Gold, Crypto, the Debt Crisis, and How to Survive When the US Needs a Bailout

27:57Coleman Church:inflationary i bought gold that month remember yeah and i've done better than the stock market's done well it's funny if i the move in gold this year i won't get it right off the top of my head but it's over the last 20 years i think now is the gold's now beat the s &p now when you compare the two yep it's really effectively just the debasement trade when you look at it what's the debasement trade basic trade is that the currency that we the currency that we all use and think about every day has been debased against gold, right? The value of the dollar. I think oftentimes people look at the dollar as the dollar strong or the dollar weak.

28:37And what people are looking at is effectively the DXY, the dollar index. And that's a basket of major currencies, or it's heavily weighted to the major currencies, euro, yen, Canadian dollar, Aussie dollar. And it's really at this point, kind of a ridiculous comparison because all of those countries are sort of in a basket case with their debt issue and their growth. But if you look at the dollar versus Bitcoin or if you look at it versus gold over the last 10 years, it's pretty clear that the currency has been debased in those terms. So if you look at it in that terms, the stock market returns don't really actually look quite as great, as wonderful if you're looking at it what a dollar would, how many dollars it took to buy an ounce of gold 10 or 15 years ago versus today.

29:30Coleman Church:And all of that, or some of it, is downstream from the decision by the Biden administration to freeze Russian assets because that scared the crap out of the rest of the world. I think the gold move is for sure. The dollar weakness against gold, yes. But there's also, I mean, I think the big move in, I mean, if you look at if you look at what we did after the GFC in terms of interest rates and global financial crisis where what we did bail out extraordinary measures, fiscal and monetary keeping interest rates at zero emergency measures keeping rates at zero that remained in place for a good 10 years.

30:19I don't know how you state emergency measures at zero interest rates when the stock market quadruples over, triples, quadruples over 10 years.

30:32Coleman Church:So what I think - Why is that bad? All those investors got rich. Everyone's happy with their 401ks. Why is that bad? Well, it's bad for a number of reasons. One is, if you believe in a free market capitalist system, you believe in the pricing mechanism. The free market pricing is everything. The price of meat at the farmer's market is set by the free market. Who's willing? Willing buyers, willing sellers at a fair price. Once you start to put in price controls of the Soviet Union, it's definitionally, we don't have free market capitalism. at the core of free market caps is the price of money. So we artificially put price controls on the price of money.

31:23That's the way I look at it. We artificially kept interest rates way too low at zero when the market didn't necessarily demand the conditions. Maybe at the time, certainly five years hence, 2015, I don't really see why we needed to keep interest rates at zero for that long. So yes, I think the reason, in my opinion, the reason the people at the Fed, the dozens and dozens of PhDs at the Fed making these decisions, probably to a man, to a woman, wrote their PhD on the Great Depression and what the Fed did wrong and the horrors of deflation. So really, the Depression was really a result of deflation, right?

32:06So that's the greatest boogeyman of all. So anything you can do to fight deflation. Deflation is the real killer, especially when you have an excessive debt load.

32:18Coleman Church:I'm going to stick to the dumbest possible questions. I hope I don't offend you. What is deflation? Deflation is prices going down. What you kind of want is a gentle inflation to help inflate away the debt, to show a gradual... The benchmark, the Fed target for a long, long time has been 2 % inflation. They soft up that to 3 % recently and as you know, just cut rates this week even with CorePC at 2.8%. So they've kind of abandoned that 2 % target. But what I think in that time... Why wouldn't I want deflation because that makes the value of my paycheck higher, right? It depends on who I is, who the I asking that question is.

33:08Right. So if you're you and your wages are constant and you've paid off your house, certainly deflation would be great. Go to the store every day and things are cheaper. I mean, there's deflation in certain sectors, right? For years, there's been deflation in all technological goods, right? Yep, for sure. TV for 400 bucks. So for you, Tucker Carlson, it would be wonderful. For the economy as a whole, that's really run on hyperfinancialization and debt. If you have a deflationary spiral, you are going to be left with a bunch of defaulted debt. So where we are right now, Now, you know, to pivot, I guess, to where we are here with the U.S.

34:03is I think when this administration came in, they messaged pretty clearly that the move was going to be away from the Biden administration and more towards some austerity. There would be some tax cuts, but it would be offset with spending cuts. uh doge elon etc people got very excited about potential potential cuts um and then i don't know what happened shortly into the administration but there was clearly a pivot that i didn't see coming um and it was around the time of the tariff the tariff uh tantrum and the big sell-off in the stock market but out of that seemed to come that there was a shift towards what people are now calling run it hot, which is forget about tamping down spending, little tax cut.

34:55Maybe we'll take some slower growth, but we'll reduce the deficit for that'll be good for the longterm. And instead let's, let's just run it both ways, fiscal and monetary. So let's, let's cut rates and let's, let's cut taxes and let's spend more. And I don't know what, what happened or if that was always the plan, but, or someone saw under the hood and said, look, the only way, typically there's two ways to get out of a debt problem. You grow your way out or you inflate your way out.

35:23Coleman Church:Right. And it seems to me we're going all gas, no brakes on both. Like we're just, we're going to, we're going to grow and we're going to, we're going to let some inflation go. And that's the way we're going to get out of this debt issue. And I think Trump this week was saying, I could see 20, 25 % GDP growth. I mean, that's a nice number, but that would certainly help our deficit issues. Well, it wasn't that long ago that many Americans thought they were inherently safe from the kinds of disasters you hear about all the time in third world countries. A total power loss, for example, or people freezing to death in their own homes.

35:57Coleman Church:That could never happen here. Obviously, it's America. People are recalculating, unfortunately, because they have no choice. The last few years have taught us that. Remember when the power grid in Texas failed in the dead of winter? Yeah, it happened, and it could happen again. So the government is not actually as reliable as you'd hope they would be, and the truth is the future is unforeseeable, and things do seem to be getting a little squirrely. So if the grid does go down, you need power you can trust. Last Country Supply's newest product is designed for exactly that. The Grid Doctor is a 3 ,300-watt battery backup system that will power full-size appliances, medical devices, and tools with clean, reliable power.

