GARY BRODE | From Deep Knowledge Investing

Join Gary and me as we dissect the current state of the US Stock Market. Dominated by the 'Magnificent Seven' tech companies, the S&P 500 has wiped out all its gains for 2023. We explore the consequences of increasing government spending, skyrocketing debt, and the alarming state of market breadth. Tune in as we discuss how this shift from insane to ludicrous spending levels impacts economic growth and the importance of governments investing in real infrastructure for long-term economic prosperity.

This episode is based on recent research from Deep Knowledge Investing.

We dive into the complexities of the US debt, inflation, and interest rates. With yearly excess spending reaching $2 trillion and an additional $3 trillion of debt set to be monetized, the inflation caused by money supply could result in rising costs of everyday items. Gary describes how the US government is essentially running a Ponzi scheme by printing more money to pay interest on previous debts and why the Federal Reserve's attempts to raise interest rates may only add fuel to the fire. We also reminisce about the time when Australia had a conservative government that ran a budget surplus and the aftermath of the global financial crisis.

Finally, we shift our focus to strategies for investing in this challenging market. From shorting stocks, buying puts, and investing in commodities like gold, silver, oil, and uranium, to investing in Bitcoin and the Volatility Index, we explore various investment options. For listeners of this podcast, we offer a chance to subscribe to Deep Knowledge Investing and get 50% off their first subscription. Don't miss this chance to arm yourself with the knowledge to navigate these tumultuous market trends.

Here's my review of Deep Knowledge Investing.

TRANSCRIPT FOLLOWS AFTER THIS BRIEF MESSAGE

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EPISODE TRANSCRIPT

0:00:01 - Chloe

Stocks for Beginners. Phil Muscatello and Finpods are authorized reps of money surfer. The information in this podcast is general in nature and doesn't take into account your personal situation.

0:00:13 - Gary

We don't believe in good markets or bad markets. I don't have patience for people who say, oh well, it's a bad market, I can't make money, but maybe next year will be better. No, no, we need to find ways to do well now.

0:00:24 - Phil

Hi and welcome back to Stocks for Beginners. I'm Phil Muscatello. Can the Federal Reserve cause inflation by raising rates? Aren't higher rates supposed to reduce inflation? Joining me in this episode is the counter-intuitively intuitive Gary Brode from Deep Knowledge Investing. Hi, harry.

0:00:41 - Gary

Hi, phil, thanks for having me back. Great to be speaking to you again.

0:00:45 - Phil

That's great to be speaking, but we were just talking off here and it's the world as a depressing place at the moment. We've been through a lot since our last discussion Bond prices, soaring, plunging markets and now another war. Anything else to add.

0:00:57 - Gary

Sure, yeah for keeping track of bad news. The Japanese yen just went above 150 yen to the dollar. That is going to cause the Bank of Japan to have to sell US treasuries to buy yen or, alternatively, let their 10-year bond fall. The Bank of Japan has been protecting that For a long time. They were keeping the rate on that at or near zero and then 50 basis points. Now they say they're not going to intervene until it hits 1%. But either way, what's going to happen here is the carry trade has to unwind. When that happens, they're going to be selling huge amounts of treasuries, raising rates here in the United States and trying to protect the yen. That activity will work in the short-term. Long-term it's futile.

In addition to all of that, we've got an energy problem, an energy infrastructure problem that no one serious is even trying to solve in the United States. I think you guys have similar things going on in Australia. In the United States, the government has this idea that everyone's going to drive electric cars, but we don't have the electricity generation infrastructure or the electricity transmission infrastructure to charge these cars. Nobody's building that. That's a big problem. It's also why we own uranium. The final thing I'd add is we're looking at all of this with a market at a very high level. Germany's estimates a little over a year ago on the S&P 500 for this year went from $260 last year to right now around $219, and the market's up in that time. Other than that, everything's great.

0:02:36 - Phil

We're recording on October 25. Of course, we've just seen another plunge in the S&P 500 and most of the major markets in the US as well. The bad news just still seems to be compounding, doesn't it? I think the S&P 500 has now wiped out all the gains for 2023.

