’re going to you know, we’re not going to pay.

We’re not going to be the policemen of the world. We’re not going to pay for everything for the world. We’re not going to do any of those things because we quite frankly can’t afford to right now.

And so that’s what they’re trying to do. And they want to stimulate growth and they want to pursue sane policies. I mean, you know, parenthetically, you know, the Biden administration basically opened the borders and let anyone come in.

And now we’re seeing that the people that favor those strategies don’t even want us to get rid of, you know, gang members who, you know, are involved in all kinds of heinous crimes. And so I can’t even get my head around what that policy is all about. But, you know, half the countries in favor or seemingly half the country, some some subset of half, you know, say 30 percent of countries in favor of keeping illegal aliens that are that are wanted criminals in other countries.

I mean, how is that same policy? You’ve got to you’ve got the same problem in Europe, by the way. Yeah, we do. I keep hearing we’re deporting people out of Germany, but all I see is flights coming in.

So I’m not really sure how that works, to be quite honest. Anyway, anyway, so that’s about the best I can do. I can see that they have some grand scheme.

I seriously doubt if they can pull it off. I want them to because I’d like things to run well here and I could run well in the world. But we have so much lunacy at the government level in so many countries.

Canada just elected a guy who’s going to be a disaster, Carney. I mean, he’s a total W.E.F., you know, global warming is the existential crisis to us every minute of every day kind of guy, which is bullshit. But that’s what they believe.

And it’s going to be a disaster for Canada. Europe’s a mess. We have this fight with China going on right now.

So, I mean, it’s not a very good moment from a macro world standpoint. Fortunately, we don’t have any global armed conflicts of any serious size at the moment. Yeah, no, thank God.

Thank goodness for that. But there’s still conflicts around the world. We don’t have to throw into the conversation here.

Let’s stay on the market side. I think we talked about Scott Bassett in our last conversation and you brought him up earlier today. Is he the cool head in the White House and sort of seems to be prevailing with his strategies a little bit? I fanboyed a little bit back in January because I listened to a few podcasts and I thought he’s a reasonable guy.

He sounds like a smart, right? And what I’ve been reading is like, OK, he’s keeping up to his end of the deal here. Would you agree? Yeah. But I mean, again, we’ve got a huge problem.

Look, I’ve been drinking tequila every day for the last six months and now I’m on heroin. I want to get better, but I don’t want it to be painful. I mean, what should I do? Well, there’s no way out.

So, I mean, he’s got an impossible hand. Now, he’s a very talented guy, but I think the people that take projects don’t appreciate the predicament that we’re in. This is no easy fix.

And he may be capable of threading the needle. He may not. I don’t know.

But quite frankly, what we need is an epic financial crisis here in America, like we had in 08, only this time we at least have people in the Trump administration in the form of Besson and some of the others, not all of them, but some of them who would know what to do. Look what we got out of the 08 financial crisis. The only way you can ever settle these big issues are in crises, right? So what did we get? What did we solve out of the 08 financial crisis? Zero.

They hamstrung the banks and we got Obamacare. That’s it. Obamacare has been, from a financial standpoint, it’s been a disaster because it’s driven up the cost of so many things, which was obvious, so it’s happened.

But we didn’t fix anything. So the only hope to get this done, any kind of real fix, is going to require a financial crisis of some kind. Now, they don’t want to preside over one and I think they only have a couple of years to get this done because if things don’t go the right way, they’ll lose the midterms.

Although, quite frankly, having the Republican majority in the House and Senate doesn’t seem to mean much. Both parties are showing how worthless they are. They get nothing done other than there’s a small handful of Republicans that seem like they care about how these problems might get adjudicated.

So without a crisis, we’re not fixing anything. What they’re trying to do is get this done without a crisis. I don’t think they can pull it off.

And all we can do is hope that when the crisis hits, we have the most capable people possible in the position of making decisions. Unfortunately, we didn’t in the crossover between Bush, Hank Paulson, and then when Obama came in. We didn’t get very many good decisions.

