N/A I believe when we look back on this we will see that we're already in a a technical recession right now. The third quarter numbers are coming out. People are talking about 4% but that's mostly AI databases about half of the GDP is that that's all we got going on right now is database building. Every other part of the economy is rolling over and people are feeling it. Ed Dow, founder and managing partner of Finance Technologies, a global macro alternative investment firm. It is so wonderful to welcome you back to the show. Great to see you as always, Ed. It has been way too long. Thrilled to have you back on today. Great to be here. Thanks for having me on. Well, we love having you on this channel and this show. And I was looking, I think it's been about 9 months since we had you on. So, it's about time for a check-in here. And I know you've been in a high demand. A lot of folks want to talk to you. This audience loves having you on. So since so much has happened in that time period, Ed, I want to start with your macro view today, where we are, where where you see things headed, what is on your radar, what are you paying attention to, what are you concerned about? And as you know, Ed, on this show can take all the time you need to set the table when it comes to that big picture macro view. Sure. So, uh, we put out a, uh, US N/A economic, uh, world, uh, deep worldwide recession, uh, report in January. It's still relevant today. Uh, and if you haven't purchased it, you should buy it. Um, here's the deal. When we issued the report, we were concerned about the hangover from the Biden administration, which had floated the economy through illegal immigration and deficit spending. And uh, at the time we predicted that uh, the housing market would probably likely start to roll over. That's that's in process. That's occurring. Um, yields at the time we put out the report, the tenure was at 480. we recommended to our uh purchases of the report to get out of risk assets and purchase uh US government securities and and kind of like raise cash and go to the sidelines much like Warren Buffett's already done. So yields since then the 10 years at 407 the 30 years come down the Fed has lowered a couple times and uh the payroll numbers that we talked about at the time did turn out to be fraudulent under the Biden administration. The jobs uh uh uh layoffs are now accelerating in real time. We have Amazon with I think 30,000 employees, UPS with 46. The Challenger jobs report came out yesterday. It was dismal. The worst October in like 22 years or something crazy like that. Yep. Um so things are accelerating. So what we said is um coming to fruition. Uh the the only thing that's not apparent to everybody is the stock market. That is still covering near all-time highs. It's classic bubble stock market mania. It's being driven by seven stocks that are 40% of the S&P market cap right now. It's the AI stocks and we are at a feeding frenzy of AI circular. They call it the cir the circle jerk of financing. There's no there there's no money to fund all this. This is the problem. They they're they want trillions of dollars, but their revenues aren't there. The ROI is not there. And the markets are starting to figure this out. And that's why they're doing all these circular deals to keep their uh their, you know, I guess the momentum of hype going. And then yesterday or the day before, Sam Alman and and and Jensen at the same time said two things. They wanted uh Jensen said China's gonna win and Altman said we need a government backs stop basically and then he denied it. Then it came out that two weeks ago in a memo they asked for government backs stop. They want they want government guarantees. So that signals to the market a couple things. What does that signal? That signals that the the financing of this uh this bubble is coming to an end. We're starting to see it in CDS spreads, credit default swaps. Coreweave is exploding up. Oracles exploding up and so the financing is getting tight because the mark the credit markets are starting to tighten in general because there's economic woes. We saw some uh subprime auto companies go bust. So the credit markets are tightening and so the financing for this whole this whole um you know I guess momentum AI hype is coming to an end and Jensen and Altman told you that because they want a government bailout at all-time highs on Nvidia stock. So this this is this is a signal that demand is rolling over and financing is getting difficult. So the end days are near. I suspect the Trump administration will you know take equity stakes or do something. Uh today it came out they're trying to figure out they denied it yesterday. David Sachs denied it. Uh but then today we're seeing PY uh talking about using Fanny and Freddy to take stakes in in in these companies. This is madness. They're buying at the top and once they do this, I suspect those stocks will have one more pump and then it's over. So we're just waiting for the N/A the uh the S&P 500 and the rest of the global indices to roll over. They all have similar characteristics. They're very narrow markets and the stock market is kind of hiding what's going on on the street and what's going on in the street is a disaster. And this is, you know, we tried to tell the Trump administration they should have a sit down with the American people and say, "Look, there's going to be a hangover from our policies to get us to the golden age." They're now declaring the golden age is here. That's wrong. Affordability is not inflation is coming down, but it's not coming down as fast as people would like. there's still health care costs rising because of the COVID debacle. Uh so we are we are at the precipice of um this becoming apparent to the masses. But you know if you look at what the institutions are doing they're starting to slowly reallocate to treasuries