Every Wall Street Legend Is Bullish… And That’s THE RISK

0:28Hello, everyone. We're growing fast, but if you hit that subscribe button, we'll get there even faster. Let's get into today's show. All right, ladies and gentlemen, the big dogs of finance have been out in full force this week. They're giving interviews left and right, and the message is very, very clear. U.S. financial markets, we're in a bull market, baby. Now, first up, we have Paul Tudor Jones on CNBC. He says that it feels like we are in 1999. Party like it's 1999. Take a listen here. It's like the Prince song. It's 1999. party like it's 1999, right? Feels exactly like 1999. I don't know whether we'll actually replay it exactly, but I think all the ingredients are in place.

1:12And certainly from a trading standpoint, you have to position yourself like it's October 99. I don't see why you would do anything but that. And remember, the NASDAQ doubled between the first week of October 99 in March of 2000. So if it looks like a duck and quacks like a duck, it's probably not a chicken, right? But you think it's 99, and we were talking to Mike Novogratz earlier today, it's not 98. I mean, everyone's in the, it's either 98, 99, but it's not 96, I guess is the point. And that's a problem, potentially. Right. Or it's maybe an opportunity, but you have to get on and off the train pretty quick?

1:55Well, if you just think about bull markets, right, the greatest price appreciation is always the 12 months preceding the top. So that's the nature of a bull market. It kind of doubles whatever the annual average is and before then, so if you don't play it, you're missing out on the juice. If you do play it, you have to have really happy feet because there will be a really, really bad end to it. And my guess is that I think all the ingredients are in place for some kind of a blow-off. Will it happen? Again, history rhymes a lot, so I would think some version of it is going to happen again. If anything now is so much more potentially explosive than 1999, 1999 we were looking at a rate hike in November.

2:45Now we're looking at a rate cut. We were looking at four more rate hikes before we actually topped in 2000. Now we're looking at four rate, well, three or four rate cuts, probably at least. Now, if it looks like a duck and it quacks like a duck, it probably ain't a chicken. What an incredible line from PTJ. And he ain't wrong, in my opinion. So how does this famous investor think investors should be positioned to benefit from the inflation story? Well, gold, Bitcoin, NASDAQ, and retail stocks, he says. Here's how he explained his logic. I think what the markets are telling this is an inflation story down the road if you look at the biggest winners right the biggest winners are gold I think it's up 46 47 percent bitcoin I want to say it's up 50 or 60 I'm not even sure there's a Morgan Stanley basket that's a retail flow basket that has all the mean stocks and it's up 67 68 percent so it's really what retail jumps on so So crypto digital gold, that's obviously something that's very, very appealing.

3:50Does that mean you're jumping on all of that right now? Well, I'd want to have positions in all of it, for sure. So if you said to me, what are going to be the winners? Again, we have this race. The race, realistically, is certainly to the end of the year, because that's when everyone marks institutionally. And then you have to figure out what's going to go on in next year. So what would I want to have? I'd want to have a combination of gold, crypto, probably the NASDAQ. I think I want to say that I've said that before, and I think that's still the right one. And I think whatever the fastest horse is at this point in time probably has a good chance of being that on deck 31.

4:32It's pretty cool to see Paul Tudor Jones talking about retail stocks. But he's not the only person who's bullish, though. J.P. Morgan's Jamie Dimon shared with Bloomberg this week that we are in a bull market as well. Take a listen to this one.

5:12that might be a surprise. On the other hand, there's a lot of spending. There's a lot of government spending, which is inflationary too, by the way. And so, look, I don't know. I hope for the best, plan for the worst. And you're not worried about a recession in 2026 for the US? You made that clear. I think it could happen in 2026. I'm not worried about it as a different statement. We'll deal with it. We'll serve our clients. We'll navigate through it. A lot of us have been through them before. You don't wish it because certain people get hurt, but it could happen in 2026. We're still, of course, in the U.S.