A few weeks ago, a couple of weeks ago, there was talk about a deliberate recession. I think that’s sort of what you’re hinting at, what they’re trying to avoid, of course, because that is painful for everybody and it’s tough to put a label on it because it hurts politically, of course. But the tariff announcement, the sweeping tariff announcement, not just on one or two countries but on the globe, put the world on the brink of global recession.

The uncertainty is still extremely high. How close are we to that crash and financial crisis scenario, Bill? Well, I can create a scenario. Look, if you want to have a crisis, here’s what I think needs to happen.

We have to get enough layoffs to where we impact the passive bid, enough layoffs and people getting scared and taking some of the voluntary money out of their 401ks. In other words, if we get the passive bid where it can’t support stocks, which we saw in the moment of weakness, the handful of days ended a couple of weeks ago, you could get a real wipeout in the market. That would then lead to a recession, I believe, because I think we’re not all that far away from it.

If it wasn’t for all the stimulative aspects of the budget deficit the last several years, I think we probably would be in one. But we need a financial accident of some sort, which is not impossible to create, to create a recession. But I don’t think the Trump administration was trying to create a recession.

I think what they said to themselves was, okay, look, if we have to do some of these things, we may as well do them now, take the pain early, get it over with. Maybe we can blame some of it on the prior guy or whoever was running the show. And try to deal with it from there.

I don’t think they wanted to create a recession. I think they’re willing to accept some amount of negative outcomes to try to pursue their goals. But now what’s happened is we’re on the way to negative outcomes, and they’re not really getting much on the positive side.

So it’s not so far working very well for them. I don’t think that they would give themselves high marks for how it’s gone so far. Now, it’s an incredibly difficult hand as I tried to point out.

I mean, look, if we had the alternative, let’s pretend the Biden administration was still in charge, or whoever’s running the show, because it wasn’t him. And all of a sudden, the bond market started hitting the skids, and we had all these problems. You know, we could have the same bad problems that wouldn’t be triggered maybe by tariffs, they’d be triggered by something else, out of control spending, whatever, the market would freak out.

Well, then you’d have that group of knuckleheads trying to figure out what to do. And I guarantee you, they would only make it worse. So I think at least, if we’re going to have a problem, you want some people that are financially savvy, helping make decisions.

That’s about the best I can do for where we are. No, absolutely. I think the bucket was already full when the new president moved into the Oval Office.

It was just the last drop that was added to it, right? So I feel really bad. It’s like, think about the guy what you want, doesn’t really matter, because we’re Trump session, it’s just unfair a little bit, to be quite honest. Well, he wanted the job.

So, you know, but I mean, because he’s so polarizing, and so many people don’t like him, just because they don’t like him. You know, there’s a whole contingent of Americans are going to blame everything on him. And then there’s some other people who were on the fence, and they’ll blame stuff on him.

So they have a really tough hand to play, especially when they duke it out with the Chinese. Because the Chinese will say, and remember, they’re a totalitarian regime, so they don’t have to worry about elections. Well, we can outlast you.

And while there’s debate, apparently, from an economic standpoint, I mean, a lot of people who know more about China than I do say that they can’t win this battle. Well, you know, maybe not painlessly, but that doesn’t mean that they’re not willing to have the functional equivalent of real economic war. It seems to me like they’re pretty dug in.

And so if that’s the case, then now you’ve got another problem on top of the problems that this exposed, which we’ve been talking about. No, absolutely. I think that brings me to two more topics I want to touch with you on before talking a bit mining and gold as well here, Bill, is really like the southern bond, I wouldn’t call it crisis yet, but the southern, let’s call the southern debt that is being held by China, for example, and how much of a stranglehold it is on the US right now, like, when I look at the, what was that mid April move in the in the bond market here in the 10 year yield, for example, I have to keep thinking about there was outside interference in there somehow, like, it was really tough to shake that thought.