which is the safety trade and there's we're in the distribution phase of the stock market meaning the insiders are selling to the uh retail investors. And if you look at insider sales they're at unprecedented record. So we're we're close. We're I I believe when we look back on this, we will see that we're already in a a technical recession right now. Uh the third quarter numbers are coming out. People are talking about 4% but you know that's that's mostly uh da uh AI databases about half of the GDP is that that's all we got going on right now is database building. Every other part of the economy is rolling over and people are feeling it. And you know look I I I call balls and strikes. I voted for Trump. Uh but you know, they came out yesterday and they basically gas lit everyone. Said the economy is great, jobs are coming back and uh affordability is is fabulous. And it's that's just gaslighting. The economy is not great. We're hurdling towards a recession. And then we put out a China report this week. It's not it's not priced uh for retail. It's priced for institutions. And it's a deep dive into China. China's at a crossroads. there N/A real estate crisis is about to go acute and that's going to have global implications and long-term China uh is going to be something we have to contend with for years to come. They hit a demographic wall in 2020 and uh that's started their real estate crisis and their internal consumption uh and demand started to to plummet. So what did they do as a nation to keep the engines of growth going? They started exporting more. So their exporting took off in 21 and 22. That's why we're having trade wars. They have installed uh industrial capacity that's you know the demand internally is rolling over. So they need to export that to keep the the people employed and that's going to happen for years to come. Uh one thing that people aren't aware of is that China China used to be 80% priced in dollar US dollars. China was 80% of the US G uh GDP. Since N/A 2020 they've been depreciating the one. So priced in dollars are now 60% of US GDP and their growth priced in one is 5% you know quarterly GDP growth in US dollars their growth is zero. So they're in trouble. We have more cards them than them at the moment. And so this narrative that China holds all the cards is bogus but and and they're trying to save face but you know they we we we don't hold all the cards either. So there needs to be serious negotiations with China to get this problem resolved because they're going to be exporting deflation for years to come. Uh and so we have they're and and they're about to hit the acute phase in their housing crisis because uh construction projects that were kind of uh still ongoing since their real estate collapse are now starting to roll over. So that's going to affect uh a large a large part of their industrial base. So they're they're exporting to to get out of this is going to increase which leads to the inflation or sorry the deflation part. Correct. Correct. And by the way tariffs are deflationary. They're not N/A inflationary. That's why that's why everyone see any inflation. Yeah. This is this is economics 101. I think Dr. Hunt has talked about that too. Dr. Lacy Hunt. Dr. Hunt. So my Carlos and Dr. Hunt and myself have been in contact. We we we talk all the time. This is this is microeconomics 101. Lacy's right. Carlos, my partner, is right. And they're deflationary. And the Fed, to make matters worse, has is too late. They've kept interest rates too high for too long. And dollar liquidity is drying up globally. And uh you're going to see the dollar rip uh versus other indices into the midterms. The dollar put in a very important four-year cycle low. And that's how you know I monitor all different asset classes and that's why I know a stock market problem is coming. Treasuries are bid and the dollar's bid and that means a riskoff environment is coming and that's and and if you look at Bitcoin, Bitcoin is usually an early N/A harbinger. Bitcoin is now year-to date underperform US treasuries or performed slightly worse than US treasuries. So Bitcoin is probably going a lot lower. That's an early warning indicator of liquidity drying up. Uh, you know, nothing against the Bitcoin people, but it's not a store of value. It's a speculative instrument that's 95% correlated to the NASDAQ, period. And stop. It's a liquidity indicator, as you point out. Um, you know, one of the things about you, Ed, you have a background in fixed income and in equity. So, I find this like you have this like breadth of knowledge of these different um assets. You mentioned the dollar. Okay, this is interesting too. Like the dollar that you see it's going to rip very different from what I've heard from some other uh guests like their views on the dollar and you know right now like this the like what last month everyone's talked about the debasement trade or whatever. I want to hear your thoughts on the dollar because that's interesting. This is a bit different from what I'm hearing. So let's go there. Yeah. So the the there's a dollar liquidity shortage caused by slowing N/A economic global slowing e economic issues plus the tariffs. So there's a dollar liquidity issue going on and that's going to continue to uh show up in other currencies going down. So this is and you know when the dollar is in a decline it's bullish for risk assets because uh it's basically credit creation. Uh when the dollar starts going up, you know, it's it's never 100% correlated when the some one of the reasons for the dollar going up is credit destruction and dollar shortages. And that's what we're seeing and we're going to see and I think that the dollar is going to blow people's minds uh six months from now. All those people on the debasement trade are going to be trying to explain themselves and there's going to be a flight to safety. It's