0:02:53 - Gary

It has for a lot of it. The thing that's really interesting about this is the market breadth is horrendous. That sounds again like a technical term, but it's really simple. The market was up about 20% earlier this year, maybe a little bit more. All of those gains had come from seven large tech companies Nvidia the leader among them, but included companies like Microsoft, google, apple, amazon, the usual. Now they're calling them the Magnificent 7. It used to be the Fang stocks and the Fang MG stocks.

0:03:35 - Phil

You don't hear Fang very much anymore, do you.

0:03:37 - Gary

Yeah, Now it's the Magnificent 7. We keep rebranding it. Even when the market was up 20%, 25%, all of those gains had come from seven stocks. The other 493 stocks in the index were flat to down on the year. Now we're seeing a situation where you have a huge percentage of the S&P 500 that's down on the year. Small caps are down on the year. The relative strength in the market indexes is masking huge falls in the equity market because these indexes are capitalization weighted. What that means is that these companies that have a market cap of $1 trillion, $2 trillion, $3 trillion they just have an outsized influence on the entire index.

0:04:21 - Phil

We're basing this discussion on your recently published article. Can Federal Reserve Rate Hikes Cause Inflation, Counterintuitive Inflation? You mentioned government spending as the main driver of inflation. What is the scale of government spending? We've discussed this before, but I think it's worthwhile revisiting how big it is.

0:04:40 - Gary

Here in the US we've gone straight through insane to ludicrous. Now, for those of you who are Mel Brooks fans, we've gone plaid. We have hit the inflection point where spending is creating more spending. The issue that we have is we keep having emergencies. When there are emergencies, the government just sprays money at the problem. The problem is it's never treated as emergency funding. That's just the baseline for future funding.

If we go back just a couple of decades President Bush he was a big spender. That was the case when he had a Republican Congress and the case when he had a Democratic Congress. Then, at the end of his term, we hit the great financial crisis and we threw $1 trillion at $800 billion at TARP, the Troubled Asset Relief Program, which is a bank bailout. Then President Obama comes in and he takes this as the baseline and ramps up spending and he ends up running us debt to a level where the debt generated when he was president was greater than that for all other presidents combine. And you know he was talking about a trillion dollars of shovel ready infrastructure projects, fill.

I don't know anybody's ever seen any of these infrastructure projects completed or, you know, shovel in the ground. You know our government is pretending and we've gone from treating infrastructure as things that have long term productive uses, things like bridges, roads, dams in the Hoover dam, things that generate electricity or help people get around. That would be real infrastructure which helps create economic growth over a long period of time. And now they've really labeled consumption as infrastructure. The last infrastructure plan something like ninety three percent of it only seven percent of it was actual infrastructure. Ninety three percent of it was just social use spending. And you know it's fine if you want to do that, but all you're doing is taking tomorrow's demand and pulling it forward. So to give you a sense. So can I? Can?

0:06:47 - Phil

I just yeah, that point again, please. What are you saying? That infrastructure spending or some some things that are being classified as infrastructure spending are actual Social spending?

0:07:00 - Gary

yeah, that is it is the ability of politicians to lie while pretending they know what they're talking about, and I want to be clear on this both parties do it. It's a bipartisan problem here. And then you know, by the way, remember, we hit covid and so you know, president trump's raid more money into the economy and that got taken as the baseline, and now we have increased emergency spending off of that. So every time we have an emergency, we throw a few trillion dollars at it and then the next president says oh good, okay, well, that's the amount we're spending now and we just need to spend a little more for infrastructure. Except infrastructure isn't infrastructure, it's social spending and again, it's simply consumption pulled forward. And the thing that everybody's forgetting is you can do that, but the people who are gonna get the bill our future, you and your future kids and grandkids Right, and people are acting like we can do this with no cost at all, but that's simply not the case. We're just deferring it. Just like you know, if you and I were to go out to eat, we go for a really nice meal. Bill comes to. You know it's expensive meal comes to a few hundred dollars, and we pay for with our credit card and see, look, the meal was free. I have all the cash I walked into the restaurant with. I still have the cash in my pocket. Yeah, well, great. Except when we pay the credit card bill. It's a few hundred dollars. We don't have to buy groceries, right, we're just pulling consumption forward and delaying the expense. But Just the fact that you're not paying for today doesn't make it free.