Although there’s probably logical explanations why the bond yields jumped 10% within a couple of days here. Like, how high do you rate that risk of China potentially interfering with the US financial markets? Interfering? I mean, they decided they don’t want to own the Treasury. So, you know, it’s their right to sell them.

I mean, did they sell them sloppy to make a point? Maybe. But the US government in the form of the Biden administration in the wake of Ukraine, it’s kind of weaponized the dollar. And this administration has sort of made some sort of dumb sounding comments about how the world should pay the US for being the reserve currency.

In other words, they’ve said things that might make people think twice about, gosh, do I want to have as much money as I have in dollar assets? And I think there’s been a flow away from the dollar for those reasons, both stocks and bonds. And like I said, did China sell some bonds sloppy? Yeah, maybe. Maybe they wanted to make a point.

You know, a few basic points here and there, a few bucks is not going to matter to them in the big picture. So maybe they did. But the fact of the matter, it wouldn’t matter if we didn’t have this out of control national debt and runaway deficit and an incompetent Congress who doesn’t care.

No, absolutely. Maybe the last question on the bond market in general and the refinancing that needs to happen this year, Bill, do you see any risk that that won’t happen? That’s sort of in jeopardy that the refinancing in 2025 won’t happen, perhaps? Well, they’ll get it done. The only question is at what rate? They’ll get it done.

The bonds will get sold, the bonds or bills or whatever, they’ll get them sold. The question is at what rate? And what are the implications of that rate? And what does that mean that they had to go at that rate? So, no, they’re not going to not sell them. It could get ugly.

And if that happens, we have a weak dollar and a weak bond market that is not good for the stock market. And we’re not for the passive bid. Stocks will be getting hammered on this.

Right. And at some point, if they lose a passive bid, as I talked about in the beginning, at a moment in time where the dollar is under pressure and the bonds are under pressure, it could get ugly fast. And you have to realize we’ve got a generation or two of investors who don’t know anything about how markets really I’m going to piss people off, but they don’t understand anything about how markets really work.

They’ve grown up in the post 2001 or post 2008 era, which are not the way markets work. We’ve had 25 years of weirdness thanks to the Fed’s policies. First, it was taking rates too low to create the real estate bubble after the stock market bubble blew up, which itself was a function of too low rates.

Then there was a monetization that came after it and all of that sort of thing. So people and then the passive bid got big enough. So people have been trained about how markets work, which is not how markets work.

So if my saying this makes you feel a little squeamish, I would suggest you get out a financial history book, read about the 20s, read about prior bubbles. You have to understand how markets work, because what we’ve seen in the last 25 years in America where they go up like this all the time is not how markets work. It’s a moment in time.

I mean, people think 25 years, my God, that’s forever. Yeah, it’s a half or a third of someone’s lifetime. But in financial history or recorded history, it’s a drop in the bucket, never mind geological time.

So I think people have learned the wrong lessons in the markets. If bad stuff starts to happen, if the confluence of the dollar being weak and the bond market being weak and other data coming to challenge the stock market at a moment in time, the passive bid gets weakened, it’s going to get very ugly. And there won’t be much anyone can do about it, because if the bond market and the dollar are going down, how does the Fed ease? Capt, what’s it going to do? That makes us an emerging market country.

You said that before. Having to deal with that plan. You said that before.

Anyway, those reasons what we’ve talked about are one of the reasons why so many of the world’s central banks, non-G7 central banks, have bought so much gold. China’s bought gold, non-G7 central banks have bought gold, Chinese insurance companies, individuals, Indians. So the rest of the world, look, if you have to decide how you’re going to allocate your money, you want to own euros? You want to own dollars? You want to own yen? I like the yen.

I think the Japanese have a better hand to play despite their demographics than most people do. So I actually like the yen. If you’ve got to decide what colored paper you want to own, I like the yen.

But I think gold’s been the beneficiary of that. And that’s one of the reasons why gold has done so well and is behaving differently than people that have been around the gold market a long time. I’ve been long physical gold for 25 plus years now.