just this is this this is this is just technical and I'm seeing it. Gold keeps setting new all-time highs, but price appreciation isn't the only way to profit from owning gold. Monetary metals is redefining the future of precious metals investing. Instead of paying to store gold, imagine getting paid to own it. With monetary medals, you can earn up to 4% on your gold paid in physical gold. That's right. Your ounces grow each month, not just your paper balance. A yield on gold paid in gold means you're stacking more ounces every single month. And you still benefit if gold's prices rise. You're earning more gold every month and enjoying potential price appreciation at the same time. Go to monetary-medals.com/jullia to learn more and see how you can start earning 4% on your gold paid in gold. You were talking about the dollar's going to rip. The treasury's bid the treasury's bid right now that we're seeing it's signaling this riskoff N/A environment. You point out also Bitcoin is an early harbinger. So talk to me about the riskoff environment like where where you see where where is the I guess the capital going to go like what are the assets that people are going to flock to? Well, on a report and as I indicated earlier, they're going to go into uh treasuries, US treasuries. Uh this is classic. There'll be a flight to safety. A slowing economic growth scenario and a riskoff trade always indicates a flight to safety. And that, you know, everyone in the last year has been talking about yields going up. Well, in a deflationary environment, yields go lower. And that's what we we've been predicting. You can't have a a a roaring economy with a housing market rolling over. It's 20% of the US economy. You can't have a an economy um ripping uh when consumer sentiment is where it is now. And consumer basically if you look at consumer staple stocks, they are down 30 40% year to date. And there's a reason for that. And you know, look, the the riskoff trade is already occurring underneath the surface of the market. If you look at the equal weighted S&P 500 index, it's gone nowhere since January. So, so there's this, you know, this euphoria that the markets are up, but they're up. What what's up are the seven stocks, the 10 stocks related to AI. And you when you have that kind of crowding into that few number of stocks leading the indices, it's usually the end. We saw this in the ' 07 bubble. There were six or seven stocks leading. We saw it in the dotcom bubble. And breath N/A underneath starts to deteriorate. And now in the last week, two weeks, we've had three Hindenburg omens, which is nothing more than a measure of breath. Meaning uh the number of uh stocks hitting 52- week lows versus the number of stocks hitting 52- week highs. It's mathematical calculation on a green day indicates that the market underneath the surface is a disaster. And that's what Hindenburg Omens predict. They're not always accurate, but they predict a very unhealthy market. It's a it's literally the bus is being driven by a very few number of stocks. Yeah, it's extremely narrow. Um, another just question for you because when we were talking about the debasement trade, a lot of people were talking about gold and gold's rally that we've seen. Gold N/A is still above 4,000 at the moment. Is gold one of those assets in a riskoff environment that people go to? Like what's your what is your take on gold? Gold has already had a fabulous move. I like gold longterm. Gold's going to 10,000 by 2030. There's a phenomenon going on that's being driven by gold becoming money again. The uh the powers that be have made gold tier one capital at banks. So that means that you can lend against physical gold. So there's a demand and a bid for gold. China has an enormous demand for gold because China to keep growing has to debase its own currency. We calculated 10% a year. So they're going to have a constant bid for gold as they try people inside China try to protect their own wealth. Um central banks are accumulating gold and uh commercial banks are accumulating gold. So the gold bid will be there. Gold just hit 4400. It could consolidate for a year. It may even go down 25 to 30% in any kind of you know margin call systemic fears scenario. That's a buying opportunity because gold long-term's going higher. So I don't trade gold. Don't be up to your eyeballs in levered futures on gold. But use any dip in gold as an opportunity to buy more. Gold longterm, I'm bullish on. Mhm. Yeah. It's it's just one of those popular topics on this channel that comes up, too. Okay. So, when you look at the markets right now, obviously, it's extremely narrow. It's not a healthy market. Um, yeah, we've had the stock market at all-time highs. And I think a lot of people intuitit this, Ed. They sense like the these markets are completely disconnected from what they feel in their everyday reality like in the economy like this disconnect. Why do you think the markets haven't recognized that like why is it so disconnected? It's got to it's got to do with N/A momentum. These things need to exhaust themselves. So asset managers and are underperforming their indices. So they chase what's working and and what's working is fewer and fewer stocks. We also have an administration that has decided that they're going to go all in on AI. So, the administration is helping ferment ferment this bubble. And uh that's that's not that that that's going to come back to bite them in the butt. Um you know, realistically, the gating factor on AI was Nvidia chips. Now, the gating factor on on AI is uh power consumption. And so once the once the reality is starting to dawn on people, we don't have enough electricity and water to fund all these bu buildouts. Uh that kind of pauses the excitement in the whole, you know, I guess mania that's going on. And additionally, AI usage is rolling over. I've looked, you know, I'm