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37:17Coleman Church:Highly recommended we literally use one, as I said. Visit lastcountrysupply.com to shop the grid doctor for power you can trust this winter. Lastcountrysupply.com. Have you ever seen any country try that? No. Really? In 35 years of watching? Oh, 20, 25 % GDP, no. No, have you ever seen any country approach a debt crisis with that? Sure, sure. I mean, Erdogan's probably the most famous in Turkey. Did it work? No. What happened? He tried to keep cutting rates into an inflationary environment and put pressure on the central bank to cap rates, but the free market always, I think I would say you can suspend the laws of science, of physics, of gravity, of market economy for a time, but ultimately the gravity always works.

38:21So the free market always works. So no, it didn't work. They have runaway inflation and extraordinarily high interest rates. and he's under been under a lot of pressure domestically um for re-election obviously so what's the right way to approach it uh well as uh i think was it thomas solo says there are no solutions only trade-offs yeah there are no solutions when you're in this situation when you're in this situation of 37 trillion dollar deficit um is that a lot it sounds like a big number to me i'm not even sure how many commas are in there it's a big number uh it's hard it's really hard to grasp but um i think you go back you started with you know ideology the answer is always going to depend to an extent on what your ideology is and what you're willing to sustain in terms of paying short term to long term and for me i was more uh i was more a proponent of what i thought the plan was going to be which is um some deficit cutting through spending cuts and from what was coming out of doge early it seemed like there was plenty of fat two cut that would have been politically rather popular i think especially with the right pr uh guys behind You know, guys were getting out there every week and on Twitter and going on podcasts and talking about sort of the absurdities they were finding.

39:56Now, maybe it's a drop in the bucket overall, but I think it was a worthwhile exercise to go with. um i don't know i you know again i don't know i'm not on the inside so i don't see what it

40:12Coleman Church:there i mean so the idea always was that federal bureaucrats public servants as we call them were serving were serving and they were making less than their private sector counterparts and there was suffering involved but patriotism impelled them to do it so they did and now you look at the numbers and it's like no no no your your federal employee on average makes way more than your private sector 2x 2x so they're the most privileged people okay in the in the middle class and by far that doesn't count their gilded pension plans is it really 2x i think it's i think the number is average medium private sector family income is 70k i think it's 110 or 115 for for federal.

41:02Coleman Church:Not including the benefits, which are ridiculous. Work from home for five years. But then, you know, of course, the population of federal workers or federal contractors, which are, I mean, there probably is many federal contractors. No one ever says that, but there are. Deloitte is a federal contractor, right? So there are so many of them now that we maybe have reached that tipping point where no administration can pivot against its own employees because they're voters. Maybe. Maybe. But, you know, I'm sure you've alluded to it many times. You can't have, what is it, seven of the 10 top zip codes in the United States are all in sort of in and around Washington, D.C.

41:45I mean, I went to, you grew up there. I went to school there in the early 90s and I hadn't been back for 15 years. It's night and day. It's gleaming, gleaming office towers, rows and rows. I remember having an internship two blocks from the White House, and you had to pass sort of bombed out derelict buildings. And now it's as far as— From the 1968 riots. They never were rebuilt. 1992, they were still there. Like literally two or three blocks from the White House. I remember. And it's crazy. I mean, it's—and flashes of Roman Empire, right? You go to Rome to collect your tribute. And so I don't know.

42:28I don't know. I'm not as privy to that world as you are. I don't know what people see when they get into office and realize that there's potentially no way. There's no way around it. All our intentions are we're great, but this is the way it's going to be. I don't know.

42:46Coleman Church:What? Okay. But you're also suggesting that this is not a solution, that you can't spend your way out of a debt crisis. I don't, I haven't seen it done before. Right. How much magic would that take? The sense, a very talented individual. He's a lot of experience in markets, very successful. The right guy to have at the helm. If he thinks this can be done, I guess, we don't have any choice, but to see how it plays out. But maybe that's the play. The play is this is our only way out. there you know people on both sides people i speak to people i knew in the markets friends of mine people whose opinion i respect on both sides of the aisle um the one thing we all agree on is that this is not a tenable situation um it's not some mmt elizabeth warren people were talking to this is like normal people that say like okay at this point we're kind of boxed at 37 38 trillion um So maybe that's the issue.

43:53Maybe we're so boxed that we got to run this experiment because it's our only way out. And hopefully growth kicks in.

44:04But the growth scenario, the current growth scenario in the U.S. is really hard to get your hands around. in one part because it's such a polarized economy. People are calling it a K-shaped economy, which I think is a pretty accurate term. K-shaped meaning the lower end is hurting and continues to hurt more, and the upper end gains and continues to gain more. And we've seen throughout history that's not a tenable situation.

44:37Coleman Church:No, it's actually what happened in Venezuela. It's how they got Hugo Chavez. Yeah, it's a powder keg, ultimately.

44:45And it's also extraordinarily difficult to get a real handle on where the numbers are because we're not releasing any numbers right now because of the government shutdown. So, you know, the Fed's flying blind to an extent. You can rely on certain private sector indicators that are kind of shockingly bad, frankly. When you look at consumer loan defaults, credit card balances, the late credit card payments, auto loan defaults, I think October was 185 ,000 announced private sector layoffs. I think it's worse since 2008. So you have a situation where you've got to, you know, the U.S. economy is 70%, 69%, 70 % consumer led.

45:29so if we're going to rely on the top 10 percent to continue to spend on you know gucci bags and trips tost bart's i i just don't know how sustainable that is when the lower end is you know swapping out uh new york strip for for pork loin and walmart numbers are great because middle and upper middle class is shifting from the publics to walmart shopping like everyone everyone's getting squeezed um so i don't know i don't know that the growth is there the growth can come maybe the growth can come with uh these tax cuts with industry cuts with uh certainly with deregulation will help um and all this promised uh foreign investment but uh there's

46:22Coleman Church:a lag to all that so we'll see it does seem from a an ignorant outsider standpoint which is mine that there's an awful lot of emphasis on the public equities markets and like the stock market's the measure of how we're doing whether or not that's a good measure you know i don't know maybe not a perfect measure feels like to me but um how safe is the stock market in the united States as a place to put your money?

46:53Coleman Church:I can tell this is an uncomfortable question. Be as diplomatic as you can be. Well, it is the largest, most liquid stock market in the world. It does attract not just domestic savings, but huge foreign investment for, you know, there's expression that says money goes, capital goes where it's treated best. And we still do tree capital the best in this country. Extraordinarily dynamic markets from, you know, venture cap to private equity to public markets. And that's something we should all be very proud of. And it helps, you know, grease the skids of global commerce. And that's great. There are some concerns, clearly concerns about the value, current valuation of the equity market and the structure of the economic, structure of the flows.

