[Music] [Music] I'm Charlotte McLoud with investing news.com and here today with me is Matthew penberg partner at buunk rers thank you so much for joining me great to have you here good to be back good to see you in person here at vac Lots going on we're going to pick up on some topics that we spoke about in our last conversation which was back in the summer yeah so I know that you strongly believe aoft Landing is out of the question and actually we're in a recession already but we also know this


is not the mainstream narrative and I think what I want to go over first is how can so many people be missing it what are you seeing that people are missing I think a lot of people aren't missing it I think the mainstream media is missing it the central banks are missing the politicians are missing because they have a best interest in missing it and this is the theme of again not trying to be Perma be or just gold bulk depression selling and always being Sensational that's a problem in the industry but the simple fact is if I


were a politician or a central Banker I'd say things are fine you know be calm carry on I think people on Main Street are people investing feel it they feel the inflation however it's misreported um they feel the stress on the Main Street economy they feel the stress in in in loan contraction they feel the stress in layoffs they feel the stress in bankruptcies we've had record high bankruptcies that's not exaggeration those are just facts those bankruptcies have employees and those employees are


losing jobs and the jobs reports are like the inflation numbers it's an Open Secret on Wall Street misreported and manipulated an interesting way but the S&P in the US particular is doing just fine and that's because we're projecting rate Cuts that's a very dobish projection it probably will happen for a number of reasons we can get into but so they'll push the narrative that the bond market and the stock market is once again safe and inflation has been defeated and everything's fine but again


if you're on the other side of the tracks and you've just been laid off or you've lost your job or your company's gone bankrupt um those jobs reports if they looked at more carefully aren't so Rosy and again it's not trying to be a sensationalist these are just sad hard realities it really depends on Whose perspective who has a v vested interest in being positive and again if I were a central Banker or a politician that would be my job when you're working for yourself or


with a group of Partners where you're not constrained by a political party or you're not constrained by a board and you can see the facts you can talk about them clearly it doesn't mean by the way you have to be always bearish the markets I'm very bullish on the markets when the FED is about to give you the Tailwind I'm very bullish on Gold for a number of reasons so I'm not just bearish across the board but the recession indicators are gone over many times are clear and convincing to me


yeah and you brought up a point that I was also going to mention which is for many people it does feel bad right now they can be on that recession so maybe we talk a little bit more about the length and severity of their recession MH yeah and again I have an interesting perspective because I lived in the US for many years half of my life in Europe half of my life in the US I live in France I work in Switzerland I travel to the US I so I talk to Germans who are in recession I talk to Swiss I talk to


Italians I talk to French I talked to Americans North and South so I am feeling that Zeitgeist to that mood of concern heightened this year and last year more than any other in terms of the recession I'm actually somewhat bullish temporarily because the FED is starting to ease they haven't officially cut rates we can talk about how many and when it's it's it's guesstimating but PO is throwing in the towel on the higher for longer because it's been too painful for just about everything but the dollar


and so that is a positive sign at least for the markets that's a positive sign for a lot of companies in the publicly traded world or the private side that now have debt obligations are going to be less expensive in a lower rate environment so that can take some of the pressure off of more Tailwinds for a recession uh ultimately I still see a lot of volatility ultimately rates are still too high for a lot of these companies and small businesses ultimately these layoffs are a foregone conclusion and these bankruptcies


already happened and ultimately um we're going to have to have some constructive destruction because of the debt levels so the severity and length of the recession which we're already in in my opinion not withstanding the S&P um and if you ask a guy in Frankfurt or you ask someone in the suburbs of Paris or you ask some who's just been laid off in Michigan that's an important question um I don't have an easy answer for that because there's still a lag effect a residue effect of a lot of companies


that are nervous about the cost of debt and whether they can afford business and what the real inflation number is versus the report how they can get by and again that's not trying to be negative or gloomy but these are the facts on the ground okay and and so you mentioned we should take a look at fed activities in 2024 and I've heard so many different opinions about what is actually going to happen so let's hear from you yeah in full disclosure like many and myself included I we all kind of s thought


after the regional banking crisis in the US with svb and that there would be some type of break cut or pivot by the FED in early 2023 and there was so much bity on the short end the yield curve that we were really they called the T btfp program by the by the freaking pivot because the pivot was coming and it didn't come and and pow for better for worse stuck to the higher for longer policy now for a number of reasons Powell is before hitting Target 2% inflation before defeating inflation is


