The melt-up goes parabolic — S&P 10,000, then an 80% bust

Welcome, welcome everyone. It's Angelo Robles. Today: what if he's right? Ninety minutes with a man who refuses to blink. It's the return of the one and only, over 50 years doing what he's doing, David Hunter, Chief Strategist of Contrarian Macro Advisors. David, with little ado, welcome back to the show.

Thanks, Angelo. Good to see you again.

They say the trend in podcasting is to try to get to the first question in 45 seconds. I fell slightly short, but for an audience that's used to me giving two or three minute opens, this is a big head start on what's going to be more advantageous moving forward.

Let's get right to it. It's August 5th. If I have this correct: last week, chips lost trillions of dollars in days, then ripped back in the biggest semiconductor rally probably since 1999, and now peace headlines are pouring gasoline all over it. Is this the final leg igniting right now on our screens — what you've been talking about?

I think it is. It doesn't mean it goes straight up here. It gapped up a couple days ago, so I can't say whether we go back and fill that or not. So I don't want people thinking, "Oh my God, I've got to jump on, it's running away." But I do think we are in that last run to the top. We've been in a melt-up, but I think that melt-up's about to get steeper — what I call parabolic — into the top.

Excellent. And again, we're very fortunate about once a year to have David on. I think there is some value in going back and listening to the last one I did in September of the prior year, and the one prior. I would love to ask David 300 questions and be four hours, so I am going to have to be a little tactful in terms of what we dive into, and it's going to be a little bit of everything, including Leopold Aschenbrenner from Situational Awareness. So this will be a lot of fun.

So you're calling — let me call it a top. Describe it. And what does the last week of a 44-year bull market look like on tape? I mean, are we in that right now?

1. The Final Secular Bull Run

I don't think so at all. I will never claim to be able to tell you what week it ends, or even, when you're in it, that that's the week it ends. I'll probably not be able to tell you to the month, or even a couple months. But my take right now is that we are at the 44th anniversary of the 1982 bottom. We started, in my opinion, a secular bull market back in August of 1982. It was driven — we were coming out of a major recession and the whole Volcker era, where rates were driven up and money supply was driven down to try to control inflation. It was high double digit. We turned the corner in August of 1982 and began this bull market.

The Dow back then was 780. We're almost 55,000 today. So that's how far we've come in 44 years. And I believe we are in the last stage. That could last two months, that could last four or five months, but that's how close I think we are. Not a week, not two weeks. I raised my targets — and I've raised them several times, certainly since October 2022, when we started this cyclical bull after the bear in '22. I'm now at 10,000 on the S&P.

So I think we're going from wherever we are now — 7,750 or thereabouts — to 10,000 in the next several months. Could be, like I said, two months; it could be four or five months, because I think it's going to be parabolic. That's why I can say we can run that far that fast — meaning even two months sounds crazy, to say you can go another 30%. But it's possible, because that's what happens at the end of major secular bull markets: things get very steep. And investors get very ebullient and start chasing things in a way where they're afraid they're going to miss everything if they don't jump on today.

We're not there yet. There's been a wall of worry that's kept this thing from getting so overbought, or getting to a top and rolling over. If you're just looking back — you could go back to the pandemic low of 2020, when the S&P bottomed out around 2,200, but just using October 2022 — we came out of that at 3,500 or thereabouts on the S&P, and really, all you heard for the next several months was: this is a bear market rally. It might go to 4,000. Initially it was going to only go a few hundred points. Then it might go to 4,100. Then it might go to 4,500. Then it might go back to the old high of 4,800. But all of that time, institutional investors thought this was a bear market rally and it's going to roll over and go to new lows — below 3,500, maybe below 3,000.

It's only been in the last — probably when we got up over 7,000 — where the institutions started saying, hey — actually, they started saying we're in a bull market when we went to new highs above 4,800, but they never thought it could go more than a few hundred points higher, and they've raised along the way. You're now seeing, all of a sudden, numbers like 8,000 out there. You didn't see that for the last year or more. And I've been at 9,000 and above for well over a year. So what I think you're seeing is the beginning of that wall of worry being brought down a little bit, or the skepticism starting to disappear. And what you're going to see in the next few months, I believe, is a full-blown shift from skepticism — one foot out the door — to all-in: this thing has legs and can go for a couple years or more. And you're beginning to see even some of that rhetoric come up now.

David, your melt-up, I would state, needed falling inflation and rates at the same time. Inflation is stuck above 4% and the Fed's leaning towards hikes. What fuels a parabola into tightening?

2. Inflation Gives Way To Deflation

Well, I take issue with 4%. It's 4% on a very short-term basis, but the trend is still down. We came down from 9% in the last couple years of the Biden administration. We came down to two and a half. The war in Iran has pushed oil prices obviously up, and some other things — fertilizer prices and some other things — and so you did have a bump up to something like three and a half percent, maybe not quite four.

But if you look at some of the other measures of inflation, like Truflation, they've been down under 2% for this time, and they may be more accurate than the CPI or the PPI or the PCE index, even though the Fed looks at PCE more than any of them. So I would argue what I've said all along — and we could talk about Warsh down the road, but I'm very gladdened by Warsh talking about the need for the Fed to look at trends, not month-to-month data. Trends are what matter, and the trend in inflation, in my opinion, is still down.

Yes, we've had a counter-trend rally in inflation, if you will. But most of that is driven by Iran — by what's going on in Iran, and mostly by oil prices and gasoline prices. So as that evolves — I mean, if we really are going to see the Strait open up here, you're going to see oil back into the 60s pretty quickly, and maybe below that. And that will go a long way to bringing inflation back into the twos. And ultimately, I'm calling for a global bust, as you know. In that global bust, I think we'll be looking at deflation. I think it's next year. We'll see. So I'm in a very contrary place, as I often am, and not worrying about inflation. I'm much more worried about deflation in the year or two ahead.

Do you feel that AI — theoretically, technology, especially something that, let's go with once in a lifetime, that's only about four years old and advancing very quickly — could lead to significant deflation?

Yeah. The deflation I'm mostly talking about is macro driven, as I say. If you enter a recession that morphs into a bust with inflation below 2% — which is where I think it will be when we enter that place — you're going to quickly go into deflation. And because a bust — just to simplify it; I can get more complicated in terms of what a bust is, but I'm calling for something worse than 2008–09, both financial-crisis-wise and, economically, certainly as bad. So if you go into that kind of a period for a year or more, and if you're going into it with inflation below 2%, it's a given it's going into negative territory. You can add on to that the longer-term consequences of AI, which will enhance productivity and will help control inflation.

I do believe, with my whole scenario about what happens in a bust — what happens to central banks, how they respond to a bust, how the Treasury responds to a bust — when you go through that scenario, I do believe it will turn into a hyperinflationary environment on the other side of the bust. And so, yeah, AI will help ameliorate that to some degree, but boy, macro will trump all of that, in my opinion. No pun intended.

Oh, we have much to — well, overused term — unpack there. Every selloff since, let's say, COVID 2020, you called a fake-out. And last week the tape proved you right again, like in five trading days. But here's the harder question: when recoveries get this violent this fast, isn't that itself the top signal?

Yeah. Part of my scenario that I've stated consistently through the last six or seven years is that if in fact we are in the later stages of a secular bull market that's been going on for decades, what we would see — and I said this way back, probably 2019 and 2020, certainly since then — I have stated that if you look at the legs to this bull as it moves along here, the legs would get steeper and steeper, and that's what we're seeing.

If you go back — just look at since 2022, each of the successive legs. And I don't think I called the corrections fake-outs. I'd say investors got faked out, for instance, in silver, when they got bearish at the bottom. I called those fake-outs. But the actual corrections, I think, are a normal part of the process. They're consolidations that build the wall of worry back up and allow you to have fuel for the next advance. But my whole scenario has been that we would steepen into the top — that each leg would get steeper.

And if you just look at the last four years, you would see that each of the successive legs — 2022 to October '23, October '23 to October '24, October '24 to the April swoon on the announcement of tariffs, the big rise out of that April swoon into the October '25 top, I think it was — and then since that, we've had successive rallies that get steeper as we go. So we're at the point now where, as it steepens here, it's going to be parabolic.

And I would even argue that in the two-month consolidation we saw in June and July — if you look at it on a monthly basis, we may have started the parabolic when the rally started; I guess it was the end of April. That steep rise out of the lows — the Iran war lows — in the spring, that ran to the beginning of June: we didn't really lose that parabolic, that rise, in the consolidation. You did in some things, certainly in some of the AI stocks, but in terms of the S&P — and if you look at it on a monthly basis — you could argue that you really didn't violate the beginnings of a parabolic. It's semantics. I don't really care whether this is a new leg starting at the beginning of August, or whether this is a continuation of things that started back in April. Either way, it's going to steepen from here.

Related to that, and some of your prior comments — with all due respect, David, your targets climbed the whole way up: 4,500, 6,000, 8,000, 10,000. Skeptics say that's chasing the tape. If you don't mind, maybe defend — is not the right word — explain, or if you want to use the word, defend the method.