47:47Um, so one, there's a massive concentration risk. Um, it was the FAANGs, now it's the MAG7, the top 10, uh, companies in S &P 500, I think have accounted for something like 42 % of the gains year to date. Um, the big get bigger. You had new NVIDIA at one point tipped over$5 trillion market cap, which is. Again, a hard number to really get your head around. At that point, I think it was larger in market cap than every market in the world except for U.S. and Japan. Entire market cap of any other index in the world.

48:36Coleman Church:Wait, bigger than the entire index of any country in the world? Yes. Bigger than the cumulative total of the value of all the companies traded on those indexes. On a random exchange, yeah. except for, I believe, U.S. for sure, and I think Japan. Again, I could be wrong, but something in that, you get the idea of what I'm... So just one company dwarfed all these economies. That's right. And that, you know, we don't need to go into all sort of the price to book and price to sales and expectations of future revenue, all that sort of thing. uh you get into a market psychology event where stocks that go up continue to go up because people chase momentum i read something yesterday that the explosion in in options trading uh the volume options is now three and a half trillion a day which is larger than the entire market cap of the russell 2000 so 2000 like the 2000 mid small mid-sized companies 300 million to 2 billion market cap companies in the United States.

49:44And that doubled, I think, from 2022 and then doubled again. So you've got an insane amount of leverage. You've got margin debt at all-time high.

49:55Coleman Church:May I ask, why is this significant that the options market is huge? Because it's not just the options market's huge. It's also the structure of the options. They've moved to zero-day to expiry options. It used to be weekly or monthly options, and now it's same-day options. So the retail, the gamification sort of. So an option, my understanding of an option is an option is a bet on in what direction. In the direction with, and you get an immense amount of leverage. Immense amount of leverage. So. How does that work? How do I. So let's say that you want to buy a call betting that NVIDIA is going to go up between now and the close.

50:39an at the money nvidia call meaning let's say it's trading at uh 177 right now and you think it's going to go up and the price of the at the money the 177 call is till now to the end of day is 75 cents let's just say so you're betting that it's going to go up more than 75 cents if it goes up$1.50, you've doubled your money. You're not just making 75 cents on 177, which would be whatever, 31%. You're making 100 % of your money. So you're getting, all you can lose is the premium, the 75 cents you pay for that option. But everything over 75 cents starts to run exponentially in terms of profitability.

51:25So people are making an insane amount of money in this run-up on options, zero-day options, and they're doing it from their phone. It's pretty easy. That's not really investing, though. That's betting. Yeah, that's gambling. But that's just one component of the structure of the market. But it sounds like it's now a huge component. It is a huge component. But again, with the gamification of crypto trading and options trading and Robinhood, and with gambling, you know, DraftKings and all that stuff. It's sort of part of the culture. And it all started in COVID with people at home with extra stimmy money and not much to do.

52:05And the market was ripping and people got hooked on it and people keep doing it. And generally people are doing quite well. I think, you know, retail has done better than institutional, largely speaking, this year. But the other part of the structure of the market that's somewhat concerning is just this passive flow. So then there's a guy named Mike Green. he should probably speak to has done the best work on this um and passive flow basically 401k if you put your money in every two weeks your money's automatically going to your 401k and it's you click to that it's auto invest if you go and you look at most companies 401k options uh their options and what to invest and then you break down each one of them basically every single equity option fund you have has the same high concentration in the same five stocks so you know apple microsoft nvidia so you don't know that necessarily you don't really know what you're buying or what percentage of the fund is in those it's very highly weighted because the higher the market cap go higher waiting the higher the waiting goes and on and on and on so it's an auto it's just an automatic machine like underlying bid to the market that continues to the big the big get bigger and bigger and bigger and you could say okay what's wrong with that these are great companies they're multinational they have great business models that were low capital intensive and high margin and they're basically a lot of monopolies in their space okay well two things can happen if unemployment rises if you lose your job you're not putting your money in 401k if you lose your job and inflation keeps ripping you might have to withdraw from your 401k which creates a vicious cycle the other way then it's too much concentration and too much concentration and the structure of it is perpetuates it and then you add on the leverage of the option trading with the momentum that keeps this trade going and going and going to where you get to$5 trillion market caps.

54:18Now, there'll be a whole coterie of Wall Street analysts that will justify why$5 trillion makes sense because of this, that, and the other thing, but I'm not sure.

54:30Coleman Church:What if they're of the 5, 8, 10 companies that have the bulk of the value, the plurality of the value of the entire S &P. If one or a couple of those companies dramatically reset in its value, in its share price, what would happen? Well, you're seeing it kind of right now as we speak as the AI trade is starting to lose a little bit of favor. There's starting to be some questioning on the AI trade. And the market can't continue to trade up when it's straight up if one or two of the major components are falling out of bed. I mean, this week it's been Oracle and, you know, last night Broadcom like took the market down.

55:16NVIDIA is starting to weigh a little bit. So we're very tech sector heavy. And the other thing that concerns me to an extent about not just for public markets, but for private credit markets is that with this AI build out and this data center build out, obviously an extraordinarily capital intensive and what i was speaking about before uh about how a lot of these maximum countries have companies had a great model of being capital

55:46Coleman Church:like they're now becoming quite capital intensive it's not writing software it's building physical things exactly you're building physical things and you're spending you're borrowing a ton of money and this is what the problem with oracle is right now is they borrow a lot of money and now they're borrowing a lot of money to build things and build things that depreciate in value over time right like a chip that you buy a lot of this a lot of the financing that's been going on too has been people have been using collateral these chips as collateral to borrow against so there's borrowing and borrowing and borrowing but you're borrowing against a chip that naturally is going to be replaced by the next evolution of course so So that's a bit of concern about the value of the collateral.