throwing in the towel on the higher for longer that's why the announcement came out that they're expecting rate cuts and I think the main reason is first of all it's not reported as as much as it should be at the higher rate policy that he was aiming for this year 2024 there's 740 to 750 billion in bonds that have to be repriced and these are bonds from companies that are listed companies on the stock market so they're going to have to reprice bonds or debt if Powell's rate hike stayed where it was


they'd have to repic it a much higher and more painful level that's in 2024 that's happening in 2025 there's another 1.2 trillion in bonds are going to be repriced if we stayed higher for longer that would be brutally painful for those companies on the stock market which would be brutally painful for the stock market in addition to what's happening these publicly listed companies the private companies have to repic their debt at higher rates the Powell's policy of higher rates was crushing business


and so the inflation story bamned because we had to think about lower rates more importantly perhaps is the fact that Uncle Sam the US government can't afford higher rates for longer so Powell is before hitting Target 2% inflation and despite his war on inflation rhetoric is already pivoting he's already announced we had the pause now we're announcing the cuts I think the cuts we can debate how many and how strong and how long and and nobody knows the final answer have strong theories on


that but the cuts are probably coming that will be good for gold that will certainly be good for the S&P that will be good to kind of Stave off in the short-term recession but what it does is if he's going to weaken the dollar which has always been my thesis every broke country every broke regime has to weaken its currency to save its system and in this case the system is the bond market I have not changed my opinion on that the bond market will be quote unquote saved the S&P will be saved at the


expense of the inherent purchasing power of the US dollar and that will be the same across other countries as well okay and you know you mentioned the FED has abandoned the 2% inflation Target we're coming down before we get to that I I've heard some people say well you know it the reads are still elevated even if we're coming down they'll be elevated so inflation that will continue to affect it what what's your view on what happens with inflation yeah it's a very important question and


uh you know again don't declare Victory before the war is over that's not again trying to be Gloom and doomy inflation is not a debate it's a cycle you have disinflationary and deflationary forces when you raise rates by from 0% to 5 and 3/4 in less than two years of course that's going to be disinflationary of course it's going to have an impact on the CPI but what is not being talked about as chapter 2 or the next battle and the longer chapter and the longer book and the longer war against


inflation which the endgame is absolutely inflationary because here's the simple math without me trying to be Doom and Gloom the Congressional budget office you know is announced in the next 10 years another 20 trillion in I and that's not just a statistic that's unimportant it's extremely important wor 34 trillion in climate in public debt right now those 20 trillion in IUS doesn't even assume a recession so even if everything goes really well the fiscal spending and the IUS and the US


Treasury have to be coming out of Washington that means that a lot of IUS a lot of us treasuries who's buying them the facts on the ground here that European and eastern central banks are not since 2014 there's been a massive net sell of us treasuries and a massive net purchasing of physical gold regardless of the gold discussion there isn't enough natural demand for Uncle Sam's IUS this is not the US Treasury of my father or grandfather and so the simple reality is unavoidably in my


opinion without being Gloom in Doom someone or something has to buy those IUS that thing will be that creature from Jackal Island the usfed and to pay for those they will have to come up with some kind of Mega QE or QE to the Moon they in the past they've been using the treasury general account the reverse repo Market the btfp program to buy time but very soon it's going to have to just be honest we're going to have to monetize our own debt with money created out of nowhere that will be inflationary


so the endgame is inflationary the pause right now is disinflationary because we just raised rates by 5 and 3/4% so of course it's disinflationary it kneecapped the middle class it kneecapped the bond market it kneecapped the S&P in 2022 it kneecapped just about everything but the US dollar but again and this is my thesis if I'm wrong I'm wrong but I haven't found anyone to convince me otherwise the endgame which no one can determine the date or the month of the quarter is destruction or


debasement of the currency to save the system and they will blame that destruction of the currency on global warming on Putin on martians on covid whatever they want but the real cause is I said over and over is the bathroom mirror of politicians and Central Bankers who tried to extend and pretend every bubble by creating a new bubble by manipulating interest rates and the money Supply okay and we're talking of course about the US Devas the currency to save the system did you say you see that being repeated in other countries