3. Forecasts Change With The Facts

Yeah, I'll start with prefacing John Maynard Keynes, who, when criticized for his forecasting because he changed some forecasts, said, "Dear sir, when the facts change, I change with them. What would you do?" And I would say that's — if you talk to any macro strategist — this isn't The Price Is Right. This is not put out one number and never change it. If anybody knows the game show The Price Is Right, you try to guess the product price without going over it. Well, this isn't that game. We're looking at new data every day and every month and every quarter, and so, as things change, you change with them. So that's the first defense.

The second defense is I've remained steadfastly bullish from basically the lows in March of 2020 until now. Because people will say, "Well, you've been calling for a bust for six years," and I go, "I said the bust comes after the bull market is over." And I've remained steadfastly bullish from the beginning — from 2020, or before even. So I don't know what the problem is. Yes, I've changed — I've raised them as I saw it. The other thing I would tell you is, if you look at when I make my changes — I get criticized for this sometimes because people don't understand it — sentiment drives me a lot, because I'm a contrarian. I'm often raising my targets when everybody else is turning much more bearish.

So true.

So I'm not raising them with the momentum. I'm raising in the opposite direction. In April of '25, when we had the big drop when Trump announced tariffs, as you remember, almost every strategist out there was lowering numbers and saying the bear market has begun: we're going a lot farther south, we're going to 4,000, maybe we're going to 3,000. It was at that 4,800 or so — I'm trying to think where we got down to — but the lows of that selloff were when I raised my targets, because sentiment had gotten so bearish at that point in time. It was clear to me we had sentiment almost similar to what we had in March of 2020, after a two-week selloff.

So that's how my work is — a lot of it's driven by sentiment. Obviously I look at fundamentals, I look at technicals, I look at macro, but sentiment is a very important piece of it. So yeah, along the way I've been surprised, obviously. I started with targets — I probably started with a target of 4,000 going into 2020. In March of 2020, I might have had a 4,200 target, and I've raised it many times since then: 4,500, 4,800, 5,300 — those are the early ones — and then 7,000, 7,500, 8,000, 9,000, and now 10,000. And I've raised them in big leaps, because my work just kept pointing to: this thing has legs. And I was, all the way through, well above any other estimate on the Street. Even today, I think the highs on the Street might be 8,200, and that's of very late — that's what we're getting today, somewhere around 8,200 as the high numbers — and I'm at 10. When I was at nine, there was nobody much above 7,600. So I don't do it to be provocative. I don't do it to get attention or to be different. I am doing it simply because that's what my analysis points to.

Remind me if I'm correct about a little bit of the multi-step process here, from our last maybe one or two conversations. Are we in a melt-up? It's going to result in a crash, perhaps in the next year. Then we're going to have a little bit of a euphoria, where things may be great and really rise up — sadly to come, within maybe 10 years, to a crashing end. One, do I have that right? And even if I had it right a year ago, what have you adopted, adapted? And I'm making it a little too complicated now, but is AI going to change some of those one, two, three, four assumptions that I noted?

4. The Bust Follows The Melt Up

Yeah, I don't think so. My assumptions are still pretty much the same as when we talked last time — a year ago, if it was. I do believe, as I said, we're going into a secular top here — a 44-year secular top. And after that top — by the way, when I talk about a global bust, it refers to the economy and the financial system. And the reason I call it a bust is because it'll be accompanied by, I think, some big bank failures, some major financial crisis — similar to what we saw in 2008, but maybe worse. So people hear bust and they think I'm referring to the stock market. No — bust refers to the economy. Bear market is what will accompany it; that refers to the stock market. So I believe the bust and bear market will follow this last run-up. Like I said, I think it's next year, but I certainly have had to push this out year by year by year, because I thought it would happen sooner than this. So, guilty as charged in terms of that. But — I've lost my train of thought.

Whether it's the right move or not — the bust, as you describe it, potentially banks, and let's go with corporations important to our ecosystem. Let's say it is a bank. Let's say — I'm throwing it out there — we have two massive private companies in AI that are among the largest companies on Earth, OpenAI and Anthropic. Whether I like it or not, I don't see the US government allowing companies like that to fail — aka they're too big, or maybe their perception too important, to fail.

Yeah. So my whole thesis for a global bust is predicated on the fact that we have leverage in the system — and I'm talking about a global bust, so this is worldwide leverage in the system — that blows away what we had going into 2008–2009. We are so far more leveraged as a world economy and a world financial system than we were back then — and that was way off the charts. So we've never been here before. And leverage works great on the way up. It enhances. But as we just saw with our hedge fund friends —

Yeah. It goes the other way — maybe even faster. So that is kind of a microcosm of what I think we'll see in the world economy, the world financial system, in terms of a pretty simple thesis: that once the economy heads south, that leverage is just going to take it far beyond what we would normally expect. And it's not a bank or one place. There'll be a lot of places where the leverage will show up as a problem. We just saw the hedge fund situation, but it's pension funds that are loaded up with private equity and private credit. It's banks overseas. I mean, China — I just saw a video on my feed today somebody put up, that was about a big project in Malaysia, and these two kids, two guys, took it upon themselves to go discover what this place was, and found it was empty. It was a multi-billion-dollar project and there was nobody living there. It was high-rises. They had a big mall to go with it that was marketed as this great shopping center, and it was all — they had pictures on the glass, on the storefronts, and no storefronts were active.

They went into the only restaurant that was available in the whole so-called new city, and they went in and sat down, and there were like eight other people in there. As soon as they sat down, those eight people got up and walked over to their table. They were all part of the staff. There was nobody there. But it turned out it was a China project, and then China pulled the plug because of all the problems in real estate in China. It was meant to be for their people to invest in Malaysia in a project, and they pulled the plug on it and don't allow them to invest in it. So it's sitting there two years, empty, multi-billion dollars. And you can probably multiply that by many, many other projects.

So the point is, it's not just the US, it's not just Europe, it's not just Japan, it's not just China. It's worldwide. We have this way-overleveraged system. And maybe I'm premature and it's going to be able to be pushed out some, but I think it's coming this cycle. Whether it's months away or a year away, I don't know. I keep saying I think it could happen pretty fast.

David, a little tricky one here. Steelman the bulls: real earnings, real productivity, better margins than '99. Make the case this is maybe like '95 — then, of course, I'll let you kill it.

5. The Bulls Make Their Case

Yeah. I mean, earnings have been through the roof when you look at what the AI earnings are, amazingly. But what we're hearing now is that for this quarter, you're starting to see the laggards — the kind of more conservative companies — starting to see their earnings turn up in a nice way. So you take out AI — because everybody thought, ah, this is just AI, or this is just semis — you take that out, and you're still getting something like 13% earnings growth out of the so-called boring stuff. So we are in an earnings cycle that's unbelievable. Some of that may be AI already, but a lot of it is just good old-fashioned cost cutting, hunkering down, and being able to have healthy profit margins in spite of oil, in spite of all the doom-and-gloomers out there talking about how this was all going to be a train wreck. So that part is there in terms of being '95.

But this is far too frothy. I remember '95, because I had made the case in the early '90s — '92, I guess it was — I was at an insurance company running their active equity department, and again, in my contrary way: there was a chart circulating back then that showed the relationship between consumer stocks and capital goods stocks — and of course capital goods includes technology — and it was at all-time lows. Consumer stocks had gone through the roof. They were in their last parabolic stage, from a move that started in 1982, because in 1982 inflation peaked, and that was the beginning of buy the steady growers — buy the kind of steady growth stocks and get out of inflation-hedge stocks. And I made a lot of money by understanding that that's the time you make the switch: when inflation's at its peak, you buy the stuff that's anti-inflation.

So in 1982 I made that call. In 1992, I made just the opposite call, of saying these growth stocks are way overvalued, they're at their secular peak, if you will, and it's time to load up on capital goods. So my portfolio at the insurance company was very concentrated in some old industrial capital goods — the Caterpillars of the world, the Deeres of the world — but also a big chunk of semiconductor and semiconductor equipment companies, and a couple other tech companies. So over 50% of my portfolio was tech at a time when nobody wanted tech. You could buy Texas Instruments, which was in my portfolio at that time in '92 — basically, because a lot of their contracts were government, when you backed out the government funding and stuff, you were buying it at book value.

Wow.

And you were buying things like Teradyne — I had Teradyne and K KI [?] and KLA — you're buying these things flat on their backs. In the next three or four years, into that mid-'90s — '95, '96 — they started slow. I was in there a bit early, and the consumers had one last hurrah, so I was underperforming. But then when they started, they took off, and by '95 they were already moving up pretty nicely. The portfolio I had outperformed the S&P in the — I think it was the mid-'93 to mid-'95 period — by 5,000 basis points. You know, 50%.

Oh my God.

The S&P in that time was flat or not very far, and these stocks were up 50%. And that was the whole portfolio, so it wasn't just the semis. And then from there, the rest is history, because the real move came in the late '90s, as you know — the whole dot-com story. So '95 was very early in that. We're not anything like that today. I think the conditions today are much more like '99, if not 2000. '95 was a very early time in the tech play. Now we're probably late.

Now, that being said, I'm looking at it cyclically, not secularly. There's obviously — AI is probably going to have a shakeout in the bust, but that doesn't mean it's over. There's probably a long AI investment cycle, an AI cycle, beyond the bust, but it's not going to be a straight line. There's going to be, probably in the next year, a shakeout.

And David, not to give away your secret sauce — some sorts of complexity of various things that you look at — but for my family offices listening in, people seem to like things in threes. Maybe, what are three indicators — employment, rates, whatever it may be — that you look at, that you think are important, that form a lot of your views?