But let's go back to your original question, which is how crazy has it gotten? So we just had, last June, july, a big you know, the big government shut down fight which, I'm gonna tell you, was just simply drama and hysteria. Right, people are acting like it was gonna be the end of civilization, except the US government shut down. All the time. Every time people act like it's the end of the republic. We do this all the time. There's, you know, fighting somewhere between two days and a few weeks, and then it gets resolved. And this time, when it got resolved, kevin mccarthy, who was then the republican speaker of the house, claim that you know he won this great victory against excessive spending. And the democrats came out and they said oh my god, the republic is horrible, heartless people. They want to cut spending. Everybody's gonna starve to. The whole country is gonna star fill because kevin mccarthy, you know, negotiated.

Except here's how dishonest the accounting is. It's so dishonest that the US government treats a reduction in the growth rate of spending as a spending cut. So we're here at these ridiculous spending levels and we say, okay, well, you know, we're gonna spend Ten percent more a year, for every year, and then they cut that down to spending eight percent more years. Oh my god, we have spending cuts. People are gonna starve. No, it's not spending records, for everybody remembers their high school calculus. It's a second derivative calculation. It's a change in the rate of change. But we're increasing spending. We're increasing spending every year. There are no spending cuts. The government isn't cutting spending anywhere on anything.

So where we are right now, that horrible deal that's supposed, you know, horrible compromise Basically insured that we're spending unlimited amounts of everything in the deal they cut was to over spend by four trillion dollars Over the next year and a half through the next election. Kind of funny that they funded through the next election because they want to hand out free stuff. Okay, great. So we start with that of in the neighborhood of thirty three trillion dollars. That's just the on balance sheet. To that we're adding two trillion a year and that doesn't sound like a big number cuz it's just two. I feel it's two. How big is it to?

0:10:48 - Phil

Nobody really can what's the percentage of a quadrillion dollars now?

0:10:52 - Gary

yeah right, we're exactly, we're gonna get there, and so you know. Just to point out how ridiculous is, because the human mind is not capable of holding a trillion anything in our heads. It's not a number that For a million, but that's two thousand billions or two million millions. Numbers are too big to understand. And here's the thing even that Is hugely understated, right, because the US government has about two hundred trillion dollars of off balance sheet liabilities. This is like using your credit card saying I don't have to pay for this, and people ask what are off balance sheet liabilities? There's simply obligations that we've taken on but haven't Spent yet. Things like pension, social security, medicare, medicaid all these promises to provide people with a certain quality of life.

And now retirement for a lot of people is twenty, twenty five, thirty years, more than a quarter century. They're expecting to not work and you taking care of you know people might say, hey, that's cruel of you to point out. No, I'm simply pointing out that the math doesn't work. The math doesn't work when people expect to spend almost a quarter century preparing to work. They spend forty or fifty years working and then they're going to spend another quarter century retirement. There is no universe where a society can support large numbers of people not working for half a century. I'm just pointing out the obvious.

But those off balance sheet liabilities are costing us roughly another $6 trillion a year. That's being added to our obligations but not included in the debt. So we're running basically on and off balance sheet deficits about $8 trillion a year. And then because we have we've taken on so much debt and interest rates are rising as the old low cost debt rolls off and we have to replace that with the US 10 year and I was right around 5%. Depending on what happens with Japan, it could easily go over 5% in the next couple of days that will lead to.