56:31And when that daisy chain unwinds, it could be ugly. The other thing is that there's so much borrowing in the private credit markets for these hyperscalers and these data centers that it crowds out. There's a finite amount of borrowing available, right? So it's crowding out borrowing and investing in other areas of the economy. And that concentration risk concerns me to an extent as well. and the different a lot of people have made the analogy to you know the 99 2000 tech bubble and you know the good news coming out of that down the line is that okay we all got hyped up on the internet and we got carried away with pets.com things like e-toys but the truth was in retrospect we weren't hyped up enough about the internet and what it would do and how it would change the world but there's still a cycle that comes along where there's the euphoric cycle and then the crash cycle uh and then on the back end of that you have the winners that survive like the amazons right that that you could have bought for practically nothing in 2002 um and then there are you know companies like the similar to me to this the hyperscale data center were the um were the fiber companies like Global Crossing, WorldCom, right?

58:00And those were bubbles that crashed. But what were they doing? They were laying fiber cable for the internet, which, okay, we had a malinvestment boom, the companies crashed, but the cables still exist, and the cables are in use today, and the cables were very valuable, and the cables didn't depreciate because the cables have a useful purpose. So people are making the same argument now. It's like, okay, we may go through that cycle as well. Let's maybe get a little fork. There'll be winners and losers out of this, and it'll be fine down the road, and AI's not going away. I'm not here to disagree with that.

58:38But there's a slightly different component where you're building these things that could, you're buying all these chips that could depreciate. It's not exactly the same tree.

58:53Coleman Church:No, and the nature of technology is hard to forecast, very hard to forecast. Yeah. I mean, so they were telling us six months ago that AGI was right around the corner. Nobody thinks that anymore. Just for example. And so all of these infrastructure bets are predicated on predictions about what the technology will require in 10 years. The thing that we're really running up against. Do we know that? We don't. You're exactly right. And I think there's the worms turning a little bit on the efficiency of a lot of these. Yes. And what they can and can't do. And people say, you know, I saved a half an hour or I saved an hour coding something, but then it took me three hours to check to debug the work that the actual, you know, clot or whatever did.

59:43But the real thing that we're going to run into is we don't have enough power. we don't have enough electric and we don't have enough water to to heat and cool all these things that's just point blank and even uh you know jensen and altman and those guys they'll tell you that and that's why they're going hand in dc and trying to make um you know trying to make trying to make the case that this is a critically important um industry that may need some government backing but even if you get that the fact of matter is the only way you can really power these things uh without spiking electricity bills another 300 and then creating a whole another political problem domestically is you need nuclear power and you know we can't we have plenty of natural gas that can work as a stopgap but you need nuclear power and it's a 10-year build-out minimum to get the nuclear power that you need so when do we hit the somewhere between there here in that 10 years, we hit the wall in terms of our ability to get the electricity for these at this growth rate.

1:00:49Now, is this growth rate accurate projection? Maybe it's not. And if it's not, then we need to see a lot of these companies come off in value.

1:01:00Coleman Church:So - Also, there are a lot of concerns about climate change. Yes. Oh, just kidding. That kind of ended quickly, didn't it? Yeah, I haven't heard that phrase in months. Have you? Climate change. No, I did see. I saw something that Nature magazine had to revoke a paper they did a few years ago that said that climate catastrophe was going to create an economic catastrophe. And that was all based on false premises. Yeah, I think the new idea is we're going to have an economic catastrophe if we think about the climate catastrophe in any way. I noticed Larry Fink's not lecturing as much about the climate anymore.

1:01:47Climate in ESG is not as fashionable as it was a couple years ago, that's for sure.

1:01:52Coleman Church:So how did that, like as a guy who has dealt in markets, like emerging debt, it's pretty pure, it's like a debt trading is like a pretty pure market, right? right well pure is an interesting choice of words no i'm not saying unsullied it's pretty plain vanilla is that what you mean i mean like there's a willing seller willing buyer and but what i really mean is the price is uh an organic price it's like what people will pay correct so that is the definition of a market right how do you get to the price correct So as someone who's spent his life in that world and who clearly you're clearly like committed to the idea of markets, like you believe people should be able to decide what they're going to pay for something and what they're going to sell something for.

1:02:44Coleman Church:How do you explain ESG? I don't know that. Funnily enough, I don't know that even the experts can actually define it. And I'm not.

1:03:00And I'm not joking when I say that. When I, at my last job, we would do a conference every summer in Europe for investors. And we'd have a series of roundtable topics. And the one topic that was standing room only sold out every summer in Europe was the ESG, without question. um it seems the u.s has definitely faded faded quickly from that but europe still seems very uh very hooked in very hooked in it's not faded there at all it's definitely a part of the investment process uh but what's fascinating is if you go to 20 clients in london and you talk about esg you will get a different answer from each esg specialist as to and especially in emerging markets it's a very difficult thing to to work your way around the esg constraints when most of what emerging markets are based on are hard commodities uh and there's also obviously the governance component the g component it's not always maybe up to western standards with the G.

1:04:14With the G. A little light on the G. The E's not great. The S, no one really knows what that means. And the G is highly questionable. So it's funny. It's just, it's there. It's still, I guess, what I call a work in progress.

1:04:32Coleman Church:But just like conceptually, the idea that factors that are not really relevant to your fiduciary responsibility, which is to maximize returns for shareholders or something related to that. Like, I don't know. That's just, it's just an interesting concept. Like, how did that happen? It's. That my personal guilt as like an educated Westerner supersedes your right to have me handle your money responsibly. Well, it's straight government intervention is what it is. It's government. It's government. It's ideology. If you are of that mindset where you believe in control economy, it is the dream of all dreams to incorporate your ideological bent into the last thing that should be left alone, which is the free market.

1:05:36you now inculcate all of this ideology into every decision-making process all the way down to setting the price of money which to me i know i'll run afoul of plenty of people on this but to me that that's a bridge too far um that's not the place for it but it's it's one in once in it's impossible to get out you know once once you call go into that's that's involved in all the investment processes it's really hard to take it back out again so back to the ai infrastructure

1:06:16Coleman Church:boom in the united states um if that slowed down or if people lost confidence in it are you concerned about a cascade effect on public markets? In the short term, yes. The question is how quickly does the market rotate? How do the rotation trade? So we're starting to see that actually the last week or two, you're starting to see like small caps really rally, Dow components really rally, old economy stuff really rally as tech is being soft. So there's theoretically a way you can thread the needle there. But with the concentration risk and with the size of just actual size of these companies, it's going to be a drag on the overall market as a whole, best case scenario.