a fundamental analyst. I've seen some charts that show that uh subscription uptake of open AI is rolling over. So that's a second derivative change. We've seen that uh from Yale studies and MIT studies that AI adoption in pilots at corporations are yielding no ROI. So corporations aren't that enthusiastic about it. They're using it as an excuse to announce layoffs. So this this you know AI Armageddon that is being propagated in the um in the mainstream media, these layoffs are all AI. That's not true. AI is not ready for prime time. AI has a a hallucination rate of 25%. I mean, and you know, look, I I I was a big fan of AI initially, but now I've realized they it makes a lot of mistakes. So, I used to I used to use AI as a as a new search function. Now, I have to go back to Google to verify a lot of the facts. So, it's become cumbersome. So, and a lot of people have telling me the same thing. AI is going to be great someday. This reminds me of the.com bubble where we knew the internet is a real thing but it was overhyped and not ready for prime time. Same thing. AI is not ready to change the world yet. It will but uh this is the hype phase of any new technology just like railroads just like broadband and here we are again too much investment too much compute power and no real test case uses. And you know when Sam Alman started talking about uh you know introducing essentially porn uh you know AI porn that told me that the demand is you know that demand wasn't as great as we were led to believe and I think people have to understand yesterday when they asked for a government bailout that is at at at at at sentiment being you know with Nvidia near all-time highs because Nvidia is the public way to play this open AI is not public yet that that's the signal they're seeing you know real demand degradation and financing problems. So that's telling you something. That's an admission that things are worse than they than we've been led to believe. And they have to that, you know, look, they have to hype to get investors to give them money. So, and Sam Alman's not necessarily a very truthful man. He's been caught in several several lies. So, this whole thing, I think, is coming to a head. I I do think the Trump administration will cave and, you know, take some equity stakes in some of this stuff and we'll get one more pump up in the stocks and that'll be the end because uh there's there's just there's no revenue there. It just there's there's no revenue. What is the mechanism for that? As you put it, um like one more pump and it's over like in the market, your thesis, what is that mechanism for that? that the mechanism is is is trump uh trumps somewhat you know if Fanny May makes a tech stake investment you know that you know the public stocks that you know are feeding the AI cycle will have like one more push up and then that's it you know it's classic you you know I I wouldn't I would not buy that top I'm not telling people to short that you know shorting is very difficult but if you're if you're putting new money to work in seven AI stocks you're going to be looking at severe losses 2 to 3 years from now. 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Visit van.com/remxjiulia to learn more. Okay. So, and yeah, one thing too like N/A um you know some folks will often point and not folks but like some people often point to like retail buying like record retail buying in the markets. I've had guests who've come on and point out that's actually a sign of not healthy market. It's actually not a bullish thing. The retail is usually the last. Yeah. No, that's called FOMO. And FOMO is real fear of missing out. And I I I I was on a call uh I'm an adviser to a fund of funds uh product and some of the um people invested in the fund were disappointed that the return of the fund for one month was like 1% and the S&P was up four and they they they were questioning questioning uh some of the decision this fund of funds is is is is um you know not going to get hurt in a downturn. So, they didn't keep up with the, you know, 3% move for the month. So, there's this FOMO. Uh, and, you know, we had to explain to them, well, you know, the S&P is up because of seven stocks, and this is what we this is why you're invested with us. We're not chasing seven stocks. And do we have warped perceptions of like what return should be then too? Because these have not been like like normal years. Not not normal years. And by the way, the faster a return uh occurs, not not not so much in a individual stock because individual stocks can can have big, you know, outsized returns in any given year, but when a market has outsized returns quickly like the the unprecedented rally since the April lows, you need to question that what what's going on. And I do believe, you know, typically speaking, retail investors uh are the last of the party and uh institutions are selling to them and insiders are selling to them. So, you know, that usually doesn't end well. You mentioned earlier when we were talking about the Federal Reserve, they were too high for too long. Um we've had for the last two FOMC meetings 25 basis point cuts. I don't I don't actually don't know like what the December one's going to be because the FOMC press or with PAL is like not a not a foregone N/A conclusion that they were going to cut or not cut. What's been what's been your take on the Fed and the policy decisions of late? Like how are you kind of reading into it or assessing it? Like what do you make of it? Well, so they they they they well during the Biden administration, they were they were keying their decisions off bogus non-farm payroll numbers. So that was a problem. Uh they thought when Trump announced the tariffs that inflation was coming. That's not occurring. In fact, inflation is coming down and we'll get a deflationary scare soon enough once housing collapses because