So we've had an increase in spending from $400 billion in interest expense a decade ago to $600 billion in interest expense a few years ago. Now we're at $1 trillion of interest expense and as the debt rolls off, we can expect that over the next few years we're going to have another $500 billion to $1 trillion of interest expense coming, and to give people a sense of how quickly this can happen, so I told you we're going to overspend by $2 trillion this year on balance sheet. Well, if they do that, you know, with 10, 20, 30 year debt. Those are all right now yielding around 5%, and so the interest expense on this year's extra borrowing alone will cost $100 billion. These are real numbers. So again, we've gone past ludicrous into plaid, and this is just. It is not sustainable, it's not controllable and it's not stoppable.

0:13:48 - Phil

Gary, if I could ask a stupid question here, which is my speciality. I was talking to a friend and I was quoting some figures like this to him and he was very blithe and brushed them off and say well, what's the size of the US GDP? What is the size of the US GDP and how does it relate to the debt?

0:14:07 - Gary

Yeah. So your friend is not being completely honest about the problem here. You know, us GDP is around $30 trillion, give or take a little bit. You know part of that is inflation, right, if buying power of the dollar is down, producing more GDP, and it doesn't necessarily mean that you can keep producing the same amount. But we're in a situation right now where debt to GDP is somewhere in the neighborhood of 130%. But what do we do when the excess spending is $2 trillion? And then we're going to have another trillion on top of that and the off-balance sheet liability.

If you add all of this together, first of all that additional $3 trillion a year maybe two and a half next year, going to $3 trillion that number will be monetized. And that's just a fancy way of saying that. We'll issue debt and the Treasury will print currency units, in this case the dollar, and spray that into the economy, and so we're going to pay for it. But instead of paying for it through taxes, we're going to pay for it through future inflation. And so you know it's easy for him to say, oh, why is that a big deal? It's no problem. Well, when people's grocery bills go up 20%, 30%, when their car payments are $1,000 a month, when they can't afford their rent. That's going to be a huge problem and that's where headed Spraying another $2, $3 trillion of currency into the economy every year.

That leads to inflation, and we saw how much unrest and how much unhappiness we had last year. Technically, the CPI finished the year I think something like 8%, 7%, 8% for the full year, and we went absolutely bananas, and with good reason. People are right to be angry about it. I'm not criticizing the people who are angry about it, but it's just not an honest accounting of the problem, because when you put that much currency into the system, you're going to have inflation, and when people can't afford their groceries, they're going to be very unhappy, you know?

The other thing that I would add is just looking at the on balance sheet number is misleading, right. If we look at $200 trillion of off balance sheet liabilities and another $33 trillion going to $35 trillion, $36 trillion over the next few years of on balance sheet, we're looking at a quarter of a quadrillion dollars of obligations that can't be paid. It won't be paid. There's no level of taxation, gdp, growth, asset confiscation. There is nothing that anybody in the world can do to pay a quarter of a quadrillion dollars of obligations. So we're beyond bankrupt. We're in double super bankruptcy and continuing to dig. So your friend is looking at this year's additional debt compared to the whole size of the US economy. He was not looking at the whole balance sheet and that's the issue that I would take with that analysis. I hope you don't mind me being critical of your friend's position.

0:17:11 - Phil

No, you've just given me some great ammunition for when I see him tonight at the trivia.

0:17:16 - Gary

Go, get him Go for dinner.

0:17:19 - Phil

Good idea. Are you looking for unbiased, in depth market insights? Deep knowledge investing is dedicated to providing conflict free, well researched stock ideas. Gary Brode is a 30 year Wall Street hedge fund veteran. Turn to the good side. He's dedicated to providing you with independent and timely market commentary. Deep knowledge investing is supported by a large, successful and highly engaged board of advisors who provide expert advice and insights in a variety of fields and industries. Gary appears regularly on this podcast so you can check out his insights for yourself and see if he's the right guy for you. Receive 50% off a deep knowledge investing subscription by using the promo code STOCKSFORBIGINNERS50. That's 5-0. By using this promo code, you can subscribe for 6 months for only $100 or check it out for a month for only $25. Visit deepknowledgeinvestingcom and use the promo code STOCKSFORBIGINNERS50. By using this code, you'll be helping to support this podcast. Deep knowledge investing helping you to beat the market. So rate hikes are supposed to tame inflation, but how can they be inflationary in and of themselves?