Yeah. As I said, sentiment is huge for me. I don't have any favorite sentiment indicator, but I look at several, and you can get a pretty good sense, even on my feed, of where people are sentiment-wise. Because just a week ago I was an idiot, and now I'm getting people saying, "Wow, you're right. Wow, you're so right." But a week ago, I had somebody private message me and say he was writing some kind of an investment letter or something, and I was going to be the feature of it as a fraud — he just thought my whole viewpoint was stupid and fraudulent. So that's the sentiment that was out there just a few days ago, and now all of a sudden you're getting people jumping on the bandwagon. So it's changing fast. Sentiment is a big one.

I'll — rather than — because I'm not really into — I look at trends. So it's not so much what's the data point that's going to turn this, or anything like that. The trends are healthy, industrials look good, all of that. As I say to people, in more generalities, my analysis includes technical analysis, fundamental analysis, macro analysis, sentiment, and cross-market analysis. By that I mean, for instance, months ago I saw the coming financial move, where the financial stocks were starting to technically look very good — and materials now also, and copper and things like that. So it's very hard for me to get caught up in — because I'm talking about a recession coming, I go: but I see too many good things out there telling me it's not yet. That may come in faster than we realize. But right now, what I'm seeing is a broadening market. And I'm saying right now — three months ago, when everybody was talking about too narrow a market and worrying about Iran, etc., I was looking at a market that had a lot of laggards that were starting to pick up speed and starting to look like they had long runs ahead of them. It was hard for me to even begin to get bearish when I've got that kind of stuff to look at.

So that's how my work kind of works. It's less about quantitative — let's sit down and compare P/Es or that kind of stuff. I was a value manager prior to being a strategist, so I look at P/E multiples, I look at all of that stuff. But basically, it's more of the top-down big stuff.

Okay. We promised we would come to the 25-year-old Leopold Aschenbrenner, Situational Awareness. Woo! 45 billion at 400% leverage, up 439% — until a point last week that it lost 67% in a single month. Sold, I guess, the public book to Citadel — at obviously a discount — the week of his wedding. Is this the Long-Term Capital Management, the LTCM, of this AI era?

6. Aschenbrenner Marks The Bottom

I don't know if it's that. It certainly marked the bottom for this cycle, I believe — anyway, for this correction, this consolidation. And I think part of the reason we're seeing the reversal here is it really put an exclamation point on what really was behind the selloff in semis, what was behind the selloff in the Mag 7, and what was behind the selloff in AI in general. Once it became clear it was this one guy, and that he had just taken way too big a bite with leverage, and then found out that he had basically unwound it all and was out of it completely — I think it cleared the air so much for those that were fearful, worried that we were at a top. Once they saw that that was what happened, and the market held in spite of that, it really gave, I think, a kind of a vote of confidence to the market for a lot of people who weren't so sure.

And that's why I think we're just starting this next run, and it's going to build pretty fast. Because I don't think it's just overcoming a couple months of anxiety. I think it's also overcoming basically three and a half years — going back to October, almost four years now, going back to October 2022. You're at that point now where I think a lot of those that have had one foot out the door have brought that foot back in, or at least are beginning to bring that foot back in, and you're about to see, I think, a united bullish front here, which we haven't had for all that time.

We've climbed a wall of worry. Now, ultimately it'll be troublesome, because that wall of worry is going to go away. But as I tell people: I'm a contrarian, but I recognize very well, from 53 years of doing this, there are times — big, lengthy periods of time — when the consensus is right, and we're about to see the consensus jump on this bandwagon and be bullish. So I get accused of sounding too consensus when I'm a contrarian. I go, yeah — that's because the consensus is about to be right.

Staying on Aschenbrenner a little bit. Cramer says that forced selling is a clearing event, I believe is what he said. A bottom-clearing event, or first domino? Because it probably can't be both.

No, I think it's kind of — are you talking about longer or shorter term, right? And I think in this case, for this period of time, it is definitely a clearing event. I mean, you saw it in the move we've had the last few days. You see it in the charts. You see it in what got taken to the cleaners. It was a clearing event. He's absolutely right about that. From a long-term standpoint, did it clear the leverage? No — it's the tip of the iceberg in terms of the overall leverage in the system. But this was a case of a 24-year-old guy who had a lot of success playing momentum, but didn't have the years of experience, or hadn't been through a cycle, to understand how that leverage can really take you down as well as build you up. And he just got — I mean, it'll probably help him going forward, to be a better investor, because he just got his head handed to him. Fortunately, he had made a lot of money and still has a pretty good chunk, but boy, he lost a lot of money from inexperience, is what I'd say.

And it's amazing — markets are a humbling thing. There's not a person — there's not a successful investor that I know of in the history of this business who hasn't been humbled by the market. It's part of the learning experience that makes you a better investor. As I say, what separates good investors from bad is that the good investors learn from their mistakes. The bad investors just keep repeating them every cycle.

His — my words — his thesis was arguably correct, and the fund — well, "died" is too strong of a word; he has some great private holdings and still has billions. But let's go with it. What's the lesson? That's the more important part of this. What's the lesson for every family office holding levered AI exposure today?

Yeah. Well, the cows are out of the barn, at least in the short run. So I wouldn't learn from that lesson too quickly, but it is a longer-term lesson that I'm sure many of the family offices, and certainly hedge funds, know: leverage works both ways. And it certainly can punish you pretty badly on the way down. So I think that's the key lesson.

I talk to retail a lot. I mean, I retired in 2013 and joined X soon after that, because I said this is a hobby for me as much as it is a vocation — it's an avocation. So I decided I could help the retail public by being on there and kind of teaching a more contrarian message, about trying to get them to learn not to pay as much attention to the short-term noise and the CNBC crowd, etc., and understand markets a little better than that, and not get caught up in the tape, as I call it. And something like this is kind of what I've been preaching. I said to a lot of people — because I get blamed for people's losses; they'll go, "Well, you were bullish" — I said, these are cycle forecasts. I'm not a trader. I'm not telling you what's going to happen in the next three months. These are cycle forecasts. But what I would tell people is, if you're playing options, or you're very margined, you're going to have periods where the market goes against you, and you may be taken out of the game. Whereas if you are an investor, and you know what I'm forecasting, you should be fine. You just ride them through. You ride through those consolidations. But what I see a lot is the whole greed-and-fear thing. This guy just got a little too greedy.

Maybe last question on Aschenbrenner. The Collisons — those are the founders of the giant private company Stripe — Nat Friedman, Jane Street money. Billions wired to a kid — I guess, to me, a kid — who's never traded. Very smart; I wish him the best, and I think he will be a figurehead moving forward. But never traded. Why does mania — again, the more important part of my question — why does mania make smart money sometimes the dumbest in the room?

Yeah, it's amazing. Again, you're talking to somebody who has spent my whole career looking at sentiment, and I can tell you, behavioral economics — how investors behave — is probably 75% of the game. It's just amazing. You could talk to the biggest institutions out there, or all the talking heads that want to come on CNBC and give their opinions. For the most part, the majority of them will have rationales for their opinions, right? For their forecasts. By and large, if you really track it — and I have for many years, not scientifically, anyway, but just watching it — they're being driven by the tape. Just like they were negative a week ago or two weeks ago, those same people now are jumping on the bandwagon, giving you a rationale why things have changed and why they're bullish. What changed? What changed was the tape. And I use the term tape for the market.

And it's the same thing, I'm sure, with prime brokers. The success that he had drove more belief. Early on, they probably said, this guy's wet behind the ears; we've got to be careful with him. But as he started becoming probably the most successful hedge fund manager out there, they started believing, because he was showing results that were through the roof. So you start, little by little, getting drawn into that. By the end, you're a full believer: this guy can walk on water; he knows what he's doing. They didn't stop and realize what he was doing was playing tremendous momentum. And that momentum reverses just as fast as it goes up. Maybe faster.

For sure. Let's switch over — we've hinted at it — to Warsh. So Warsh held at 3.6%, nine to three, dissents demanding a hike, and he says he has no tolerance for inflation. Does he hike in September? And what does that do to your parabola?

7. Warsh Ends Fed Handholding

Yeah. So I don't try to predict month to month or meeting to meeting. I feel it's kind of a fool's game. As I said before, I'm somebody who follows trends, and I've spent many, many years on X preaching that the bond market sets rates, not the Fed — that this silliness of watching the Fed and agonizing over what the Fed's going to do, looking at dot plots, looking at what traders have priced in for cuts or hikes — none of that interests me. I think it's a giant waste of time. So it's been music to my ears that Warsh is trying to get away from that.

Keep in mind, I cut my teeth — I had Arthur Burns as a Fed chairman when I first started. Then I had G. William Miller, who was a disaster in the late '70s under Carter. Then Volcker came in and basically said, the problem is we've been targeting rates. I lived this. I watched it, and I was a monetarist, so I knew he was doing it wrong. But G. William Miller made the mistake — because rates were rising in an inflationary environment, he had hiked rates. He made the mistake of thinking he was tightening, but rates should have been going up a lot faster than they were. He was actually printing money so they wouldn't go up faster; he wanted to bring them up gradually. So money was going into the system at a rapid rate and pouring fuel on the fire of inflation. And that's why we got that: we went from five, six percent inflation — all of a sudden we're at seven, eight, nine, ten, double digits.