housing is 36% of the CPI and that's coming. So, they're going to be behind the eight-ball. And I suspect when things really get going and uh we see the credit markets blow out, there's some uh bank issues, bank stocks start collapsing and the and the general indices start going down quite a bit. We'll see the Fed panic and cut 50 to 100. I don't know when that's going to it could happen. It could happen before the end of the year or sometime in the beginning of the year, but the Fed will panic at some point because they're so behind the curve. It's it's and it takes it takes 18 months for interest rate cuts to actually affect the real economy. So these cuts, you know, won't save the stock market. They won't save risk assets. Eventually there'll be a, you know, a risk asset rally, but not not anytime soon. Should they have been cutting like long before now? Like what what should they have? They should they should have been they should have been cutting in uh in 2024 and and then once the tariffs came on uh and Lacy Hundas talked about this and documented this quite well. Tariffs are attacks. Tariffs tariffs take liquidity out of the system. So the Fed during the uh tariff uh the the the the tariffs in the Great Depression did not lower interest rates and provide liquidity. Same situation. Liquidity is leaving the global markets. So money is tight everywhere and it's starting to show up in the credit markets. I mean you we finally see the CDS's of the AI um markets go up and that's a function of too much AI debt coming at once and uh issues in other parts of the credit market. So people people in the credit markets are starting to question the growth scenario right now. And you know that's why there's been a bid on the 10-year and a bid on the 30-year. And once people realize how bad it is, and N/A that's coming, you're going to see the 30-year go to, you know, 3% super quick, the 10ear go to 2 and a half, it's all going to happen. And some and it's and you, you know, you're not going to be able to get in the trade fast enough. That's interesting. And that's why I pointed out earlier your background in fixed income, too. Like looking at the credit markets and what it's sniffing out before anything else. Is that what you're referring to there? like it's it's kind of gleaning something that's happening. And and and let let me give you a little historical. I was at Black Rockck in the great financial crisis. I was an equity growth portfolio manager, but I had spent five years as a bond salesman at HSBC. Mhm. And at Black Rockck, uh before they went on all their acquisition sprees, it was quite a a very, you know, fundamentally focused firm. Now it's all passive investments. But back then we had a morning meeting and we and the the bond guys and the equity guys all got together for 30 minutes and went round the table and talked. I remember in ' 07 the bond guys and because I'm a former bond guy and I think bond people are generally more riskaverse and usually early to see the warning signs uh and not storytellers. A lot of equity people are storytellers. The bond guys are usually the first to move and I remember at Black Rockck our bond guys were freaking out. absolutely freaking out for most of 07 while the equity folks were still partying. Uh poo pooing the the bond guys, but the bond guys ended up being super right and uh and and the equity guys, a lot of people at Black Rockck were on the wrong side of the uh of the trade when when when the bottom fell out. So, uh this is the same thing. The the credit markets are telling you something. Uh the Treasury market's telling you something. yields going lower is not a sign of of economic strength. It's a sign of economic slowing. Especially the story had been unprecedented in inflation. So the fact that the bond market's going lower in the face of this inflation talk is telling you the bond market is sniffing out not only lower inflation but a deflation scare. A deflation scare. Elaborate a bit more on that though because that that scenario that's not the scenario anybody wants. But elaborate a bit more on the deflation scare. A deflation scare is basically a credit a credit crunch. Okay? And you know look the banking system the mantra of the bankers are inflate or die. So credit deflations are not allowed. So what we suspect is going to happen is that we're going to get this deflation scare. We're going to see oil go to 30. We're going to see you know you know we're going to see yes as all this you're going to see a credit crunch. You're going to see bank issues. Then the Federal Reserve is going to come in guns blazing again and do QE. The fiscal response. So we're going to be it's it's basically the deflation scare will be brief. Uh and then they're going to try to reinflate it again. And so that's where we're kind of in this 1970 stagflation period of N/A inflation scare, deflation scare, pump again. You know, this is where we are. We're going to be in this yo-yo trying to stick save the system. It's kind of a disaster. It's not It's not pretty. No, it does not sound pretty. And like stagflation is like historically the worst environment for pretty much all asset classes. Okay. Oil $30 a barrel. Okay. Explain the oil one to me. I want to hear more on that. Well, when when we were uh when we put out our report in January, oil was 70 $78. It's now 60. Uh oil in a strong N/A robust economy should be ripping. It is not. oil in any and once the US economy goes into a recession, oil will go to 30. Oil is also reflective of what's going on in China. China's internal consumption has been plummeting. So if you reme if you may or may not remember, but during the the the early 2000s, oil, you know, went on a bull run after after the dot bubble into into 08 went from like 30 bucks to 180, I think was the top. Um, and that was all China internal consumption driven. China was, you