0:18:37 - Gary

So normally they wouldn't be. And if it helps, let's go through a quick explanation of what the Federal Reserve is trying to do. What happens when interest rates are too low is you have a situation where people are desperate for yield and so everything gets funded. That doesn't cost you anything, or very much, and all kinds of bad ideas get ridiculous funding and it blows up a huge asset bubble. And that's what they're talking about when they talk about an economy becoming overheated. People are just desperately grabbing for assets. There's no cost to taking on debt, future obligations, and so your asset prices go through the roof, your inflation starts and that's why you have a situation that people talk about an overheated economy. So when the Fed raises interest rates, it almost has the effect of pulling money out of the economy to try to slow things. It makes funding the next thing more expensive or, much more dangerously, for companies that are overleveraged when they have to refinance, they're going to have to refinance at much higher rates and that's going to crush profitability and reduce the amount of currency flooding into the economy. And they're trying to slow things down and take inflationary pressure out of the market and interest rate changes. Interest rate increases are a crude tool for this, but they're effective.

Historically, this is the kind of thing that does work, and so what's different this time is we were just talking about the massive debt of the US government. So we're $33 trillion now. That'll go to $36, $37 trillion over the next year and a half, and when you have that much debt, the problem is we just had interest rates go from right around zero to about 5%, and so we were talking about okay, another $2 trillion of borrowing. Well, that's another $100 billion of interest expense just for this year alone. Then the next year, that gets added in. Right, so you're financing the next $2 trillion. That's another $100 billion, plus the first $100 billion, plus another 5% on that. So now it's $205 billion, and that's just on the borrowing from this year and next year. And then remember that every year we have debt rolling off, and so when you have zero percent debt rolling off and it's not zero, but it's very small, for years the 10 year was trading below 1% when that debt rolls off, it has to be refinanced with new 5% paper and that will increase interest expense. And so one of the things we talked about is these bills are not going to be paid through taxation. They're going to be paid for through inflation, right? So instead of financing $2 trillion, they'll finance $2.2 trillion or $2.5 trillion, or, like I said, over the next few years, we're going to have an extra trillion dollars of interest expense, and so when that happens, that's just added to a budget where we're already over budget, and so all of that borrowing, even the interest on the we're basically in Ponzi scheme territory, right?

A Ponzi scheme is where you're paying people out with the proceeds from your next investors, and so we basically have to issue debt in order to pay the interest on prior debt. This isn't somewhat like a Ponzi scheme. This isn't kind of like a Ponzi scheme. This is exactly what a Ponzi scheme is, right, we're printing dollars to pay the interest on the dollars that we printed yesterday. This is a mess, and so, if the thing that's causing inflation is the government monetizing our debt, having your interest expense go from $600 billion to $1.5 trillion or $1.6 trillion means you have to monetize another trillion dollars a year of this debt, and that's inflationary, right.

Throwing trillions of dollars a year of excess government spending into the economy causes prices to rise and, by the way, this part is not the fault of the Federal Reserve.

Let's please blame where it belongs. The Federal Reserve is responsible for blowing up a massive asset bubble by keeping interest rates at or around zero for almost a decade and a half. That is 100% on them. Powell's doing the right thing right now. There's nothing else he can do. But the rest of this problem is being created by Congress, overspending by both parties and the American people, who are screaming for low taxes and lots of free stuff, and we'll vote out any politician who even begins to talk about any kind of fiscal sanity and I'm defining fiscal sanity as living within your budget, like every household of every person listening to this podcast has to do. We all live within our budget. The US government has decided that they can magically run the currency printers and that somehow the rules of economics don't apply, and unfortunately, all the Keynesians are going to find out that it works for a while, and then, as Margaret Thatcher said, you run out of other people's money and then it's a problem.