1:07:10Coleman Church:One of the reasons the stock market, as my theory, is so big is because it's the easiest and, as you said, most liquid way to park your money with some hope of return. And I don't really think Americans are encouraged to think of other ways. I just have always noticed that. Absolutely. And as an emerging markets guy who's been able to look into other countries, frontier markets, et cetera, and how they look at it, there's always from, if you're an Argentine or a Brazilian or a Turk, you're always looking outside of your domestic economy, domestic market for opportunities. And we really don't too much.

1:07:55No.

1:07:56Coleman Church:And it's so easy to participate in the public markets in the United States. As you said, you can do it on your phone. You can make bets on market movements from your phone, which is just like, seems like it might have unintended consequences maybe. Yeah. It crosses the line from, as you said, from investing to straight gambling. But, okay. So, ease of use is like the key to any scale, I think. Sure. That was Amazon. That was, yeah. there's a lot of there's a lot of there's a lot of applications to that uh well yes yeah yeah that's true yes yeah well that's by the way why tobacco use went absolutely crazy as soon as someone figured out an automatic rolling machine for cigarettes people used to have to smoke pipes cigars take snuff up their nose the second you made it super easy to burn tobacco the whole world became addicted to it makes a lot of sense right and that's what the stock market is in the united States from my perspective.

1:08:51Coleman Church:So, but if you're trying to be a little more creative or hedge a little bit, your future, your family's security, where else do you put your money? Again, it depends on, you know, who you are, net worth, et cetera. Let's say you have an extra hundred grand. What would you, what would be a good call? Well, the problem is the great obvious trades run a lot already, right? Gold and silver's already a run a ton so long-term investing let's try to look at stuff the ideal cross of um you know what sort of fairly valued or cheap or distressed or out of favor that people haven't really cottoned on to because you see a trend that's about to emerge right right now we're in full-throated recognition of the debasement trade and silver's breaking out for not for that reason but also there's a notion that there may not be uh as much physical silver out there as to read has been written against so there's been a bit of a bit of a squeeze going on two weeks ago the chicago mercantile exchange shut down for a cooling issue overnight uh just as silver was spiking, which was kind of convenient.

1:10:11So there's some technicals in that market.

1:10:14Coleman Church:Wait, so you think it's possible there's more paper against silver than there is silver? Yeah. So yes, there are definitely more derivatives written against all commodities than exist, but no one ever asked, not no one, but typically if you're an investor, you don't ask for physical delivery of the commodity. I do. I know you do. I do. I know you do. And I'm going to find out where that stuff's buried too. So you don't typically ask for the physical delivery of it when you're trading in tens and hundreds of millions of dollars of derivatives against. You cash settle your derivative against mine.

1:10:50Cash settle. The loser pays the winner and you move on. So where do you go? At this point, given where valuations are, I think you go abroad. You look at multiples. on U.S. stock market where we were trading historically, extremely high PE ratios for the index on a historical basis and very high against foreign markets. I think what this administration's doing in Latin America particularly, as I mentioned earlier, sort of Monroe Doctrine II, there's clearly a movement afoot to stabilize the region and to partner with those that are critical to us. I would imagine that open up a ton of investment and growth there.

1:11:36There are plenty of Latin American countries that offer pretty cheap historical PE ratios. So I think it's probably time to diversify a little bit out of the U.S. and diversify out of tech heavy stuff.

1:11:50That's where I would go simply. I think you still have to own some gold and silver. You just have to own some, but just not as much as you wanted three years ago, given how far it's run.

1:12:01Coleman Church:so but you're basically making a pitch for the venezuelan stock market uh not specifically but there may be a there may be a catalyst coming there that could create create a big move on way or the other it seems in the next in the next couple weeks what about real estate land real estate land for sure that's why i asked like it depends on who you are um i think productive agricultural real estate anywhere is always a good investment sort of a disaster hedge um but yes land as a whole yes um i don't think i'd want to be rushing into blue cities uh and paying high interest rates and taking out a bunch of debt on uh on overpriced uh co-ops in new york what about buying a 70s era office building on sixth avenue in midtown new york uh if you can convert it to residential perhaps and get a lot of tax breaks but i may want to see uh may want to see what our friend mom donny says the first couple weeks so you made the point that for a bunch of different reasons ukraine war but other structural reasons we are on the path to losing our privilege as the holders of the global reserve currency at some point, right?

1:13:21Coleman Church:Well, because all empires are. Yes. So we know that. The question is, when does that happen and what replaces it? And my read is, as of now, there's no obvious like national replace. We're not going to like adopt the British pound or the euro or the yen or the ruble. But instead, gold is the stopgap as it has so often been. But crypto seems like the next global reserve currency. Is that fair to say?

1:13:56Yes. Yes. I mean, I would say this. There's kind of, I think people bundle together the notion of like blockchain and cryptocurrencies. And what I'd say, I can't necessarily make a pure prognostication on any one particular crypto. I mean, it's been a phenomenal exercise and wonderful to see. It's sort of like adhering to Austrian economics to see the experiment work. I don't think we want to get into the dynamics of individual cryptos. I think at some point, probably Bitcoin as a crypto will be usurped just by sort of a better technology. but put that aside what to me unequivocally and the next venture I'm going into is related to blockchain is blockchain is here and is not going away whatsoever and blockchain is going to transform the financial services industry pretty much everything we do financially transaction wise and fortunately we have the wind at our backs with this administration and dave sacks and genius act etc uh and nobody nobody who maybe was somewhat skeptical three four years ago is at all i mean uh larry fink and as an example is i think he continues to say all assets are going to be tokenized uh just this week dtcc said all all assets are going to be be tokenized and put on the chain and that's going to remove a lot of little frictions in the system um extra costs that don't need and extra time lags that don't need to exist um so the cryptocurrencies like cryptocurrencies exist with the layer of the blockchain you can't have crypto without the blockchain but the two are somewhat distinct so a couple questions one uh is it

1:16:16safe i mean it's reliant on electricity yes but so is uh so is every and i guess mentioned the cme went dark right the other day um chicago market right so um the nasdaq shut down right um everything we do is reliant on except for you coming over in your golf cart with a bag of gold coins for me is is uh is relying on energy to that extent is it safe is it hackable uh the theory you know one of the theories being proposed of bitcoin i'm not really sure if this is you know bitcoin's had a pretty decent drop from high 120s to around 90 um you know part of part of the thing being floated is that with quantum computing making the leaps that it's that Bitcoin might be able to be hacked at some point, perhaps.