But it’s behaving differently now in the last, say, six or eight, nine months than it has in the past. And I think these big picture items we’re talking about, I mean, there is no colored paper that you can really have confidence in. If we had the old DM, that would be a currency.

The Swiss has been abused because they didn’t want it to go up versus the euro, so they made that into confetti. The euro’s confetti, the dollar’s confetti. Anyway, so the gold market’s been the beneficiary of that, I think.

I got to remember to come back to the dollar, sorry, but let’s stay on gold for a second because the role of gold has changed. The BIS sort of reclassified gold as a tier one asset, also in regard to Basel III regulations, something the banks need to hold as well. And then Chinese ETF buying has been very, very strong, even the last week.

A lot of inflows into Chinese gold ETFs as well. They’re just smart. Are they just smarter than us when it comes to that? Because they’re not buying in the US and in Europe, for example.

Well, I mean, the US is myopic. Like I said, for 25 years, people are being trained in the wrong way. When I first started the investment business in 1980, that was the tail end of the period for 10, 20, 30 years where people said, in your stock and bond mix, you need to have some insurance in the form of gold.

And that was considered a prudent allocation. Like 60-40 is taken as gospel. Well, it used to be stocks, bonds, and some gold.

So gold’s only going back to perhaps to where it used to be. The Chinese have favored it. The Chinese government has favored it.

I mean, it’s been a good decision because the price of gold has gone up. And it seems like a lot of more people now are understanding that it functions as a currency, but it doesn’t have any liabilities. If you own a currency, you basically own the liability of some country.

They’re promised to pay you or make your currency sound. Gold doesn’t have that issue. It’s sound on its own.

It’s worth what it is. So I think that they concluded that a long time ago, and now it’s worked for them. And they’ve encouraged it now.

I mean, is that out of control? I don’t know. I mean, it would be highly unusual to have a really big bull market like we’ve had in gold and with the US public not participate, because they’re basically not. You can look at the ETFs or the GDX, no interest in miners, no interest in gold, really.

It’s been foreigners, right? Well, at some point, I believe that the US will understand the joke. But you haven’t had to know this. You haven’t had to understand.

You haven’t had to be very good at analysis and understand problems to do well as a US stock investor for the last 25 years, a combination of the passive growth in the market share, the passive bid, QE to get over the rough spots. You’ve been bailed out time and again. And extraordinary valuations have appeared in places where they really don’t belong.

And you’ve been bailed out by just kind of saying, OK, is the market open? I should buy some stocks. It’s not that easy. And so before this period is over, whatever this period is, people that weren’t very good at analysis and made a lot of money, they’re going to really piss when they hear me say this.

If they don’t take some defensive action and start thinking about what could happen, they’re going to get hurt down the road. I don’t know when, but it’s going to happen. And it’ll be there in the form of inflation, higher bond rates, lower equity prices, all of the above, some kind of crisis.

I don’t know. But all that’s out there. No easy way to thread the needle between here and the promised land of what the Trump team would like to see happen.

I think we put us globally, not just in the US, but we put ourselves in a position that would just be painful to get out of. And there’ll be pain. Hopefully it’s just short term and it’s just ripping the Band-Aid off.

But as we have seen, the politicians here, the clowns running the EU, we go through G7 country after G7 country. They don’t have any backbone. They don’t want to do it.

They won’t even stand up for free speech, for Christ’s sake. So now you think that they’re going to say, OK, listen, we have to do the prudent thing. We have to save more.

We can’t have free money. People say, get out of here. So it’s a very bad mix.

There’s going to be a really bad period. I don’t say this because I want it to happen. I’m just afraid that it will happen.

The fourth turning, it just all happens in cycles. You can track it easily. It’s been 80 years since World War II, a couple of generations since then, and change is happening and the world order is getting reshuffled.

I think it’s just a logical, almost pragmatic thing to do. That there’s pain, short term, long term associated with it, I think that’s part of the game. Let’s call it that.