0:23:49 - Phil

Yeah, and I think even Keynes said that these were only temporary measures and then the budgets would have to be brought back into order. And this is so insane when it seems quite recently that governments actually had to go and sell a program understanding that it would be taxpayers' money that would be funding these programs, and taxpayers were kind of made aware of this. And I just wanted to preface all this by also mentioning that here in Australia we had a conservative government from 1996 to 2007 that for most of that time, ran a budget in surplus, and it just seemed so long ago because, of course, after that, when the more of a left-leaning government came into power and the global financial crisis hit and they started spraying money against the wall and it's just gone backwards ever since.

0:24:37 - Gary

Phil, let's cover that in a way that would make sense to people. Everybody listening to this podcast handles a household budget. They all understand this stuff. So let's go back a few decades 100 years, whatever it was. And we typically had a situation where in the United States, the Democrats wanted to be the Santa Claus of free stuff If you don't have to work, we're going to give everything you need. The Republicans wanted to be the Santa Claus of tax cuts Don't worry, you won't have to pay for anything. Okay, fair enough. And where you had a reasonable push-pull between those options is people would say okay, well, you know, we want a government program to do X, y and Z and this is what it's going to cost.

The American people had to pay for that spending in their taxes and they understood that as they wrote their check to pay their tax bill, that that was going to Washington. And if they felt like they were writing a really big tax bill and not happy with the level of government services they were receiving, then they could be justifiably angry at Washington, vote people out and put in people who were more fiscally conservative, and vice versa. The opposite could happen If we had a situation where there was great demand for social services and people were flush and they sat at their kitchen table and they wrote that tax check. It didn't seem like that much. People were inclined to say, okay, well, let's be more generous, more charitable, more helpful to people, and basically the check and balance in American finances was the people writing the check for their taxes and they knew where to direct that anger. And so now we have a situation where the US government has somehow discovered this ridiculous Keynesian modern monetary theory on steroids where we don't have to pay for anything but we can afford everything. And so what they're doing is they're overspending by trillions of dollars a year. That's being financed by creation of currency units Again, in this case it's the dollar and when all of that excess currency enters the economy, we end up with inflation and people know they don't like it. They know they don't like paying four, five dollars, six dollars in California for a gallon of gas when they have to fill their tank. They don't like having $1,000 a month car payments. They don't like not being able to afford their rent and regardless of what calculation the government gives us for food inflation. I'm calling complete and other nonsense on that, because people's grocery bills in many cases are up 30, 40, 50%. The problem is they don't know who to hold accountable and they don't know who to be angry at.

And we're seeing all of this rhetoric here in the United States that all of this is. It's being caused by Vladimir Putin. It's being caused by greedy corporations. Yeah, let's just take a minute and think about this. Corporations weren't greedy in 2019, 2020, 2005. Like all of a sudden two years ago, corporations decided you know what? We just really want to make a lot of money and hurt people. That's ridiculous. Corporations are always trying to make money. They didn't all of a sudden get greedy and cause inflation.

Now, the person who has taken this to the most hilarious extreme? I don't know if you followed what's going on in Argentina right now, but the political situation there is fascinating. Argentina, after Zimbabwe, has been the poster child for 20th and 21st century inflation, and these guys default on their debt every 15 years to 15 minutes. And I've spent time there and it's a fascinating place. I love the Argentinian people. I love their food, their culture, their warmth. It is a fantastic place, but the people who live there have to spend an enormous amount of time, money, energy and effort trying to protect the value of their pesos because the inflation rate there is well over 100%. It's more than 10% per month. So try to imagine you know, you bring home your paycheck and if you don't spend that money immediately, every month you're losing 10% of the value. That's not in a year, that's in a month. They have no way to save and so they're all busy trying to convert money into dollars and into Bitcoin and to hard assets. It is a huge mess there.

So they ended up with a candidate who really grabbed people's attention. He's an anarcho capitalist, he's a pro-Bitcoin guy. He wants to dollarize their economy and you know, for everything I've said about the dollar being a mess and I stand behind everything I said it's held up well because everybody else's currency is worse. For every stupid thing the US government is doing right now, the other major world governments are doing things even worse, and that's keeping the dollar in a position of strength. So he wants to convert from the peso to the dollar. They'll probably start using Bitcoin.