Volcker came in and said, "I'm no longer targeting rates. I'm targeting money. We're going to crank down the money supply" — M1 — "and let rates go wherever they go." Because when you crank down the money, you're not printing money, and you're not able to control rates — the bond market sets rates. And that's when "bond vigilantes" became a new term. And frankly, that's what Warsh is coming in now saying: basically, I'm not here to target rates. I'm not here to think I know best what the right Fed funds rate is at any given point in time. We're going to let the bond market kind of tell us some of that.

Now, the bond market spoke loudly the day after his meeting, but I think that was more of a tantrum than it was any kind of indication of where rates are going. The bond market doesn't like to be told what to do, or doesn't like change. We've had this system — a little bit under Greenspan, I guess, and under Bernanke, and very much so under Yellen and Powell — where we spent all our time agonizing over what's the Fed going to do at this meeting, what's the Fed going to do at the next meeting, how many rate hikes are there. We're still doing that, right? Warsh doesn't want us doing that anymore. He wants you to look at the data, do the analysis, and make your judgments — not based on us. That's why — I forgot the term he used, but the referee, I guess, is what he said. Don't look to us to determine where rates are going. Do your economic analysis, do your financial analysis, and look at where things are going.

And that's why I believe what we're going to see — you've heard me say at the outset of this interview — I believe we're going to see inflation trend down and rates trend down with it, such that you could be probably at 3%, certainly within six months. It could happen faster or slower. But you wouldn't get that from the dot plot. You wouldn't get that from most of the Fed rhetoric. You certainly wouldn't get it from Neel Kashkari — who, I thought that was kind of an interesting one-upmanship, or a little bit of a backstabbing, for him to go on CNBC and talk his book about what rates are doing, or what we should do, or how the Fed should be run. You have a new sheriff in town. Your boss is Kevin Warsh, and he's basically saying — not because he wants to control it; he just doesn't think it's good for what their job is — he doesn't want all these Fed speeches out there every other day. You look at it: in the last two or three years, there was one Fed member or another — one FOMC member or another, or one Fed bank president or another — out there talking about their view on interest rates. We didn't used to get that.

And actually, under Greenspan — he did a lot of double-speak, Greenspan-speak, that was confusing, because he didn't want you to really know what they were thinking. He was notorious for talking a lot but saying nothing, because he was trying to keep it close to the vest. And I think Warsh learned from him some of that. So they didn't like his post-meeting presser, but I think it was a little bit of Greenspan: I'm not here to tip my hand on everything we're doing. He has said — he knows it's a collegial group; it's meant to be kind of management by committee. So he's not going to be dictatorial about where things are going. And he's not a puppet of Trump — that's not what it's about either. He's really trying to get them to be more long-term focused and get away from this meeting-to-meeting thinking that they are smart enough to tell everybody where rates should be.

And he's also a supply-sider. Part of the conflict, I think, that the media has — because they've grown up on this Phillips curve idea that if the economy gets stronger, we have to tighten, because that means inflation's coming — he's saying that's not true. If you have a supply-side incentive to produce, to create supply, it doesn't lead to inflation. If you have enough capacity out there, inflation doesn't necessarily automatically have to go up when the economy is doing well. So that's why all these people wanting to know — he says he's going to get inflation down to 2%, and they want it to happen in two or three months. That's not what he's talking about. He's talking about the trend towards 2% will be their mandate. That's what they want to do. But it's not about the next two or three months. It's about the next year.

Well, you answered kind of the first part of what I was going to ask, which is: Warsh killed forward guidance — two decades of Fed handholding, over. But maybe the follow-up to that: what happens to volatility when the Fed goes silent, like at the top of the bubble?

Yeah, I really don't think it matters all that much. Again, we're going to have that volatility no matter what. That's one of my struggles — I think Kevin Warsh is the most qualified person for the Fed chairmanship we've had, maybe ever. And that says a lot, because Bernanke was qualified, certainly, having done his thesis on the Great Depression, etc. Greenspan was a master at certain parts of the Fed job. And Volcker, of course, is up there on Mount Rushmore in terms of a Fed chairman. But I do think —

And the fact that he loves cigars makes him beloved in my mind, David. Only us, probably 60 or older, will even get that reference — of what Volcker used to do inside the most hallowed grounds of DC, smoking his cigars.

And he did it with his New York accent. I mean, he was a master at kind of sitting back with a cigar and pontificating. I loved Volcker. He was great, and he did the right things back then, for sure. But I do think Warsh and his training is well suited for the job — well qualified, and a bigger thinker than what we've had of late in terms of federal government. And he's going to change things over time. It's not something quick. But — I forgot the question.

Well, speaking of things as of late: Powell. Powell is still on the board — a former chairman watching his successor. Does it matter, or is it just theater?

I think it's mostly theater. I think Powell hopefully behaves himself there. I think he will. I understand he's there probably, and most definitely, because of the lawsuit — he's pretty much said, I'll leave when that thing's pulled away.

Right.

But I don't know what he's doing there, really, and it's kind of awkward for him to be there. I was a defender of Powell through much of the last few years, when a lot of people wanted to attack him. There were things I had trouble with that he was doing, and I think he was a bit political. But more or less, what I have said for the last couple years is: all the criticism he got — when you step back and look, the Fed basically managed through a difficult period, brought inflation down without crashing the economy. How can you fault that? So they were more right than most of the critics in terms of that period.

That being said, I think it would do him well to just step away. It feels a little bit political, and frankly, he's got a loyal group on that committee. And I do feel like Warsh has his work cut out for him a little bit, because he's trying to change things, and you've got a Powell group in there, basically, more than you don't. And even though they're not speaking vocally about it, you can kind of read between the lines: at least some of them are not liking the fact that the game's changing. They want to be out there speaking. They want to give their opinions. And I think you see a little bit of that in the aftereffects of the presser — the aftereffects of that meeting. Like I said, I really thought what Kashkari did was kind of, you know, not very professional. It's like, your boss is telling you he doesn't want to see this anymore. And yes — I don't know if he is on the FOMC or not, but he's a president, and yeah, you're entitled to have your opinions, and all of that. That's fine. But to come on CNBC and kind of spout off about things that are kind of contrary to what Warsh is trying to do — I just didn't see the need for that.

There is a viewer in chat that does want me to go back to that prior question. It's pretty simple: what happens to volatility when the Fed goes silent at the top of the bubble?

8. Panic Printing Creates Hyperinflation

Yeah. So here's what I've said — and I'll get around to answering that specifically; probably my answer to that is I don't know. But — and oh, that's where I was going before, when I lost my train of thought — I have said that whether it was Powell in that position, Warsh in that position, or anybody else, when we go into a bust, their hand is going to be directed by the crash — by the bear market. And the bust is going to be so bad that no matter who they are, and no matter what they say today, ultimately they would all be forced to do the same thing. So as much as I think there's a huge difference between Kevin Warsh's approach and Jay Powell's approach to monetary policy, in the end, that bust is going to trump all of that.

And I'll explain that by saying — and I think I probably said this a year ago — I expect this global bust to be something worse than 2008–09, which means you're going to have a free-falling financial system. Not a bank or a company, but a financial system that's in free fall around the world. They are not going to be able to say, "Well, we don't believe we should follow the script we had in 2008. We think that was a mistake. We're not doing that again." They can say that on the way to that point, but once this system starts breaking, they're going to be deer in headlights and saying, "Well, we've got to do whatever we've got to do right now. We'll worry about that later."

I believe — and this is, again, just seat of the pants — but I believe we'll be looking at something like a 20 trillion expansion in the balance sheet, or maybe more. We were at nine trillion in 2020, '21. We went from, I don't know, 3.7 or 4 — we increased it 5 trillion. We backed it off; now we're at about 6.7 trillion. I believe we'll be at 30 trillion in response to the bust. And that's just the Fed. Every central bank will be doing proportionally something similar. The money coming into the system will be unprecedented, to say the least. We did 3.7 over the course of several years post-2008–09. I'm talking about doing 20 trillion just from the Fed, and then maybe another 30 trillion from the other central banks.

But before we get there — when we reach a top in the market and it starts rolling over, what's going to happen? Actually, 2008–09 is actually part of the problem. Because — and Warsh maybe even more than Powell, but both of them — have said they don't want to go back to that again. They don't want to go back to zero interest rate policy; they think that was a mistake, and it was. They don't want to go back to printing money — QE infinity — like there's no tomorrow. So that means early on in a recession, early on in this bust, or on the way to the bust, they're going to say, "Yeah, we're not doing that again. We're going to go slow here. We'll cut rates a little bit. But we're not going to have the balance sheet zoom up. Maybe we need to put a trillion in, but we're not putting three, four, five trillion in." They'll look, and that won't put a dent in it, and it'll keep going down. They'll come back and say, "Well, I guess we've got to do a couple more trillion — but boy, we can't do much of this, because we don't want to go back there again. And we've got to remember to take this back out right away." And that won't do anything.