5:41government shutdown. But I do think there are positives, like deregulations are real positive, which also helps animal spirits to be positive. And, you know, in the one big, beautiful bill, there's also more stimulus that has positives for the economy, but maybe negatives for inflation. So how it all sorts out, we'll see. Now, it's great to hear the leader of the world's largest bank say that he isn't worried about a recession. Diamond has access to more information than almost anyone in the world. He's got tons of people, data, economists, et cetera, all on staff. He did, however, say that he's worried about inflation.

6:12And that's something that investors around the world seem to be more concerned about. And you can see that because of the recent rise in gold and Bitcoin's price. But another investing legend, Ray Dalio, he said this week that he believes gold should be around 15 % of a portfolio. Here's why Dalio believes that's the right allocation. When you're thinking you're doing your asset allocation, what is going to protect your real after-tax returns so you create that optimal mix? Gold is a very excellent diversifier of the portfolio. So if you were to look at, just from the strategic asset allocation mix perspective, you would probably have something like, as the optimal mix, something like 15 % of your portfolio in gold because of the fact that, if you didn't even have a tactical, because it is the one asset that does very well when the typical parts of your portfolio go down.

7:07because the typical parts of your portfolio are also so credit dependent. So anyway, I think all of this means that there should be some piece in that of gold. If I'm making tactical bets, I don't like debt assets per se. And I would say I don't like debt assets per se, not just government debt assets, but also if you're looking, let's say, at credit or private credit and look at where the credit spreads are. Credit spreads are very, very low. And so for those various reasons, my tilts would be away from those things. And toward gold. But again, yes. So more than would be a normal asset allocation mix.

7:51But I think you have to also say, you know, start with what is a real dollar, if you're a dollar investor, a real return asset that you're going to hold as part of that portfolio. The most of the system is dependent on credit. Equities and everything is dependent on credit. You change credit and then all sorts of things happen. And so it's an effective diversifier as well as probably the timing just seems good. So these sophisticated investors, they're not talking about gold because they think inflation is going to be low. In fact, if we look at poly market, the prediction market, that shows an 85 % odds of inflation over 3%.

8:32But I personally, I'm going to go out on a limb here. So pay attention. And I'm going to say that inflation is not going to be nearly as big of a problem as these legends are predicting. In fact, I think the inflation fears are widely overblown. I've thought that all year. If you use the same polymarket data, you can see the market is really saying inflation is actually going to end up somewhere between 3 % and 3.2 % in 2025. And Truflation, which as many of you know, is my preferred method for understanding inflation because they have real-time infrastructure. Truflation is saying that inflation right now is at 2.2%.

9:03That's a big drop from the 3 % true inflation reading at the start of the year. But inflation isn't the chart to watch in my opinion. This is the big thing to pay attention to. That is a complete distraction from what is really happening. Strives' Jeff Walton nailed it when he called out the divergence between CPI and M2 money supply. Just look at this chart. Now, Jeff says that the M2 money supply has grown two and a half times faster than CPI over the last 20 years. So which of these metrics are you worried about? Which one should you be worried about? The manipulated, slow-growing CPI numbers?

9:35Or the parabolic M2 money supply growing to the sky? It's obvious the latter is the bigger concern. So keep this in mind when you hear Ken Griffin and others talking about the U.S. dollar, and them talking about the dollar having a significant decline so far this year. Here's Griffin's latest comments. Inflation is substantially above target, and substantially above target in all forecasts for next year. I mean, it's part of the reason the dollar is depreciated by about 10 % in the first half of this year. It's the single biggest decline in the U.S. dollar in six months in 50 years. Gold is at record highs.

10:13And the appreciation in other dollar substitutes, to use that word loosely, in items like crypto, for example, is unbelievable. So we're seeing substantial asset inflation away from the dollar as people are looking for ways to effectively de-dollarize or de-risk their portfolios vis-a-vis U.S. sovereign risk. Are you really seeing that? No. Just check the price of gold. Well, that's a life of its own. What? It's a life of its own gold. No, but it's a life of its own as you see sovereigns around the world, as you see central banks around the world, as you see individual investors around the world go, you know what?