And 20% annual growth rates of your portfolio is not the norm, exactly as you said. That just can’t happen. And investors got a bloody nose this year already.

Absolutely. Bill, one thing before we talk mining stocks real quick, we need to talk about the US dollar. The Dixie is below 100 still.

It’s trying to catch back up to where it was. How much of that pushing the dollar lower, and I already sort of put the answer in your mouth here, was deliberate though? How much does it play into the hands of the administration right now? I don’t think it’s deliberate. I mean, yes, Trump at the margin is a mercantilist.

He’d like to see the dollar go down so we can export more. But I mean, what we do export, whether it’s Boeing planes, I mean, does FX change things that much? I don’t really think so. I mean, obviously, it’s big dollars because they’re expensive.

So I think they’re okay with the dollar going lower. I don’t think they really want it to. I think Bessett knows that it can be trouble, especially when you’ve got to sell as many bonds as we need to sell.

So I think dollar weakness has been a function of sort of a little bit of benign neglect. And it was, I think, ready to happen anyway. I mean, certainly vis-a-vis the yen on a purchasing power parity standpoint, which doesn’t always lead you to the right answer, the yen is monstrously cheap, right? So in the case of the yen, you know, maybe they’re happy to see the yen appreciate vis-a-vis the dollar.

But I don’t really think that they want a weak dollar. It’s not good for them. I think they’re okay with it, but I don’t think they’re rooting for it.

Yeah. No, it makes sense. It definitely makes sense.

I’m curious how it plays out versus the euro and others. There’s a bit of capital rotation happening back into the euro zone. Yeah, there’s definitely repatriation going on.

I think there’s a lot of foreign investors that decided that they’re not happy with the euro. I mean, they’re not happy with what’s going on in America for whatever reason. And they’re going to take some of their money home.

And I’m sure they can find better values than some of the big cap tech stocks here. But then again, you’ve got to be, you know, anyway. I think quite a bit is ideological, quite honestly, because I think Trump’s approval rating, if you were to poll here in Germany, would be like 10%.

Yeah. Well, yeah, Europeans in general are not big fans. Yeah, Europeans are okay with losing free speech and open borders and all that stuff.

So, I mean, of course they wouldn’t like Trump. We take it apparently. We’re not hurting enough yet.

I mean, when I look at what’s going on in England, I cannot believe it. You know, the way that they’ll put you in jail for a mean tweet, and then they don’t pursue criminals. We have a lot of that going on in America too, you know, of catch and release and all that.

But it’s a travesty. But anyway, you know, this isn’t a free speech podcast, even though it’s one of my big hobby horses. Yeah, no, absolutely.

I agree. And it’s embarrassing. But let’s talk mining stocks, because we managed to squeeze in that conversation last time as well.

Because I know you look at the mining stocks, they haven’t really outperformed in a way that we might be expecting it. Gold touched $3,500. But the GDX, let’s not get too greedy here, is up 39% here to date.

Okay, which is not bad. Last year, it did next to nothing. What do you make of the performance? Let’s start there.

It’s the same thing. Americans aren’t buying gold. So, I mean, you think the Chinese are going to buy American mining stocks, or Canadian mining stocks? Or, you know, if you got some of your German buddies who are buying gold, are they buying US mining stocks? So, no, I think mining stocks tend to be purchased by North Americans.

And if North Americans in general are not buying gold, they’re not going to be buying mining stocks. Now, some of what we’ve seen in the last year and a half has been a real sorting out process. Some of the mining companies, there’s a very few of them that are in good jurisdictions, have higher grade properties, are really well managed, and they have done very well, much better than what if you look at, you know, Barrick Gold, or Newmont, or some of the big names that people think about.

Agnico Eagle, Alamos, Westone, Newgold, which doesn’t quite fall into the same category. Those are some of the ones that I own. I was very, very picky about what I owned, because I only wanted the things that I just articulated.