In other words, the very fact that they don't want to repeat 2008–09's mistake — and they're cheered on by most of Wall Street, right? Most of Wall Street agrees that shouldn't happen again — means they're going to be slower to respond this time than they did then, or than they did in 2020, by a long shot. That means many months, probably, before they get to a right-sized policy. So in answer to that question — and this may have been a question from way back earlier in our interview — when you have AI companies looking like they're going to go under, or you have a bank looking like it's going to fail: how come — you know, we know the Fed will just step right in? No. I think the Fed's going to be slow to respond. And when you're at this point of a cycle, where things are really unwinding fast because of leverage, a month or two can be an eternity.

So I'm not saying they're going to be a year late, but if they're late by a few months, you could have a much deeper decline and see many more failures than you would have seen if we hadn't had 2008–09. They're fighting the last war. They don't want to go back there, because they got criticized so much for all that money printing back then, and zero interest rate policy. But the problem is, we have far more leverage today than we had then. We're going to likely have a faster unwind this time than we had then. And it's going to require bigger and faster responses, when their inclination is to be slower and not responsive. You put that together — that's a big conflict.

So — I mean, maybe I have this a little off — if your bust needs 20, 30 trillion of, my words, panic printing, and Warsh built his career attacking exactly that, why does the hard-money man fold?

Because you have no choice. And that's why I say it will trump these guys. Because you have a situation where — and again, I'm theorizing; it'll come in some different flavor than I expect, probably — they're looking at this thing, and all of a sudden things are coming apart at the seams. Again, it's not going to all of a sudden happen one day. They're building up to it. They're responding to problems in private credit, let's say, or problems in commercial real estate, or problems here or there. They're going to see some of this coming. But then all of a sudden it reaches a point where it starts really unwinding fast, or banks are starting to — almost — if you remember October of 2008, the critical point was when the commercial paper market froze, and the rumor around the Street — I can remember this, the day it happened — the rumor around the Street was GE Credit's about to go under, and so will GE. If you remember that, the policymakers responded quickly and opened up the commercial paper market. They stepped in — I may not have it exactly right, but I think that was when they went to the "we won't break the buck" on the money market funds — and they stepped in all of a sudden and said, this is serious; we've got to do all these things. And they held the markets together. If they hadn't done that, we would have had the bust then.

The difference between then and now is, this time I think we go over that cliff, because these guys are fighting that 2008 story. They don't want to do that again, because of what the aftermath of that was. So that makes them more reluctant. But at some point, as we go over that cliff, they well know when that point comes — they're going to understand: if we don't do something today and tomorrow, we've lost the world's banking system. In other words, there's a domino effect going through the banks. And if we don't respond now — and the reason why I know it'll be the Fed and the central banks is fiscal policy doesn't fix something like that fast enough. The only thing that moves fast enough is to get liquidity in the system. And that's what will drive this: the need for liquidity in a big way. And like I said, it'll start out with thinking, okay, a trillion might do it, or two trillion might do it, or three trillion might do it. Ultimately, each of those shovels is not putting a dent in it, and it continues to get worse. They come in with both feet and say, "Okay, we've just got to do whatever it takes."

And because inflation lags money printing by probably 18 months — there was a technician on Wall Street by the name of Stan Berge years ago, back when I was early in my career. He was at Tucker Anthony in Providence; I was at Textron in Providence. I went to lunch with him one time, and he brought out all his charts — he was an engineer by training; he went into this because this was his love, but he was a technician — to show how inflation has an 18-month lag to money supply. So you can print all the money you want. Let's say the bust hits second half of next year in a big way. You can print all the money you want in that second half of next year — you probably won't see the real inflationary effects of that until 2029. It might start picking up some the next year. So they have the benefit of: you're in deflation, you're printing money, and there's no immediate inflation effect. So they're going to deal with the here and now. The emergency right now is the economy and the financial system; we'll worry about inflation later. The problem is, once it does hit the system, with that lag, it's going to hit fast, and in a matter of a few years you're going to go from low single-digit inflation to high double-digit inflation. So by 2033, let's say, you could be looking at 25% inflation in this country.

Well, you gave me a good clickbait there for a 30-second clip. So thank you, David, by the way. And a little scary. Someone does ask in chat: ask Dave if AI stocks are done in this rally.

Good question. I don't think so. Now, some may be. I gave you my numbers before. My number for the S&P is 10,000. My number for the Dow is 70,000. My number for the NASDAQ is 36,000. I did the math on that before the meeting today, just to kind of know where we're at, because we've moved so much. To those targets: the Dow, based on numbers this afternoon, was about 28% to that target. The S&P was 29, I think. The Nasdaq was 35, and I think the Russell was 32 — my Russell target is 4,000. So we're basically looking at 30 to 40% upside from here, assuming my targets don't get raised again.

And when I do the SMH — the semiconductor ETF; I use that as a proxy for the semi industry — I have an 800 target on that, and when I did the numbers on that, it's about, I think, 38% from today's price. So semis are a big part of that AI thing. That tells you I still think they have at least market performance from here — maybe a little better than market performance from here. The Mags — I didn't do the numbers for the Mag 7, but I think you're probably looking at pretty much in-line market from here, but new highs.

The one area where I have put out — it's not an official target — but the IGV, the software ETF: I said several months ago, when it went through its first selloff from its highs, I said I think it can get back to 110. And it got up to 108 a few months ago, and then sold off again a couple months ago. And it looks to me like — now it's 102 or thereabouts — that 110 still looks like a right shoulder on a head-and-shoulders top. If that's correct, it peaked pre-Iran, I think — I don't remember exactly — it had a left shoulder on the other side of that top, and I think we're forming a right shoulder at 110. Again, it can go to 112, 114 and still be a right shoulder. I think the top was 116 or somewhere above that. If that is truly a head-and-shoulders top, software may not go to new highs. And AI is part of that. Microsoft looks pretty good right now, so maybe that's not the case — we could go on to new highs. But if that head-and-shoulders holds, that is one group where we may not see new highs.

But I think in most of AI, you're going to see new highs — another 30% plus. Well, it's 30% plus from here, so I don't know how much above the highs that is on some of them. But Google — or Alphabet — and Amazon and some of those, they still look fine. Apple looks okay despite the weakness this week. So I do think there's probably room there. On the other hand — they didn't ask this question — but when I do the numbers on my targets on things like the XLF, which is the financials, or the XLB, which is materials, you're looking at, in those cases, 50, 60% upside from here. So maybe double what you're getting out of tech now. So tech still has room to run here, but more like market performance from here, or a little better. Whereas some of these things that are just coming up now — kind of the old economy or the more conservative stuff — some of those things are going to be the real outperformers in this final run.

I'm going to disappoint a person in the chat that said, "Angelo, finally, you're an hour in and asking coherent, proper questions." Thank you — although it's a stab in the back, indirectly. I'm going to disappoint you now and go on a slight rant, and I think comment, and try to ask a convoluted question. So you're talking about a melt-up, a bust, 25% inflation looking seven or eight years out. We don't know what the political landscape is going to be — AOC could very well, as scary as this is, be president in 2028. We have the impact of AI, that supposedly might be deflationary — in theory, it should be, David. And how about the challenge of, suppose it eliminates jobs? I'm not finished yet. And then you have our deficit, going from about 40 trillion to 60 or 70 trillion. I've got to be careful — this is a family show — and not use "what in a you-know-what kind of world." But this doesn't look like it's going to end so well.

I don't think so. The easiest thing to kind of look at, if this scenario plays out anywhere close to what I'm talking about: if you get high double-digit inflation, interest rates track inflation, pretty much. So you're going to have high double-digit interest rates. Keep in mind, I was an equity pension fund manager back in the early '80s, when we had 18, 19% interest rates. Actually, T-bills got up to 21%, and the long bond got up to 15%. I think we're going to exceed those this time around, because if inflation goes to 25%, you're probably looking at something close to that for T-bills, and high teens, if not 20%, for the long bond, for the ten-year.

As I say — and I've said this many, many times over the last several years — you can't come up with an equation that balances when you've got high double-digit inflation and high double-digit interest rates and budget deficits, or a debt load, that's through the roof. And as you rightly say, not everybody gets this. I talk about the worldwide debt because it's a number that I can talk about — there are numbers out there: supposedly 330 trillion plus in overall debt, sovereign plus private debt. That's 330 trillion in the world. I think that could go to 500 trillion because of the bust. Because what you're going to have in the bust: not only money printed, but you're going to be creating new debt to go along with that, for fiscal expansion, right? Because they're going to be bailing out everything in sight to hold the system together. So you could have 500 trillion in debt — you could go from what seems ridiculous at 330 trillion up another 50 or 75% from that. And at the same time, a few years out, be looking at double-digit interest rates.

We can't fund our debt — we can't service our debt at 5%. How the hell are we going to service it at 15%, or, you know, potentially 20%? It won't happen. And people say, "Oh, they'll print their way out." That's what they just did — they printed their way out of the bust. There's a point at which — and I'll have the timing wrong, I guarantee you, because it takes longer, or it happens in a different timing — but at some point, in the next cycle, you will see the Fed will be out of the game. The printing press will be shut down. Because there's a point at which you cannot print more money, because it instantly creates more inflation and higher rates than you just had. So it's not just diminishing returns — it's negative returns. Every time you print more money at that point in time — when we cross over that point — you're going to be actually behind even further, because that money instantly goes into even higher inflation, higher interest rates. So at that point, the central banks are out of the game. The printing press is shut down, and shut down for a long time.