well you see I mean look at the jgb in Japan they've had to sacrifice the yen to save the jgb but again I talk about the US dollar not because I'm so pro-american or so American biased but it is the home of the world Reserve currency it affects other currencies from Venezuela Argentina the Germany and turkey and the EU so it's not just because well it's the American dollar I'm America let's talk about the US market whether we like it or not that market that IOU that currency is


extremely important and the fact that it's been weaponized and played with those are all other kind of silos you get into but all those discussions whether you're talking about geopolitics cryptos Gold Bond markets recessions deflation inflation it all comes back from the ripple effect of one key problem unsustainable debt levels and the issuance of even more I us it's just fascinating the bond market is the thing if you understand the bond market and the need to save it whether you believe


it or not or like it or not that is how governments work without exception throughout history not a single exception always destroy the currency to save the system in this case the bond market is there I I think I just have to ask is there anything that the FED could do differently to to get out of the situation that you see coming are there any other yeah there are some cryptic options I mean and this is L Luke groman who by the way I I read a lot and think a lot my favorite analyst is Luke groman


maybe because he thinks the way I do but I I can't think of anyone better I respect a lot of people but Luke is very impressive he's made some kind comments and we could cut entitlement spending by 40% we could cut our military budget by 40% we could come up with a an immediate solution to energy but failing even said frankly if 40% of the Baby Boomers all died and transferred their money to the Next Generation maybe but other than those unlikely events debt is what it is I don't think a politician alive in the


West can get elected by being truthful about cutting spending now jav Malay did that in Argentina you got to give him credit whatever you think he is doing what a politician in the west cannot do and just admitting that we're broke admitting it's the fault of big government admitting it's the fault of living beyond our means and debt cutting spending taking a chainsaw to spending with a very colorful personality and a population that's so beaten down by a failed system they'll they're willing to


deal with it they admit it uh no politician in the US left or right or Europe left or right will admit that come on we're broke and hey we're a world Reserve currency or we're powerful we're not Argentina but in a sense our balance sheet is the US is is but they have the world deserved currency status to to stall and buy time okay and when it comes to Gold I know that you really see it as a tool for wealth preservation but I also know in these circumstances you see the price going up and as we


speak right now we're close to all-time high so gold in 2024 what are you coming I I'm extremely bullish on gold again that could be talking my book but I try to remain objective because I didn't come into gold because I wanted to work in a gold company I came into gold because I made money on the S&P as a Speculator as a hedge fund manager and I realized the gold made more sense than Fiat money Bitcoin makes more sense than Fiat money gold is just more stable for me in terms of what happens with gold


even if you take my thesis I'm completely wrong gold wins either way that's what's interesting about gold that's why even people have different views on the US dollar like Brent Johnson than I do we have the same view on gold you take Luke Roman's argument that they're going to have to print more money inevitably to save the system that's going to be very good for gold and Bitcoin uh but let's say Luke and I are wrong and they don't prick more money to save the system they they allow


the bond market to take naturally and yields to spike that will destroy everything but the US dollar and so in that scenario gold still does well you know typically people say gold needs negative real rates and needs inflation it needs a strong dollar to survive but gold reached all-time highs despite those Tailwinds not being present because gold is disconnecting from the old narrative simply because everything is not normal anymore again that's not gloom and doom it's just the reality the


the fed or the ECB or any major Central Bank is damned if they do damned if they don't there are no good scenarios they can either either inflate the current debase the currency by super QE to the Moon to save the bond market or they can do nothing and let the bond market crash on its own and then we'll go into a real depression Obsession and then gold will still do well in that scenario gold simply gets the last laugh because policy makers have failed to manage the balance is correct so as you said we're


in very interesting times right now they're different than they have been for quite a while and I think that means people need to rethink what they're doing with their portfolio so I'm wondering if you can talk about what a strong portfolio looks like right now of course with gold component yeah yeah not withstanding my obvious biases described for gold which is a long-term play and it's a preservation play I think portfolio questions are important questions as the the rubber meets the


road what do we do with the information we have or the presumptions or themes or premises that we have I always start by saying what's your goal in your portfolio depends on your age depends on your experience depends on your your income are you there to try and preserve what you have are you trying to speculate and make more and so um those are different portfolios for different goals um you know preservation or speculation I think gold can do well in both categories always for me it's a