1:17:19But again, I'll put that separate to the blockchain. The blockchain, deeply encrypted, safe. These are the rails on which everything's going to run.

1:17:32Coleman Church:Okay. Will it eliminate corruption?

1:17:39Coleman Church:Or curtail it? I think the question coming from you is a funny question because you know that nothing will ever eradicate corruption in the human spirit. Unless it changes the human heart. Right. No, of course. Yes. It should eliminate corruption because what the blockchain is going to do, what it does is it creates a permanent electronic unhackable ledger. So think about something as basic as title insurance. I don't know if you've ever had to deal with that. but first of all like why do we need to pay have i ever deal with that yeah i pay constantly okay so why like it's an absurd notion right there's a title you own the title you put it on the blockchain it's there forever and i buy my house from you the title gets transferred to me it's registered on the box the transaction's there now it's mine it's there forever we don't need to pay a couple grand or whatever sorry one of my best friends runs a title company in maryland uh but you know he's my age so he's probably almost done anyway um but uh that's just an example like why do we need to pay five grand for title insurance i just sold a house in westchester and i found out that there was from two owners ago there was like according to paperwork there was a 650 000 mortgage still on the property and that never got expunged but the the tie the brokers just kind of waved it back and forth and everyone just kind of stamped it like that stuff that's just an example that everyone can kind of uh relate to but also like why we'll be able to send money uh immediately you know with no you know if i send money to you you'll immediately get the money get the get the care get the interest on it why should i be paying 30 to send a wire from jp morgan like that's pure 30 of margin like all that kind of little stuff and And so the company that I'm going to be starting with Jan 1 is called Liquidity.io.

1:19:44And we have one of only six fully registered licensed alternative trading systems, which is a trading system that's going to be able to trade all these tokenized and financial assets. And what we want to do is help democratize the financial markets and tokenize all kinds of assets. but we're working with our, with our backer, just made some acquisitions with a couple of, uh, consumer loan businesses, auto loans and, uh, manufactured homes, mobile homes, for example, like there's a great story. These two young guys in Dallas, uh, they're working at JP Morgan and with their fourth bonus, they said, we're not, we're gonna, we're not gonna blow it this time.

1:20:27Let's buy some rental property. And they couldn't find any rental property. they're in dallas so they just cold called like 250 mobile home uh parks and they found one put in 50 grand turned around it was a six million dollar trade uh they were going to do a bigger one and what they realized they were better off doing was revolutionizing the lending business for mobile homes uh because guess who the biggest player in that is was warren buffett so So great business, obviously, high margin business. But what I didn't learn until recently is that there is no refi on a mobile home and there is no lending available on a secondary purchase.

1:21:10So if I take out a loan for my mobile home and then want to sell it to you, you can't get a loan. You have to buy it for cash. And if rates go down from eight to four, I can't refinance it. So they're going to, with their business and tokenization, they're going to eradicate all kinds of costs and create these two separate markets, which is a solution to, is a partial solution to the home affordability crisis. Like that's something everyone can get by.

1:21:37Coleman Church:How does this new technology figure into like monetary policy? Wow, that's a great question. So you familiar with stable coins? I am. But will you describe what they are? Sure. So stable coins, think about it this way. In simple terms, say crypto, like a Bitcoin, is sort of a free-floating currency. The market dictates. A stable coin is more like a pegged currency. So pegged to fiat. In this case, like Tether, Circle, they're pegged to the US dollar and try to keep it stable at parity, one-to-one. uh so what they are is a and there are national currencies like this there are countries like the bahamas or whatever just pegged one-to-one exactly um yeah panama's dollarized steven hanke was a big dollarization component um they tried to do it in argentina it didn't work um hong kong's got a dollar peg um so so the stable coins they um they try to keep parity with the dollar and they're back theoretically backed by um treasury bills so money comes in the money gets invested in treasury bills one for one you're backed by triple a rated short dated no risk uh but it become these become a conduit for all these transactions uh on the chain automatic through these so it could go through go through the uh the stable coin and into other things from there as a sort of a conduit now that's all good and well as long as they we're sure that those stable coins are taking dollar for dollar investing in what they say they are without a lag or without moving too far away from that.

1:23:37Tether at the moment, it seems to be diversifying away from strict T-bills and they've been moving into gold, which is working for now, but you have to be determined how that works out.

1:23:48Coleman Church:So does all of this make the US dollar stronger or weaker? Oh, sorry. Yeah, so that creates a natural bid for our treasury bills, which is a great thing for the sent friends because that creates a whole new uh demand vehicle for our treasury debt on the stable coins um and what these stable coins do allow for again a lot of emerging markets uh participants is allows them to quickly access dollars and um and avoid depreciation risk in their own country so you're getting a lot of foreign foreign money into stable coins, that will be bid for T-bills, which should hopefully help with our funding. Is there any way for the U.S.

1:24:39Coleman Church:government to use stable coins as a weapon in the way the Biden administration used Russian assets at the New York Fed as a weapon? I don't know. I don't know. I imagine there is. I don't know what that mechanism would be. And I don't think, I mean, in the Russia reserve instance, it was a bilateral seizure. This would be a seizure of untold amounts of investors. You're seizing that. I'm not sure what the purpose would be other than just stealing the money. Well, we've seen that before. True. What do we know about global gold reserves since it's such a huge component now? what we know we don't know everything that we know because it's not fully transparent but what we do know is the direction of travel which is massive increases particularly uh from india china russia that doesn't seem to be abating at any time that means they're importing gold that means they're buying gold and there has been a lot of movement of physical gold particularly over the summer but the movement appeared to be more from the london vaults back to the united states rather than elsewhere but we don't know we don't have complete clarity on any of that stuff how and why how so if you're gonna have an ancient commodity that's like a huge part of the global system economic system how can you not have transparency maybe i'm answering my own question i saw you look at me like i'm an idiot i saw you answer i saw you answer it before you finished the sentence in other words if it's so important why are people being honest about it because it's so important that's why weird that the chinese wouldn't tell us exactly how much they have in the vaults yeah um yeah there's no reason they should or would or have to i guess my question also you don't want to say show your hand on how much you're accumulating as you're trying to accumulate an asset.