And all of a sudden, you realize there's no there there. I mean, we don't have a system. We can't go to the capital markets, because the capital markets will say, "You can't service it. We're not buying any more debt." You all of a sudden have to live within your means. And what happens — kind of like Bernie Madoff — the Ponzi scheme just unwinds very quickly. And that's by the mid-2030s. That's what I think we get. And again, this isn't just us. This is systemic worldwide collapse.

Now, David — and we have discussed this a little bit in prior interviews — if that were to play out as you described, in about seven or ten years, you're making it sound, as I queued up the prior question, pretty horrific. But there's a "but" there. The "but" is: it's happening around the world. America still, I think, has contract law. I was going to say the words secure borders — kind of. Oceans on both sides, the world's best farmland, tremendous oil reserves, Silicon Valley. Maybe we will be the one-eyed giant in the land of the blind. Where — if I have money and resources, not that I want to run — but where do I go? And do I just stick it out, and this is the best place to be?

9. The Next Cycle Favors Commodities

I will say this: between now and that period — whether it's 2035 or 2037 or 2034, I don't know — but between now and then, there is another cycle. If we print that much money in response to the bust — the game changes every cycle. And I've been doing this for 53 years. We've had many economic cycles, many market cycles — '73 to '80, '82 to '90, '93 to 2000 — each cycle had different leadership. Obviously, we know the '90s into 2000 was tech, and in the '70s it was oil. This cycle we're in now, it's AI, it's tech, it's semis — it's tech-land mostly, but it's also other things.

But the next cycle is going to be very different than this one in terms of leadership. The next cycle is going to be commodities and industrials. Because we're doing a lot of capital expansion, reshoring, etc., and obviously the build-out of the power grid and AI — it's going to be all about commodities. I believe oil will go to $500 in the next cycle. I think it'll go to 30 in the bust, and from 30 to 500 in the following seven or eight years. Silver will go to a thousand. Gold will go to 20,000. Copper will go to, who knows, $20 or more — probably more. Natural gas, which is two or three dollars, could go to 50. It's going to be a commodity cycle.

So as bad as it's going to be — because, the broad markets: if interest rates are going from zero in the bust to potentially, let's say, 20%, P/E multiples work in reverse of that. That's not a time to own growth stocks. That's not a time to own the S&P index, because multiple compression is going to be hitting you pretty hard. That's a time when you want to be in the lead stocks that can outperform inflation. And the only things that'll have that kind of pricing flexibility, to be able to outproduce inflation, are mostly commodities, along with some industrials, like Caterpillar, that service commodities. But it's going to be very hard to own pharmaceutical companies, or steady growers like food companies, or Procter & Gamble, or those. Because if inflation's going at 20%, those stocks are going to be going straight down.

And again, not in the first year out of a bust, because in the first year everything goes up. Let's say the S&P drops 80%, which is my call — that we could see, in the bust, in the bear market, a peak-to-trough decline of close to 80%. Let's use 10,000 on the S&P: if we get an 80% decline, it takes you to 2,000. In the ensuing first year out of the bear market bottom — maybe even the first 18 to 24 months — you'll be in a cyclical bull market. You could quadruple out of that 2,000. You could get back to 8,000, right? That still will be far short of the 10,000 peak of this cycle. So we'll be in a secular bear market, but a cyclical bull market at that point. But you'll have lower peaks along the way, over the course of the next several years.

And so the only winners that will continue to make higher highs will be in the commodity sector, I believe. So energy stocks, precious metals, metals — even agriculture, probably, will have a big cycle. So my point in all that is to say: you've got at least one more cycle to get your house in order, get prepared for what's coming after that — a systemic collapse.

And I would take issue a little bit — I don't want to be too gloomy, because I could be wrong about all of this — but I would argue: keep in mind, we've been the winner from the Great Depression on through this, right? But we're starting to kill the golden goose. We've got socialists coming in — we can talk about that later. We've got people now embracing communism in this country. And frankly, sticking to just the macro: for the last 80 years, the Fed has been the lead dog in all of this. When there's crisis in the world, who comes to the forefront and fixes things? Who leads the fix? It's the Fed. Who prints the most money? It's the Fed. The problem is, if we're going to see a systemic collapse, it may mean that the one that's been the biggest fixer is also the one that has the biggest problem when we unwind this. So I'm not so sure that we're the safe haven anymore at that point. We will be up until then — I think in the bust we will be — but not in that final systemic collapse, which I call the unwind of the Ponzi scheme that's been in place for 80 years.

Okay. You might be right. I love it — we're having a conversation where we may have some disagreements, and that's awesome, by the way. However, you've got to give me, within ten years, who might be that new — who's that phoenix that has potential to rise out of the ashes? And you could give me something that people may be aghast over; I don't care. Maybe it's remote, like New Zealand. Maybe you think it's Russia. I have no idea. But who do you think could be — several countries in play for that? Or — boy, I'm making this more complicated than it needs to be — do we go to multiple regional hegemons, and the US still has our, you know, Monroe Doctrine here in our part of the world, but there's something different in Asia, aka China, in the Middle East, and Europe and other parts of the world? A convoluted question yet again, but David, I kick it off to you.

I'll start it with the caveat that chances are a lot of this stuff I'm going to be wrong on. To try to see out five years is tough — or even a year is tough. To try to see out through what we're describing here — what I'm describing here — it's almost impossible to know exactly what comes out the other side. But my fear — I'll start with the negative — my fear is that there's a vacuum. If the world collapses — if the financial system of the world collapses — and it doesn't mean just the Western world. It means, you know, Asia — China's got bigger problems than we do. They may look like they're in the driver's seat in terms of growth and things at times, but boy, they have a big problem there, too. So this is going to be worldwide.

And I worry, coming out of this, that it's going to be a vacuum that could be filled by — because of the agenda that's been going on for decades now, of new world order — what I call code for communist takeover of the world — one-world government, all of that: my fear is that they fill the vacuum with that. That the solution we come up with is, we've got to all get together, and this is going to be run out of some centralized place. That would be the worst of all worlds.

The other possibility is kind of the Austrian school possibility, which is — yes, they think it happens now; they don't believe we have another cycle, and I think the Austrians think we have a reset coming in this bust. But there is a possibility that the slate's clean — kind of like our hedge fund friend just had happen — the slate's clean, everything goes down together, and you start over. And you start over with a hard-money policy. You start over with discipline again, and you learn from your mistakes. I think that's remotely possible. I don't think it's a likelihood. I think, more likely, we're going to see some sort of totalitarian type of response. And again, I say it with a caveat, which is: I could be all wet. It could be dead wrong. So I don't want people losing sleep over that part of this interview, because it's too far out there. There's too many things between now and then that could happen differently than I expect.

Oh, David, we always seem to go down interesting roads that probably get us both in a little bit of chaos. I'm going to complicate it a little further. I'm going to challenge you a little bit on some of that. I'm extremely, as my audience would know, very, very active in AI. Maybe I'm in an echo chamber — I try to get out of it — but I'm pretty connected in Silicon Valley. I'm an investor. I use these services in a very complex and deep way every day. I look at its IQ, its intelligence. I look at the compute. I look at everything that is happening, and the last two or three months have been accelerating beyond even me — who was an optimist — what I would have thought. I look forward — forget ten years; maybe three to five years — I'm seeing billions of AI agents transacting. I'm seeing millions of humanoid robots. I'm seeing potentially capitalism as we know it, with labor costs coming way down with robotics, to now where I'll challenge you on maybe the oil part: AI may solve for, effectively — let's broadly call it fusion energy. Energy cost goes near zero. In other words, capitalism broadly as we know it will change. Everything will change.

I don't know if I'm giving much of a counter to the one-world government that you noted, although I presented other opportunities right before it. But I do know, unless there's nuclear war and we all go in bunkers and there's 5,000 people left, AI is going to march forward, and there will be changes relative to robotics, the space — which we didn't have enough time, even SpaceX, to get into — coupled with, again, energy. Maybe you may think 50 years, like I may think within 10 years, going to near zero. Where am I crazy? Where might I be right? And again, we're both taking out a crystal ball, making some guesses that are for sure going to be wrong, but maybe there's elements of what we're saying that are going to be correct.

Yeah. I think your scenario is the hopeful scenario that could cause mine to be moot. It's certainly — people smarter than me, like Elon Musk, would tell you that there's a huge future ahead, and it's not anything like what I portrayed. So I'm the first one to say: if anything's going to be a solution to this and lead us to a place where it's far more optimistic than I portrayed, it's probably that. And I agree. I think, if we have fusion, or if we have things that can really take care of the energy inflation problem, that can alleviate things.

My biggest problem, and why I stick to my guns on my scenario, and why I'm pretty gloom-and-doom on what happens a decade out, is because of the bust. The easiest part of my forecast — the shorter-term forecast, the forecast of the next five, seven years, any of it — the most predictable part of it is the response to a bust. The timing of it could be a little different than I expect, or what have you. But ultimately, if we get a global bust, the human response to that — whether it were Powell, or whether it were Warsh, or whether it were somebody else — is very predictable. They won't have a choice. There's no other solution but printing money if we get a bust. Now, you may argue that we aren't going to get a bust — that's a different thing. But if we get a bust, I think you're going to see it's going to take a very big amount of money. And that very big amount of money, with a lag, will create inflation in spite of AI.