10:59I now view gold as a safe harbor asset in a way that the dollar used to be viewed. That's what's really concerning to me. And there's been plenty of published research in recent weeks, months, about foreign investors now when they buy U.S. equities, hedging the returns back to their local currency. so that again is a bifurcation of i'm gonna bet on american business but i want to immunize some of my sovereign exposure to the united states so in my opinion it isn't inflation that's driving the dollar's fall but rather the fact that the united states government can't stop printing money nothing of value in the world has infinite supply so until governments stop printing money bitcoin and gold they're going to continue surging higher gold bugs they're celebrating their recent outperformance on a relative basis to Bitcoin.

11:51Congratulations to them. But I believe Bitcoin is going to have a very big Q4, and it would not surprise me if Bitcoin ends up 2025 with a larger annual return than the precious metal. Regardless of relative performance, the sound money principled assets of gold and Bitcoin, they are working together to do what central banks have failed to do. They are going to protect the purchasing power of the people. We should all be thankful that we have these two options available to us, and you should consider putting each into your portfolio. You remember earlier this year when everyone was max bearish, I told you that it was likely worth being max bullish, the exact opposite of what the market was telling you.

12:27But now that everyone is being frothy, excited, and max bullish, I think we might be worth having a little bit more rationality into the market. Here's how I explained this to my brother, John, earlier this week. I want you, if you're listening or watching, I want you to close your eyes for a second. And I want you to think back in your mind to April of 2025. And every time you would turn on the television, every time that you would go on X or Reddit, if you would go and you would look at what people are talking about, if you went to your country club or you went to the local bar or you just talked to your barber or your taxi driver, everyone was pessimistic.

13:03They were regurgitating the public conversation points of tariffs are bad. This is going to be super inflationary. There's going to be empty shelves, the recession, the depression, all the chaos. I can count on two hands how many people I know who are max bullish during that entire thing. Three of them are sitting in this room right now, right? And when you think through that, you say to yourself, wait a second, we went from max pain, max fear in the first half of the year to max bullish in the second half of the year. What changed? What people thought about the tariffs didn't come true. The Fed cut rates, asset prices went up.

13:45Price drives sentiment. And so we learned that in 2020 and 2021. We're learning it again now. What I will say is I think that there is significant room for asset prices to run. I do not know when it ends, but there will be a correction. When that correction happens, could be in a year, could be in five years, could be in six months, could be in two weeks. I don't know. But when it happens, you should have already done the work to prepare yourself and say, based on the asset allocation that I have right now, I feel comfortable capturing the upside that is left in this bull market. But I am also comfortable holding these assets if they were to draw down 50 % or more.

14:24That is how I think about investing. I want to hold assets that are asymmetric to the upside, but I also want to have an allocation in that high risk bucket where if If it draws down 80 % like it has in Bitcoin, I'm cool. I can wait. I'll just wait it out. I'm not going to do anything. You can't panic sell me, right? That is the type of asymmetric upside capture with the resiliency on the downside that makes an investor very, very dangerous in the market because they can take high risk because they're willing to actually ride the downturns. Not a lot of investors, especially hedge funds, they can't do that stuff.

14:58So in conclusion from that video, yes, I think prices are going higher, but don't get too excited. If you lose your ability to think clearly, you're gonna make bad decisions. Woo-sah. Never get too fearful and never get too greedy. Just stay cool, calm, and collected. The market will take care of everything else. It pays to never get too excited or too fearful, staying right in the middle. That's not only where the best investors hang, but it's also where all the returns can be captured. Now, that's it for today's show. Thank you so much for watching. Remember, we have less than 29 ,000 followers on YouTube, and I need your help to get to my goal of 1 million.

15:35The people are saying it's not possible, but I believe in me and I believe in you. Hit that subscribe button and let's get to a million. That's it, and I'll see you guys tomorrow live from the desk of Anthony Pompliano.