1:26:53Coleman Church:Oh, is that true? Well, yeah, typically. Typically. I'm learning a lot about markets from you. That's great. That's great. So I told you, I promised you stupid questions. I know, I said there are no stupid questions, but I was wrong.

1:27:10Coleman Church:So, okay. Then let me reframe the question this way. if we got somehow full transparency on gold global gold reserves where they are who has gold how much would we be shocked is there a big spread between i think so i mean reality we we still don't have the audit of fort knox that we were supposed to get a few months ago so really yeah you might be shocked about that too i don't know right you think fort Noxious has a lot more gold than they're telling us? They may have 10 times more. I don't know. I really don't. I don't want to speculate. I mean, I like to speculate, but I don't want to speculate on that.

1:27:55Coleman Church:I'm guessing if there is a spread between perception and reality, it's to the negative. But what do I know? Not sure. There's talk about revaluing the gold as well. What does that mean? That means if you automatically revalue our gold reserves to market, we automatically have a higher effective capital base that should make us more credit worthy, for lack of a better term. So gold now, U.S. reserves are valued at like under 100 bucks an ounce, something like that, something crazy, right? I'm not sure exactly what it is. But I mean, that's like 1933 levels or something. And of course, gold is over four grand an ounce.

1:28:39Coleman Church:So why would we continue to value our own gold reserves thousands of dollars below what they're actually worth? I have no idea. That's weird though, right? It is. Yeah, especially when every other metric in the economy, we've cost of living adjustments based on the CPI basket. I don't know. So how much, just to go back to your career trajectory in emerging markets debt. Yes, sir. how much chicanery is there in that business? So if you're dealing with emerging markets, so some of those are solid, transparent, well-governed countries, and some of them are Nigeria. What's that like?

1:29:25Well, I would say there's two components in the emerging markets trading business. There's the trading thereof in sort of the big money centers like Hong Kong, London, and New York. And then there's the domestic stuff that happens. Now, I could say in terms of chicanery, there's a clear 80 BC line at the global financial crisis on how we conducted business across the street in all products pre-GFC, post-GFC. And all I could say is a lot more fun pre-GFC. was it fun it was a lot of fun it was as much it was as fun as you could have having a job really job what was so fun about it um every day was different uh you're on a trading floor everyone every every day is different you had a front seat uh you have a front seat and you're participating in global events every day uh mark's moving up moving down you're working with like a truly diverse bunch of people from all walks of life that are as close probably to meritocracy on trading floors you could get and it was very clear what the motivator was it was making as much money as it could every single day and there was nowhere to hide from that so as a young person uh it couldn't be a better learning experience because every day at the end of the day there's a number next to your name and whether it was through your good luck bad luck hard work whatever the number doesn't lie and that's the number and it's just a great way to learn and to have to face yourself and improve upon yourself and uh you know the training floor was guys you know like PhDs from Princeton to guys that dropped out of college and we were all kind of in it as a

1:31:23Coleman Church:team it was really fun and uh what were the personality traits that allowed people to be successful like what's the perfect profile of a trader you know it's funny I found that the best traders and there's there's investors and there's traders right uh different it's a different mindset the best traders i find were guys like to think we thought more in two dimensions so if you thought in three dimensions you could out think you're you could outsmart yourself way too much the what ifs and oh but uh and if you're in one dimension you're just not at the iq level to function so the two dimension that kind of took the factors at play uh saw what the trend was took it at face value didn't overthink it went with it and wasn't too much had enough risk appetite but wasn't too much of a cowboy I guess would be the perfect trader that I saw the the you're describing my dogs yes the worst traders I saw uh were oftentimes the smartest people really yeah because they just overthink just overthink your way you overtrade it you overthink it uh you're always looking at the you're always looking at but this and that and i have all this for me you're either now paralysis and or talking yourself out of a good trade how did it change after the financial crisis?

1:32:57We were egregiously over-regulated from all sides.

1:33:05Coleman Church:Did that make markets safer for retail investors? I don't think so. Because the picture you painted over the last hour and a half is not one of impregnable safety. No. Let me just say that. I mean, there's obviously a lot of unintended consequences from the excess regulation, but it just, you know, it's funny. On Wall Street, I think we were actually at the vanguard of hyper regulation, hyper monitoring. I mean, they were monitoring every Bloomberg chat, every email, every phone call. Everything was taped. then they ran algos against it for keywords um you just like way more scrutiny and everything lived in the panopticon before everyone else yeah i did and i and i think there's also you know a lot of going back to the global financial crisis is such a seminal moment in this country in a lot of ways because it actually we made this deal with the devil and i I, you know, I, I, I'm a beneficiary of bailout.

1:34:18I worked at a big bank that got bailed out and, and, uh, uh, I will make no, uh, I won't, uh, I'll never deny that. But in doing so, we, we let the Trojan horse in and we married the government effectively. And we, they came in and they basically wrote our policies. They wrote our policies for us and from HR policies to recruiting policies to, you know, all the regulation and the stuff that I saw from a distance in terms of sort of arbitrary fining for violations was kind of gangster-like. and I saw a lot of good people sort of thrown on the funeral pyre, sacrificed, just tossed out. Like, let's, you know, this guy was in violation.

1:35:16These guys weren't, but they were on the same Bloomberg chat. So let's give like 10 bodies. Everyone's fired. Everyone's career's over. It was, that was a bad, that was a bad time. It was a bad time. And so everyone started trading scared. People started trading scared and it lost the joy and it lost the...

1:35:33Coleman Church:But famously, none of the, you know, the CEO, the executive level seemed pretty insulated from punishment. Yes. You know, if I were going to give a more sort of generous take on it, you know, the CEOs really didn't have much of a choice in some regard. It was like, look, here's the deal. you could keep your job and keep making 25 million dollars a year uh or if you agree to this fine for mortgage-backed securities or whatever libor rigging or whatever it is this this arbitrary number you can keep your job and you can keep your salary or you can get fired and the next guy will agree to it so like and they kept it a full and they had to be they had to be in good stead with the government or the fines and the regulation would just come and come and come come but once you get bailed out once you ask for the bailout they own you and that's what happened it always is what happened they made the deal yeah and it was like the tobacco companies right like they kept the tobacco companies alive just long enough to keep bleeding them for fees like then they figured out there was just there was money there to to take and uh they just kept coming back about yeah and the country did not get healthier life expectancy went down and if i can just be honest i don't think the quality of the cigarettes improved at all no i'm serious if you smoke a sort of pre-settlement marlboro red not that they exist anymore or a current one it's like it's not even the same product i was a pre-settlement guy i quit yeah oh me too i'm just I'm just saying I've heard that.