Now, beyond that — so that takes care of, let's say, the next four or five years. It's very possible that some of those things you mentioned can help soften the inflation in that four or five years and, more importantly, can kind of overcome a lot of those things and move us, maybe in the next five years after that first four or five, into something that's far different than what I portrayed. So I won't say that can't happen. I think it's low probability, only because I think we've spent 80, 90 years ramping up excesses and imbalances to levels that are beyond comprehension. We talk about trillions today like we used to talk about millions. And I don't think anybody grasps the magnitude of the leverage in the system, the magnitude of the imbalances, the magnitude of the excesses. And when you get to those levels, it becomes unmanageable. It means when you make a mistake, it happens fast, and it happens in ways you just never could comprehend.

And that's really what I'm talking about more than anything else in this. Warsh is, as I said, the most qualified Fed chairman. If you sat down with him, and he was able to be totally honest — he has to be careful saying things — he doesn't see any of what I'm describing. There's nobody in government today, or certainly nobody in policymaking places today, that has any idea of what I'm saying is coming next year. They may say recession. They may say it could be a bad recession. I don't think there's anybody in the Fed — and Bessent's the most qualified Treasury Secretary we've ever had; smart guy, very smart guy — I don't think, if you sat down with him and he was honest — I mean, I don't think it's just protecting, "I can't say these things because of my position" — I don't think any of them are really understanding. And I don't mean it as, I'm smarter than anybody. I just don't think anybody is really prepared for this being bigger than 2008–09 by a lot — faster, steeper. If I'm right, that means the response is going to be unbelievable, and lead to those things I described. If I'm wrong — if we don't get anything close to a bust; if we have a hard landing but not a bust, and kick the can down the road — then everything I'm talking about may come way down the road, or maybe doesn't come, because AI has enough time to work its magic. Because of the bust being so imminent, I fear that there's not enough time for AI to really offset that.

David, you've been very generous with your time. I could only imagine, when you have me reach out to you, it's like, "Oh, the guy with the beard that keeps me on for two hours." So luckily, it's only once a year. Maybe we've got about 15 minutes left, for about five questions. I wanted to do three to five on the war; we're going to have to knock it down to just one, and then we'll really go some out-of-left-field questions — I think the audience will enjoy it. But the war has run since February. A supreme leader killed in the opening strikes. Hormuz closed. A ceasefire signed and collapsed. And now a US naval blockade. Oil spiked to, what, 90, then sank the moment that Trump cancelled strikes and said the Hormuz deal is closed. Your bust calls for oil at, I think you said, $30 a barrel. Does this war break your deflation thesis, or actually prove it?

I think it proves it. I don't think it breaks it at all. If in fact the Strait of Hormuz is opening soon — if in fact this agreement is a real one this time —

Yeah. For like the 39th time. Who knows?

Yeah, I wouldn't bet on it. But if it is, it'll happen soon. I mean, I think you could be, as I said, at 60 — in the 60s, and maybe towards $60 — in the next month, possibly even. If it's prolonged — if this is just another false alarm and we go back to shooting — then obviously it goes back up. I don't know what the reasons for optimism are right now, but certainly there is some out there. I'd be hard-pressed to understand why anybody would be optimistic about a deal, given what's taken place over the last several months.

I mean, I understand Trump. He's obviously paying attention to the midterms, but I think he's also paying attention to too many people. There was a time when Israel and the US were together and doing the bombing — I think they could have maybe actually gotten it done, but Erdogan and the Turks talked them out of it and said, no, don't go there. So they didn't do it then. And then one other time, he was going to do something, and the Saudis wouldn't let us do it, because they wouldn't let us use their air base. And then just this one now: the Saudis and, I guess, the others — UAE, Qatar, etc. — talked him out of it and said, give us a chance to get this thing negotiated. Number one, he doesn't want to blow up Iran, because he's trying to save the economy for the people. Number two, he knows there's no public sentiment for boots on the ground and casualties. So it puts him between a rock and a hard place. And we don't know — I don't know what to believe in terms of our military inventory at this point — missiles, etc. But he seems reluctant to go farther. There are certainly arguments to be made — and I think Israel would support them — to say, finish them off; you're never going to get a deal with these guys; they play games, etc. And I tend to be sympathetic to that view, but I understand where he's at. He's trying very hard. People say he's a warmonger — not at all. He wants peace. I mean, he's trying very hard to do a deal. The problem is, you're dealing with people that have no — there's no trustworthiness whatsoever in that group.

David, boy, there could be so much I could follow up with there. But I'm actually going to punt a little bit — a US term, for those of you international, not knowing American football, like the NFL. That doesn't mean that I want to avoid them; it just means we could do two or three hours about that. And I think there's more to cover, and other people covering the war, right or wrong, relatively good. We may debate that, but some prominent people — and I will have some guests on as we head towards the midterms, where we will do deeper dives into that. My perspective: some of what David said I would agree with, and some disagree. It's complex. Let's give that one to a bit of a different time.

Commodities, you mentioned, and things like gold and silver. So miners — I believe you're calling for, in another American sports term, in baseball, doubles and triples. They're levered businesses in a credit freeze. Why do they trade almost like Treasuries, instead of like the levered equities that they effectively really are?

Well, things have changed. I mean, when you have gold go from 2,000 to 5,500 or 5,600 — and now, obviously, back to the low 4,000s — silver go from single digits to 122 and now back to 60 — that big rise up in the prices of the metals, even poorly managed miners figured out a way to have cash flow, and they've had probably their best cash flow in this last year. The reports you're getting there are actually really good. And they're really cheap stocks on the basis of where they are now and where they're going.

My silver target is 200 — and that's for this year. And again, I don't do calendar year — it doesn't have to be by the end of the year; I think it will be, but it doesn't have to be. Gold, my target is 7,000. And again, as I said before, I have a 20,000 target on gold for 2033, let's say, and a thousand target on silver. So this isn't the top for them. This isn't the end of a secular bull market for them — but they will get hit in the bust.

But I do think we just made major bottoms in both. They spent the last six months unwinding all that speculation that happened in December and January. They had such tremendous runs, particularly silver, in those couple months, and people jumped on the bandwagon very late. I've been a big bull on gold and silver going way back several years. A lot of it was ignored until this last move, and all of a sudden — again, as I mentioned earlier, the tape is what draws people into things — and they had such a tremendous bull market tape in those, you sucked a lot of weak-hands people in. And you've spent the last six months unwinding them, and they've thrown in the towel. I think we got the bottom a couple weeks ago, and we've been kind of building this short term, trying to shake out whatever's left of people who are hanging on. And as of this week, or as of the last week, we're starting to turn the corner.

And I think you're going to see — it doesn't have to happen this way, but silver went from 35 to 122 — basically, when it broke out above 48 or 50, it went from there to 122 in a few months. You could have a steeper run this time, even. It doesn't have to be, but it could be, where — 55 was the low a couple weeks ago — you could go to that 200 and get there in two or three months. And so my view is that the miners, as a result of that big run-up in the metals I see coming, will — yes — for gold, I'll use GDX. Where is that now, maybe 95? I don't know. I'm calling for GDX to go to, I think, 180, and GDXJ to go to 250. So those are probably two-and-a-half-times moves. The silver miners, which got down into the 23–24 area — I don't know where it is today — I'm calling for that to go to 90. So almost a quadruple. And in a lot of the miner stocks, I think you're going to see that — triples and quadruples. So to me, it's an area where people got pretty discouraged over the last few months, because they just couldn't get out of their own way — they kept going down. But they have to look at the whole last couple years and see where they came from. And I think we came down to a very sweet spot, where they are turning the corner again as we speak.

Well, David, it is that time of the interview where now I'm going to use two more sports analogies. One: I'm not going to punt on this one. And: we're coming to the home stretch. And that would be — this summer, over the last five weeks, I did about two and a half hours over two videos, me solo. I know that sounds like torture for the audience. I did them, specifically among my many other solos, not only about AI, but effectively on the rise of socialism and why, to me, it's horrific. We're looking at a very different Democratic Party than the Democratic Party that we grew up with — I was even voting mainly Democratic, actually, pretty much heading into the early 2000s. It's just a very, very different perspective now. The energy is all in the DSA. Socialism is in their name. They really want to have communism in the name, but maybe for now that's just too strong a word for many.

You hear them in interviews — in terms of defunding the police, in terms of getting rid of DC, although that, as we know it, may sound a little attractive. And basically: why not give people things for free? And where is that money going to come from? What happens when you have a state, a government, where effectively outcomes don't matter per se — it's their bureaucratic processes? Now, Thomas Sowell probably had the best quote on that of all time. You see a politician like Mamdani, who's a very talented politician — I'll tip my hat slightly from that showman perspective. And now that he's multiple months in, and we see the rise of the DSA — I hinted earlier that I think there's absolutely a coin flip that AOC could definitely be the president in 2028.

And you see younger people — I was going to say under 30, but often under 40. Is it the overproduction of elites, things I spoke about in my video? I don't know if it's work ethic, or it's timing, or the type of education they got — indoctrinated in a system, in degrees that were not as viable to have your skill become a utility, or vice versa, your utility become a skill — your skill become a utility that you convert into making money. It's very frustrating to me — maybe you could hear it in my voice — but my audience, for the most part, has heard my perspective on it. I would like to hear your perspective. But maybe more importantly — unlike me going on my rant — you do need to tie it into the US picture, the macro picture, investing, and your big picture about the melt-up and challenges. I do think it needs to tie into the money aspect. So I'm going to give the hard part to you.