He wants to slash government spending and his opponent who won the first round of voting there will be another round of voting, but his opponent actually offered people no taxes, so just think that one through. It wasn't no new taxes, it was no taxes. He's telling people that, hey, we're Argentina, we are going to. 40% of their population is on public assistance. So, yeah, we're going to continue to provide you massive amounts of government assistance, government services, welfare spending. We are going to provide everybody with everything and, don't worry everyone, you don't have to pay for it. Well, you know he's right, they can keep printing pesos and everybody will pay for it through an even higher rate of inflation.

But you know, that's kind of the end game on this. And you know, the US Congress, rather than looking at this as a warning, they seem to be looking at and saying, oh good, there's a model, these guys are ahead of us, we can catch up. And that's a bad idea. It ends badly for everybody and I would love it's not going to happen.

But I would love for us to go back to situation where the government didn't spend more than it took in and where people wrote out, instead of having your wages basically garnish by the government Right with withholding, and if you overpay, you get this wonderful tax return. You know, you get a refund on your taxes. I feel like the government gave me money. No, you overpaid all year and they're sending back some of that overpayment. I would love a situation with the end of the year, people at a right, one massive check to the government and then, after that happens, let's have a real national conversation on what the legitimate size of government is and how much what they should have in the economy. And I guarantee you, if we presented them with paying for there's timmies and free stuff and government services by writing a check at the kitchen table instead of through inflation, we have a real conversation on it really quickly. But that's not gonna happen so gary?

0:31:38 - Phil

the world is screwed, but your portfolio needn't be. How are you looking at that? Where are there any opportunities in all of this mess?

0:31:47 - Gary

there always are, you know, for one of the things that makes me laugh is when the fed keeps interest rates at zero or around zero for a decade and half, it blows up a huge asset bubble, and that's what we saw. We saw stock prices going through the roof, and this makes a lot of sense, and it's why Last year, when the fed started raising interest rates, the stock market dove right. Yet the major index is at one point down 30 plus percent, and so you have a lot of people who have the sense that we just need the fed to lower rates and then we can make money. And my response to that is why? Why? If you need the federal reserve to blow up an asset bubble to make money, then you should not be charging for your services as an asset manager. Then You're simply somebody who bought the market and you're waiting for somebody to hand you policies so that you can skim off the top. There's really no skill to that and a deep knowledge investing. One of our mantras is we're gonna roll with the changes. There's no whining. We don't believe in good markets or bad markets. I don't have patients for people who say I was a bad market. I can't make money, but you know, maybe next year be better. Now, no, we need to find ways to do well now, and so we do have individual investments in stocks that I like, that are performing very well, and you know there are individual Stocks in a really big market that if you're a good stock picker you can find opportunities. But you know, remember it's been a negative conversation I'm certainly pointed out a lot of really unpleasant things, but in all of those opportunities to make money so let's talk about some of them ways that you can hedge, ways you can make money from all of this horribleness, you know one is people have the idea that you can only buy the market, only on stocks. That's a hundred percent not true. You can short stocks, you can short market indexes. You can buy puts. You can buy on correlated things, assets like gold, silver. You can buy oil right, deep knowledge, investing. We are huge energy positions. The world demand for energy is only going up and you know oil, among other things, is a great option. I think uranium is a phenomenal thing to own. The supply demand Curve there is hugely out of balance. We are by we, I mean the entire world is producing less uranium than we're consuming, and if you're running a nuclear plant you need that fuel. So the price of uranium, I think, is going to go through the roof.

I'm also huge fan of bitcoin and anybody who's listen to any two of the podcast you and I've done together. You understand my concerns about fiat currency. That fiat currency that's just a fancy way of saying a government sponsored currency like the australian dollar or the british pound or the japanese yen or the us dollar. So you know I like bitcoin. We were buying I think I've mentioned this to, I think I've mentioned gbc To you the grayscale bitcoin trust, which was trading at a massive discount to net asset value, is a way to buy bitcoin At very cheap prices. We were buying that in june at fourteen and a half and earlier today that hit twenty seven and it's still trading at a discount to net asset value. But we think the sec, the securities exchange commission here in the united states, is going to start approving bitcoin exchange traded funds. When that happens, that discount collapses. I think there's demand, institutional demand, for bitcoin. So you know I just named, and I'll give you one more volatility Is very cheap.