preservation asset but you know if gold goes from 2100 to 4200 in a year or month or a day you have to understand too that also means the price of just everything else has gone up too so it's kind of an interesting consideration um again between now and the endgame of I think much higher inflation because I do think the central banks will have to liquefy the bond markets there's still going to be a great deal of volatility so the more general advice would be not just what asset classes because stocks


will do well when rates come down everything will inflate and as the dollar debases that will be a Tailwind for equities then you have to pick your equities The Magnificent Seven to me are still too overpriced so I wouldn't buy a top I still believe in the old adage of fine value I think Industrials and those type of stocks that still have good value would be good purchases but most importantly if you're trading your own account then you should have some understanding of exits and entries uh I


think this is the end of the passive Buy and Hold portfolio because of so much volatility you have to actively manage you have to find Value you have to decide whether you're in is to get rich quick or to just preserve what you have so those are kind of generic answers but they're more important now than ever the standard risk parity portfolio that many people use I think is very bad I think long-term duration long-term bonds especially long-term us treasuries are not going to be a good investment


because interest rates or yields whatever they are you're going to be eclipsed by the inflation that's coming longer term that doesn't mean there won't be opportunities in the short term to Arbitrage stocks and bonds but again there's going to be volatility before we get to a full pivot to full QE and I don't know when that will be no one does I know it's inevitable when there's this much need to support the bond market there will have to be massive amounts of liquidity like we saw in March of 2020


that will be a liquefying Tailwind for risk assets but again your yields on your bonds are going to be eaten Away by uh inflation so you're going to have negative returning bonds like we saw in 20181 19 so it's a damned if you do damn if you don't in that scenario too and even the appreciation you're going to get in your S&P or your you know Canadian stocks and bonds that's going to be eaten Away by the real effects of inflation so my view on inflation is inevitable where we are right now in the


US very low CPI print from the 9% to the 3% but again that's only chapter two of a much longer book you have to think that if you believe in that premise If the Fed or the central banks of the world don't liquefy the markets don't go to QE to the Moon then just about every asset class is a risk except for the currency the US dollar um so it's really playing chess not Checkers um my premise and Luke's premise and and even the St Louis fed's premise is super QA is coming that is very inflationary in Risk


assets that can be a Tailwind for your portfolio but you have to manage it actively I don't think stocks and bonds are going to Zig and zag they're going to go up together if we see that liquification but again inflation is going to be eating away your real returns so I think a big part of this eventually will be looking more at Commodities I'm not saying that as a gold bug because precious metals are monetary metals are different than copper um obviously if you're looking at you know uranium other asset classes you


have to pick each asset class in the in the real asset Place carefully there will be opportunities in Commodities but even now Commodities don't do well when they're in a global recession the demand pull isn't there there's supply chain risk though they could argue that would help but I think commodity's day is coming it's just not this year probably it's just not today certain Commodities will do very well again it would take hours to go through one by one and under


fin rules I can't give you specific stocks but again if we go to super QE which we will don't know when that's going to be a Tailwind for for for stocks so that's good but between now and then there's going to be volatility so active management is very important picking your entries and exits is very important if you are hiring someone else to manage your portfolio Grill him or her on how they actively manage risk don't think it's going to be up and to the right everyone should know that


don't pay for overpriced stocks like the mag 7 uh and and really think about questioning the risk parody stock Bond 6040 7030 wait for your entries I think right now is actually an entry in hard assets and real assets across the board in the indexes but you have to be very patient as Rick rule said these assets he was talking about silver but I think it's true of a lot of um hard Assets in particular when you're when you're thinking about them you have to realize that they reward infrequently but


extravagantly so it all depends on your patience your cycle your trading style there's no one answer for all for me it's an easy answer because gold just takes care of both for me and I'm at a point in my life like many where I'm just trying to preserve my wealth not grow it but I realiz that's not true for everyone um and so there's so many ways to answer it but there will be massive Tailwinds for those who are paying attention but you need to pick your exits and if you don't do that make sure


your manager does if they're just going to buy and hold sit back and be passive that's going to be very dangerous that's my view on that yeah I think that's some great advice to end on many things that I've been hearing repeated here be active know what you're doing so great something suppos to pick up on later but thank you very much for today my pleasure of course and once again I'm charlot cloud with investing news.com and this is Mata penberg thank you for watching if you


like this video make sure you subscribe to our Channel we'd also love to hear your thoughts so leave us a comment below we'll see you next [Music] time