10. Socialism Reaches The Voting Booth

I'll start off by saying it's the same thing I've been saying about wars, et cetera: I think the macro picture — because it's been building for eight decades, and the excesses and imbalances are so great — that trumps, and again, no pun intended, that trumps the politics. It's just so big, it's beyond any of that. That being said, I do worry, just like you. Who would have ever thought, not very many years ago, that you'd ever see anybody with a communist label be able to win primaries, let alone elections? And we're seeing that. And I put it right at the feet of the education system. We've been asleep at the switch for way too long. A lot of this, by the way — and again, this is controversial; I'm sure it shouldn't be — but if you do your homework and look, a lot of this plays right into the playbook of communists in Russia or China, in terms of how to take down a capitalist society: you go after the education system.

I'm a child of the '60s. I went to college in '69, so I was right there during the whole Vietnam War protests and Kent State and all of that — the baby boomers, the rat going through the snake, being the kind of thought leaders from then on. Back then there was something called SDS — Students for a Democratic Society. It was a communist-party group, and a lot of the radical students joined that. That was basically Russia — the Soviet Union at that time. They were pushing that; they were involved in that on our shores. And basically what you saw was the radicals of the '60s, who were the far left at that time — they made a concerted effort to go into the ministry and the teaching colleges, with the idea that we want to be able to mold minds. And where do you mold minds best? Where you have captive audiences, particularly young captive audiences — which is the public schools, the colleges, and churches.

And what you see today is: mainstream Protestant churches — it's happening in the Catholic Church, too, but mainstream Protestant churches — are far left. Their platform, what they preach, is almost coming right out of the Democratic platform. Their issues and their interests align very much with that. And now, in the last five to ten years, they've become very outspoken about preaching against conservatives — preaching against even conservative churches, even Protestant churches — because they don't agree on the political stuff. And I'm going there somewhere with this, but it's the same thing with the education system. So what we've got now is a whole generation of kids who are at voting age now — from 20 to 50 — who have been brainwashed and fed this propaganda all the way through their years. And some are able to kind of think their way out of it and think for themselves. But a very large number are now in that place where they actually believe maybe communism isn't so bad. Maybe the problem is capitalism. Maybe we should do away with the electoral college system, because it favors those that are —

We are probably down to our last couple of minutes, David. Maybe put a little bit of a bow on the topic that we were talking about, and then we'll close with a little bit of me challenging you a little bit, and a little bit of a family office question. So, if you don't mind, if you could wrap up on that last question in a minute to 90 seconds, we'll move on to the two final.

Yeah, very quickly. I mean, I was kind of rambling, but I do think that people need to be very aware that our country is radically changing, because the younger people do not really understand economics or capitalism, and have been taught pretty leftist philosophy, and just don't know any better. And they are today's voters. And I think we should not take lightly the fact that we are seeing these so-called Democratic Socialists gaining ground. And I do agree with Angelo that we could see somebody like AOC — as crazy as it sounds — that she could actually win an election, given where we're at. I still am hopeful that we're not at that point yet, but we're moving very fast in that direction. And I think there are a lot of signals out there that we should not be ignoring. And it's problematic.

David, with all due respect on my question — and this goes back to some degree to others that I've asked earlier — you have 53 years of work, and I'm being a little bit dramatic, but coming down a little bit to one call. And if you're right, well, you're the man who saw the biggest crash since the late '20s coming. And if you're wrong — it's the first line, in my words, of an obituary relative to a career. Am I being a little dramatic? Sure. So you're sticking to your guns. You might be right. Timelines — well, they do adapt somewhat, but you haven't backed down. Tell us a little bit, in terms of your perspective, how I phrased it: why you feel this way, and why it's important for you to get this message out. You don't have a fund. You don't have a truly significant financial stake in it — yes, I'm assuming you have some subscriptions and things like that, but relatively, you're not doing this from your own monetary perspective. You really believe it. Why? And is there anything that could change your mind?

Yeah. First, I'm retired — I'm 74 years old — so I'm not worried about a legacy. None of what I'm putting out there is anything but what my analysis suggests should happen. That's one of the reasons I've got 400,000 followers, I believe: because people know that I just speak what I see. None of this is gamesmanship or trying to be remembered for something — none of that. And frankly, in my career as a money manager, et cetera, I made big calls in '82, and in '93, and in 2000 — this one, obviously, is a game changer. In September of 2008, I was one of the very few out there talking about a hard landing, and almost every economist and strategist out there was saying soft landing, no recession in sight — and we were weeks away from the biggest financial crisis since the Great Depression. So that shows you how this stuff can unwind fast and happen fast.

But basically, I'm looking at my analysis and I'm putting out what I see. Can I be wrong? I sure can be. Am I worried about the fact that this might not happen the way I say it? Well, obviously I don't want to hurt people, and I'm not putting out anything that I don't believe. But people have to understand: these are forecasts. It is the future, and it is an extreme forecast. So it may or may not play out exactly that way. If my analysis suggests otherwise, I will change as we get there — and I think I'll be able to change ahead of time for that. Just like I have adjusted on the bull market, which I thought could have ended a couple years ago, and stretched it out. Again, it's not a game. It's what my analysis says. If my analysis says this thing continues, I'll be continuing. But as I see it right now, we're coming to an end of a major secular bull market — the longest in my lifetime, in your lifetime, by far. And what follows that, I think, is going to be very unpleasant. But we'll see.

David, at the heart, my audience is the single family office. I've been in that business for multiple decades — I dedicated my life to it — and areas around family office structuring, geopolitical, macroeconomics, investing, and lately AI, from a multi-geopolitical investing but a deeper operational perspective — not your concern at the moment. But you being a macro person and an investing person: now, again, they may have a hundred million, a billion — they may have hundreds of billions. So dealing with tough times over multiple years may be something that they have the strength to pull through. Now, we could get into a deeper discussion on being careful with a major bifurcation of haves and have-nots — remember the French and Russian revolutions; both you and I are relatively fluent in history and philosophy. You hinted at some things earlier which I didn't even jump on, with Mao and things like that — look at how many tens of millions of people died because of communism with Mao. But go back and listen to my two solos, where I talk a little bit more about that. What would be a message — specific, I know, to a very small subset of people: the single family office principal, rising gen, executive — relative to what you're describing? Whether it's a macro take, a commodities take, an investment take — what would you have them walk away with?

11. Capital Preservation Comes First

Yeah. Probably, right now, because of where we're at in this cycle — this is a message I give in many of my interviews — but basically: understand how far we've come. Know yourselves as money managers. My forecast isn't to say, stay right to the top, because I know where it's going, and get out. But what I have said is: since the mid-'80s, the financial industry has pushed this mantra of "it's time in the market, not timing the market." If I'm right — and at least on parts of this I have lots of conviction — we are at a point where, though, you know, rules are made to be broken, cliches are made to be proven wrong. There is a time — and those who have followed that mantra of time in the market, meaning just keep dollar-cost averaging, or keep putting your money in the market because it always goes to new highs — we may be at the end of that, where timing the market is going to be the biggest story going forward. At least right now — where, sometime in the next several months, if you stay with the mantra of "it's time in the market; I'm not smart enough to time the market, so I'm just going to stay fully invested and ride it through, because next cycle will be higher" — as I said, this secular top may not be revisited for decades.

And so it really does behoove people — particularly professionals managing other people's money, and family offices managing their own money — it behooves people to understand that if we're looking at anything close to an 80% bear market, the way the math works, you can have a great cyclical bull market coming out the other side for a year or two and get half your money back, or two-thirds of your money back, but I doubt you're going to get all of it back — unless, obviously, you can change horses and do it maybe in commodities. But I think this is one of those rare times, particularly in the last 40 years, where it does make sense to say: I'm going to cash, or I'm going to Treasuries, or I'm going to something that doesn't have the volatility. Not necessarily today, because I still think there's 30–40% upside. But in this period, take advantage of that strength, and understand that capital preservation is going to be your number-one goal for the next year. And then, on the other side of that, there'll be great opportunities in different leadership — and then you're set up in big ways. If you just ride this through and say, "Well, I learned through 40 years of lessons that we always come back, and you should not bet against the US" — this is one time where that may not work out for you.

Well, that's a little bit of a harrowing way to end, but we do have to bid adieu. David, I enjoy your work so much — your commentary, your contrarian views. It's great to have some disagreement; that makes it an engaging conversation, myself included. We all have to be careful about getting out of echo chambers — as new information comes in, we do need to change our mind. And yes, some of that plays into some of my political and geopolitical comments as well, and mistakes and echo chambers that I get into like anyone else. One: thank you to David Hunter, our live audience, and those that will listen and watch this. I hope you enjoyed it. The two hours flew by — easily, we could have done so much more: deeper dives, including with the war, more global perspectives on Europe, and even a deeper dive on some of the political issues that we went to, and why it's important from a macro, investing, and effectively a societal perspective. David, thank you again. Have a great summer. I appreciate your time.

Yeah, thanks, Angelo, as always. It was a lot of fun.

Appreciate you. Thank you so much.