know, demographically growing. Uh their, you know, their young workers were buying cars. Now we have the opposite. They're in a peak worker demographic decline. It's so bad that uh that that's why oil is where it is. And oil is going to 30 just because it it's going to technically it looks like that. And unless there's a war in the straits of Hormuz, oil is going to collapse to 30. It won't stay there long. Uh but and gas prices will come down during the recession, but then they'll come back up because, you know, I know what's going to happen. We're gonna we're gonna, you know, print money. We're going to run big deficits. There'll be all sorts of uh you know, you know, Trump likely loses the midterms if this happens before the midterms. Um it's bad. And the Trump administration had an opportunity to communicate this to the public, but they decided not to because they thought they could they thought they could bridge the valley and the hangover from the Biden. They thought they could bridge the gap and they can't. Is it too late to communicate it? Well, you know, yesterday I was just the White House was putting out don't be a panic in the stock. They keep pointing to the stock market and and and I you know I've said you know people don't Joe sixpack doesn't care about seven stocks that are leading the S&P indices with the rest of the economy going I mean Biden lost because of the economy full stop. You know Reagan won against Jimmy Carter because of because of the economy. Clinton won against Bush because of the economy. Trump won against Biden because of the economy and Trump Harris really but yeah. Well, Harris, but you whatever. I know what you mean. I got it. Um, but, uh, Trump now is unfortunately, I don't know what his advisers are telling him, but yesterday, and I wasn't the only one that pointed this out, a lot of, you know, Trump, a lot of people who voted for Trump pointed out that he's gaslighting us, and people don't want to be gas lit right now. the the reality on the street versus the seven stocks hitting new highs. You know, you cannot say I'm doing a great job because of seven stocks. It's ridiculous. It's patently absurd. Consumer sentiment hitting a new low today. That, you know, the corporate markets are shutting jobs. They're going to blame AI. It's not AI. It's economic cycles at large. Hangover from the immigration, hangover uh from the housing market rolling over, hangover from the tariffs. It's it's all coming to a head and it's not all Trump's fault. It probably has been building up for years, N/A too. You going back to the It's not the thing. Yes. He had an opportunity though and not he I I think the time I think he unless he changes course and start to explain to the American people what happened and and why. If he doesn't do it soon, it doesn't matter what I say or you say and we can say it's Biden's fault. The American people won't. you know that the opportunity to communicate this and lay blame where it is is is passing quickly because you're gaslighting. It's not a good move. Okay. What would be the communication strategy? Like what if you were in that position or you could advise what I said in January, February, there needs to be fireside checks. We're going to cut government spending, the illegal immigration, juice the economy for two years. I'm stopping it. Uh we're going to have a recession and I'm going to do trade deals and I'm going to bring manufacturing back. We're going to have some tough times, but on the other side of this, we're going to have a golden age. Right now, we saying the golden age is here. That's the that's the problem. It's not here. The communication of and and people people are looking around going, "What gold?" You know, other than an oligarch or someone that's fat on seven stocks, you know, in their in their personal account, the average Joe Six-Pack and and and by the way, job wos and layoffs are are just starting to accelerate. Average Joe Six-Pack is looking around. What golden age are you talking about, bro? So, this is this is a this is a massive communication problem. And he could have done the fourth turning. Yeah. Yeah. And he could have done it and they could still do it if they turn on a dime right now, but they're not going to listen to me. I'm just one dude that lives on Maui. Well, a lot of people a lot of people do listen to you when you come on this show, so you never know. Um Yeah, maybe somebody will see it. Yeah. Uh maybe. Okay. Um, I actually I N/A actually want to go back to China real quick because you've brought it up twice in this conversation. I can tell it's important and it's probably not getting enough attention. Is China like a canary in the coal mine or something for like the global economy or like how should we be thinking about it? Well, G China literally is facing a crossroads and a crisis and it started in 2020 and they're about to hit the acute phase. um they uh overbuilt their industrial cons installed capacity and their real estate. Uh you know, everyone says, "Oh, China plant 100-year planners and they're so smart." Uh you got to go back after the great financial crisis to keep their economy going. They turned up stimulus, government stimulus, and they built real estate well above the demographic demand. Demographic dem they overshot it like you wouldn't believe. So what what do they have now? They have 20 years of of of excess inventory. 20 years. 