And if you have a real strong bias towards what you want, there’s not very many names you can own. And so, the better ones, the better ones did quite a bit better than the average ones, the ones that have more risk, more risk from a geopolitical standpoint. Are you starting to look more downstream, meaning more developers? Because the names you just mentioned are all producers, so we’re not at this stage yet.

Look, we need to see some pulse on the part of US or Canadian investors to get that whole food chain going. I use a proxy. There’s a big drilling company in Canada called Major Drilling, and they do a lot of the drilling.

So, when there’s exploration and need to develop, buy the juniors because they’re going to go out and explore, and then they’re going to get bought and all that. There’s not been a lot of that. There have been some M&A, but there’s not a lot of that.

Juniors aren’t getting money because there’s no demand on the part of investors to own the shares. So, the whole frenzy that we saw, for instance, in 2009 or 10 through 2011 or 12, that hasn’t happened. It’s only been the very best of the companies that have done really well.

Maybe some of the smaller, some better speculative ones, just because you’re small and speculative doesn’t mean you can’t be well run and well located. But across the board, there hasn’t been any real enthusiasm at all. I expect we will have that.

When you see that, then you can start thinking about going downstream and owning the small little ones. But until you see some pulse, I don’t see any reason to do it. No, it’s true.

The 401k money might have started moving, but it’s very, very sluggish when it comes to that. We’re seeing a bit of rotation, but it’s so slow. 401k money will come later.

You need individual savvy investors that aren’t just managing their retirement money. Whether it’s money managers or individuals, I think it’ll show up there. The 401k money will come later and pay the bad prices.

The question is, though, is the risk capital tapped out? With higher mortgage rates and things like that, can they even afford high risk juniors or developers or minors even? Well, if you’re talking about 401k money, people that have money, if you’re going to be an investor, you have to have money. Presumably, if you have money, you’ve got your mortgage in your house or house with no mortgage. Those variables are already set for you.

It’s true, but it’s just the mortgage rates, for example. Especially the Canadians seem to be brutally tapped out when it comes to risk capital. The US is a little different, but Canada seems to be dead broke when it comes to junior mining investing.

That’s what I’ve been hearing from the companies, what I’m hearing from the investors to a degree. When your mortgage goes up from $1,500 to $3,000, you can’t afford putting money into a high risk junior, for example. Not that you should anyway in that situation, but that’s a different story.

Bill, maybe last question here. We were talking about the 60-40 portfolio, but in April 2025, what is it, April 29th today, what does the ideal portfolio look like? How would you split the pie? Well, I have the most cash I’ve ever had. I have 40-50% cash and then I have a mixture of gold, bullion, some miners, a couple of individual rifle shots, but mostly I want to have gold and I want to have a lot of cash.

Makes sense. It really is a good summary of our conversation. No, it makes absolutely sense.

A bit of Smith & Wesson, a bit of Browning and off we go. Things are so dicey and there’s so many potential problems that, first of all, I can’t figure them out and even if I could, I’m not sure I’d know the pacing in order to get paid, having to do battle with passives all the time. It took me a while.

I started raising cash in the fall and into the first quarter and now I’m kind of where I want to be and we’ll just see how things go. Absolutely. Fantastic.

Bill, absolutely fantastic commentary here. Really, really appreciate you coming on. I know you’re not selling anything, but anywhere we can send our audience to follow your work a little bit and get some more of your comments.

Yeah, my Twitter handle is at FleckCap and then my website is Fleckenstein Capital. I write a daily column that is long or short depending on if anything interesting happened or not and then I also answer questions. That’s $130 a year, so you have to pay for it.

I wanted to price it so that if people wouldn’t pay for it, I wasn’t going to do it, but I wanted anyone with a paper route to be able to afford it. I’ve been writing the column for, gosh, 30 years and I’ve had my website for the last 20 some odd years. Fantastic.

Bill, really, really appreciate your time. Thank you so much for coming back on here on SOAR Financially. Thank you so much and everybody else.

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