The ticker for that's the vix, vix. Volatility is very cheap given all of the huge geopolitical risks and fiscal risks we've been talking about during this conversation, and so you can buy the vix. You can buy options on the vix. That's way too complicated for most people. The ticker I'm using for that is just the xx victor, x ray, x ray.

If people want to buy that, please, please, please, keep it small. It is volatile and if the vix doesn't go up, you will lose money. The losses and that could be huge. It's not the kind of thing that you throw ten percent of your portfolio my position and that is well under one percent. But the point is, you know, listen to this list of things in addition to a whole bunch of individual stock picks, there are ways to make money in this environment. There was to make money in every environment and, rather than complain about it, we're just gonna keep finding ways to help our people and our subscribers and our partners and our clients Do well, regardless of market conditions, including in the inflationary, dangerous conditions that we're in right now.

0:36:16 - Phil

Say you're offering listeners of this podcast deal at the moment where they can subscribe and find out more about deep knowledge investing. Tell us a little bit about that deal and how people can find out more about you and deep knowledge investing.

0:36:28 - Gary

Okay, so let's approach this into different ways. For people who want to know more, please feel free to check out deep knowledge investing I n v e s t I n g dot com. There's a lot of information on the website. I do paywall some of the blog posts where deals with portfolio positions and how are helping people make money, but there's a lot of macro writing on their stuff about how to deal with the current economic environment, so that's a good option. I'm also active on twitter. It's at gary underscore, brode b r o d e on twitter, so please feel free to follow there.

The other thing is we're thrilled to be working with you, fill and stocks for beginners, and are happy to offer your listeners 50% off for their first subscription, whether it's a month or six months, but you can do it at half price and do it through fill.

He has a coupon code that you can use to get that discount and we're excited to be partnering with you and you know, one of the things I love fill is you are all about investor education and when I started deep knowledge investing, I was originally just working with my peers who are hedge fund managers and as the business has evolved, we've taken on a lot more people, who are people like your listeners right there, smart people who know something about finance and want to learn more, and so much more of what we're doing right now is educating people on the markets in the macro environment, and it's not just I'm buying stock x or stock, why I'm selling stock a and stock b.

A lot of what we're doing is explaining to people why and this is why I think about things, and one of the greatest parts of the job, one of the things I really enjoy, is the interaction and the questions I get from our subscribers, because they're smart people, they're people like your listeners who are really interested in learning and their focus and they want to learn more, and so we're always happy to partner with people like yourself who are really trying to help people successfully learn more about investing.

0:38:24 - Phil

Gary brode, thanks very much for joining me today. Before we go, I should say that coupon code is stocks for beginners.

0:38:29 - Gary

Fifty right fit when you go to deep knowledge investing. Click subscribe, fill out the information and there will be a section in there for coupon code. Stocks for beginners. Fifty you get fifty percent off and you'll be supporting fill as well, so please do that.

0:38:43 - Phil

Gary, thanks very much for joining me again. It's great. Your explanations are so clear and precise. I love hearing them.

0:38:49 - Gary

Thanks for always a pleasure to speak with you and thanks for sharing your audience with me for the day.

0:38:54 - Chloe

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Stocks for Beginners is a production of Finpods Pty Ltd. The advice shared on Stocks for Beginners is general in nature and does not consider your individual circumstances. Stocks for Beginners exists purely for educational and entertainment purposes and should not be relied upon to make an investment or financial decision. If you do choose to buy a financial product, read the PDS, TMD and obtain appropriate financial advice tailored towards your needs. Philip Muscatello and Finpods Pty Ltd are authorised representatives of Money Sherpa PTY LTD ABN - 321649 27708, AFSL - 451289.