20 years. Okay. That that's So that killed uh a lot of internal consumption. They overbuilt their industrial installed capacity. So here we are. They have this population that needs to be employed. Their biggest fear is the people themselves. If if if if people start to go and not be able to feed themselves, they have a revolution on their hand. I mean it's it's there's 7 million party members with I don't know what 1.5 billion people in the country. So it's and that's why they have social credit score systems and whatnot. So this is China needs help and China has two choices. They can try to export their way out of this but then it destroys and wrecks other economies with you know and other industries in those countries which is deflation or they can uh produce a consumer-based economy. We could help them with that because they need to open up their markets so we can come in and like start selling stuff and whatnot, but they won't do that because they should do it. But when you when you when you give people a consumer-based economy with a real middle class, you give up power and they don't want to give up power. So that's why they it's it's a it's a mercantalist system where most of the profits acrew to the very few there and it's a slave system. Uh so that's that they need they need they have a choice. They're at a crossroads and they're going to come to headto-head with the US, the EU, Asia, and one of the ways that they can um deflect from their internal problems is go to war with someone uh create an enemy. So China is going to be uh a paramount issue for decades to come because they have problems and when they have problems, we're going to have problems. Yeah. The other issue that mo most people don't understand is they have uh they have about 43% of the world's money supply. Now, a lot of that's trapped in corporations and rich individuals and we have capital controls, but that money leaks out. Uh they are so they're going to be exporting deflation, but at the same time bidding on everything uh around the world, real assets, because they're depreciating their own currency. So we we're going to have like deflation coupled with some asset inflation in assets they want when they buy things in other countries that soft Chinese power. So this is a this is a problem that's going to continue for decades to come and it needs to be solved because uh if China wanted to they could buy the world. What is the solution then? Like what is the solve? The solve is uh you know serious negotiations and adult talks uh about how they manage the crisis and you know they need to open up their economy. They need to create a consumer-based economy and give up some power. Absent that we got problems and we we're just going to be in trade wars and and and and whatnot and we have to watch out for the soft power of Chinese money. And if if Chinese power soft power gets too big, there'll be capital controls and we won't allow Chinese people to buy anything in this country. I think that's coming at some point. Does that also does that tie into any of the dollar liquidity drying up part of the conversation that we had earlier or is there a connection there or no? No. Uh not necessarily, but the dollar because we're the result we're the reserve currency of the world. A lot of transactions and debt is denominated in dollars and people people are scrambling for dollars right now because things are N/A getting tight and do the dollar uh dollars are valuable because the the best uh collateral to shore up margin accounts and other things. So that's why the dollar liquidity issue is going on. And you know, I I I think one of one of the benefits of this recession that's coming is we'll be able to term out our short-term Treasury bills into longer term notes. So, we're going to be able to do that, but it won't it won't be because of uh you know, economic growth. It'll be because of a recession. So, our Treasury Secretary Besson uh will have N/A an opportunity to take Yellen frontloaded our our debt with the Treasury bill issuance. he'll be able to term it out at much lower rates. Okay. I do remember that Yellen did a lot on um like the front end of the curve like short the short-term Treasury bills. Yeah. Explain to me the significance of that if they are able to um term out the short-term Treasury bills into longerterm notes because of a N/A recession. Can you explain to me? I don't know. But what what would be the significance of that? Well, that would uh that would um because one of the biggest concerns is if you rely too much on short-term financing, you're subject to capital flights if there's a problem. That's a third world problem. You know, I remember Mexico was very heavily reliant in the '9s on on uh their short-term financing, and there was something called Tessabonos that were yielding way higher than US bills, and everyone was loving them until there was a problem. Um, so you don't want to have uh to keep continually rolling over the debt. If you can term out some of this debt, it free it it frees up the ability and gives you more flexibility. Janet Yellen really really screwed up and also when you when you issue a lot on the on on the front end, it does juice the helps juice the financial conditions of the market because that's pristine collateral. So when you, you know, when you issue a ton of T bills, people will hypothecate that and create credit from that. And, you know, people keep pointing to this M2 chart. The M2 that's been created the last year and a half was not the people think it's the Fed printing money. That's not the case. That's credit creation. That's Ponzi finance credit. That's all speculative at the end of cycle finance credit. And N/A that, you know, look at first brands that just went bankrupt. That's the kind of M2 that we were creating. And that's all going to disappear. When you create money out of thin air, you can also disappear out of thin air. And every time you create a loan, you're creating money. So, there's a lot of bad loans have been made. And private credit is an opaque industry. Uh that's that's that's starting to buckle. The asset back market starting to buckle. So, we're starting to see these feedback loops. And housing, of course, is the underpinning of our credit system. That's going to become a problem uh pretty quickly. Yeah. You did mention just