1:37:23Coleman Church:No, I don't really think anyone won except for politicians. Right. I don't think there are a lot of lung cancer patients. A lot of nice new regulatory buildings were built. And I think also one of the great stories that hasn't really been, maybe this was for you, one of the great stories that should be investigated is where did the proceeds from all those post-GFC fines go? Because I saw some stuff in around the time that was kind of staggering as to where it went. Now, obviously, it went back into building more of the regulatory bodies, like more SEC regular, whatever. But I think some of the money flowed to some very specific political organizations.

1:38:13Coleman Church:There's no question about it. It went to the swamp. Meanwhile, the whole pretext for this, the justification for doing this was I lived here then. I just saw my house that year. So I was a victim of all this, too, even though I never participated in it. But I lost my job along with a lot of other people. And just because the economy contracted, so people lost their jobs, including those with four children. but the justification was which I wasn't against it was like these people are totally reckless like they're completely reckless like what is a mortgage-backed security what's a derivative and like no one outside your world has ever heard of any of that it's like I thought when I you know signed up for a mortgage like the bank I signed with held the mortgage like we had no idea they sold the mortgage like most people didn't know again there's a lot of ignorance including in my house about this stuff and so the idea was like this is crazy and we need to rein it in you've just described the quote gamification gamification of yeah of markets and it's like that doesn't seem like a decrease in recklessness what actually reminds me something the for the part of the previous conversation which is you know people say you never know when you're when you're in a bubble until it's over yeah and that's entirely incorrect i mean i've been through a bunch and we all know like we all really oh yeah we just didn't know when it's gonna end i mean like give me an example people were talking about the bubble in 05 no if you fought it in 05 you were out of a job pretty quickly like it went on for a long time i can tell you the reason i want to bring it up is again the the perilous today is you know so in 07 i had been on trade and bonds for whatever 13 14 years so not the smartest guy not the most quantitative guy but been around enough to trade enough stuff to understand kind of how stuff works and all this stuff they're coming through with like cdo squared and clo and like synthetic this and that and like i didn't really understand it i didn't have to trade it but like i didn't really understand it i don't really want to get into it because i didn't need to but it's just it's thinking if if i'm already in the whatever percent of financial experts just by nature of where i sit every day and it doesn't smell right to me yeah something's not right um and you trade nigerian debt right right right right so yeah i'm taking credit derivatives on bulgaria and stuff so like yeah yes but yeah you're taking derivatives of bulgaria but you're like this is too much for me it's just How many acronyms?

1:40:52Also, I'm substantially averse to any acronym. And then when you take the acronym and square it, you know you're in trouble. But then this latest go-around the last couple months with all this circular financing and hype with all the AI companies, and every day, somebody's buying chips from somebody who's going to lend the money to buy the chips, to invest in the scaler, who's going to do this. like for every day four companies or you're like dude i suppose i could figure that out if i sat down and really tried to but it gives me a headache just even thinking about it and clearly it smacks of some kind of it smacks of desperation or something that's just my my gut is just having you know the sniff haven't been around a long time it's like dude if it doesn't smell right it's just it doesn't don't put it in your mouth right right so you remember thinking like what

1:41:52Coleman Church:about the tech bubble in 99 2000 did you think oh i got blown out per in personal training trying to short that like the fall of 99 a lot of other people yeah i mean everybody yeah oh i've hilarious I was with my wife in March of 2000 at a dinner, at a lunch with a guy who was chairman of a major broker dealer, famous broker dealer. And where she's 30 at the time, never invested in anything. And we're sitting next to him. He's like, so what do you? she's like oh i've been day trading stocks he's like explain that what do you mean you've been day trading she's like oh yeah i just buy whatever ipos i just if it comes out i buy it do you remember that in 2000 all the ipo friend everything just went up like she's like yeah i just i just buy it and then i sell it it's awesome and i saw i saw his eyes just go like this and then that was like that was like the that was like the joe kennedy shoeshine moment i mean it was literally like February or something.

1:43:05I think it was probably within probably two days.

1:43:07Coleman Church:No, it's when your housekeeper is investing in condos in Clark County, Nevada, that you're like, I think maybe this is overheated. Just a little bit. No, for real. Or you get your Uber divers, like, trade crypto on one hand. Completely. Whenever people are going hard on, like, Cape Coral, Florida real estate who don't know anything about real estate, not against Cape Coral, but you know what I mean? And those were the hardest hit zip codes. Yeah, so So you think it's pretty obvious is what you're saying? I just, it's, it feels. There are sort of like the Russian, just sort of like the letter that they wrote about the Hunter Biden laptop.

1:43:53It has all the hallmarks of Russian disinformation. It has all the hallmarks of a late stage rally. Let's say that.

1:44:04Coleman Church:Yeah. Well, you're very diplomatic. I have to say, though, just like with the baseline fact that you spent your life trading emerging markets debt, I think if you're uncomfortable with something, it's fair for the rest of us to be uncomfortable with it. Appreciate that. Yeah. Last question. You've been through all these bubbles and bursts and debt crises and bailouts. And at the end of every story is the United States or U.S.-aligned institutions like the IMF coming in and kind of saving the day. That's the thread that runs through all these. Yeah, in simple terms, sure. i only deal in simple terms coleman um but what happens if that happens who bails the bailer uh nobody okay so then what happens i don't i don't think i hope you bought that uh that agricultural land in brazil at that point uh so then what happens i don't think we i don't think we get to that point anytime soon um but just theoretically as we mentioned before you know there is no there's no alternative right now right um people still as bad as it could get in the states like we're still the cleanest dirty shirt in the pile for the time being right we still have this free open markets where capital flows and gets treated well there's time there's still time to course correct um i'm not willing to go to who bails out who bails out the bailer i just i i'm not willing to go there i'm not willing to go there we'll be all right we're still still the united states of america and we've got a lot i mean this administration's got a lot of mental firepower and a lot of experience.

1:46:00We still got time.

1:46:02Coleman Church:Coleman Church, ladies and gentlemen. Thank you. Thank you so much.