first brands I forgot the other one. It's Primal Land. And and and what's interesting uh Julia is I remember I was on your show nine months ago and I talked about the immigration problem. It's very interesting that these all three are tied to immigration. Yeah, you're right. There there is an immigration story. Yeah. Explain that too. And like I want to hear a bit more on this because it's Yeah. Yeah. So So uh what is what's Ponzi Finance? Tricirricolor was Ponzi Finance. There was growth in immigrants coming in because of the Biden administration. And one thing to understand about growth finance stories there, the faster you grow, the more ridiculous your credit standards are. Fast growth in a credit uh growth story always blows up. Grow growth growth uh growth finance stories always blew up. So when I was at Black Rockck, we never bought growth finance stories because they always ended poorly. Triricolor was exactly that. was taking advantage of the inflow of illegal immigrants basically giving them some prime loans and that was great as long as the flow was growing they could h you know if you're growing faster than the losses accumulating it looks good temporarily well the flow of immigrants stopped that's all it took it just stopped so their growth slowed and then their bad loans overwhelmed and they went bankrupt that'sricolor and they were mostly subprime to legal immigrants without any you know they didn't even have any documentation they didn't care. They were just giving them money. Um, Primal Lens, same thing. And First France, while not directly related to uh immigrants, was an after after uh markets body uh aftermarkets auto parts dealer. So, they probably on the incremental uh the incremental customer was illegal aliens and they stopped showing up. So, this is this is how it begins. It's like it's it's the tip of the spear. And then illegal immigration is also affecting rents. uh new new tenant rents are have been plummeting because they were they were sping up the housing market rentals which supports home prices. That's all going the way of the dodo burden. That's why you're starting to see weakness in homes. Uh we also overbuilt multi-tenant housing. Uh we built uh because of the immigration influx. We built more units than we did during the 70s. That was the last boom. And that's going to that those are already starting to roll over. So this is going to be not just a single family units will get hurt but this is a multi-tenant story. The other problem we have is that it's cheaper to rent than to buy and you know how that ends. Home prices have to go below to incentivize buyers again. So it's cheaper to rent than to buy. Yeah. And that doesn't go that doesn't bode well for the housing market. No. And I got to say like I am a millennial. I want to buy a home. I am not I am I am holding out for now because to me like I look I look at housing prices since the pandemic what they're up 40 50%. Doesn't quite make sense. I could probably I mean I could go buy a house if I wanted to but I'm just like I want to wait but yeah I I kind of hear you. I feel like there's going to be it's got to correct. It doesn't Yeah. One of our one one of our charts in one of our real estate reports that are available for purchase, we show homes for sale versus homes sold. And the time series, they usually track each other. The two lines are kind of they go up and down like this. Well, homes for sale is like this and home sold is like this. It's like it's like an alligator jaw. There's only one way that goes and and it's price. Price is the only correction to this. And then to that point, how much? Okay, so how much when you look at homes like people have probably have a lot of their wealth tied up in their homes. If you're a homeowner, you might really like what you've seen the last few years because the price going up. Maybe look at your Zillow's estimate. It looks pretty good. I wonder how much psychology there is there where maybe you feel more prosperous because of the inflation you've seen in those prices. Well, you know, that's that's interesting. So homes cost, you know, your primary home is where you live. You shouldn't view it as an investment. is actually a cash burn. It's It's a cash burn. Well, yeah. Insurance, right? Property taxes. Insurance, property taxes, up maintenance, upkeep, you you name it. It's a cash burn. If you own second homes and rent them out, then you have to do the math to, you know, you need income to cover so you can pay your mortgage and all those other expenses. Um, so th those poor people that levered up to buy rental properties, if if they're overlevered, they'll probably they're probably going to go underwater and lo lose those homes. If if you are a homeowner and you saw appreciation in your house, unless you took out a heliloc, it shouldn't affect your psychology. If it does, well, I don't know what to tell you. It's it's not money until you turn it. It just because it's it's just it's a value on a piece of paper on on a website called Zillow. It doesn't mean anything. Um do I'm not suggesting you take out a heliloc. Do not do that in this environment. But uh the bottom line is if you own if you own your single family home and you only have one property, you sh shouldn't care about whether it goes up or down. As long as you keep your job and you can pay your mortgage, you're fine. It's not a thing. Uh you know, someone was asking me advice about buying, you know, their son was buying a home in Chicago and I said, "Is it their first home?" They said, "Yes." I go, "Are they going to live there a long time?" They said, "Yes." I said, "Then don't worry about it. I mean, you know, he bought it for, let's use a mill, bought it for a million, so it goes to 800 or, you know, 700,000 in two years. Who cares? It doesn't matter if you as long as you're able to pay your mortgage. It It just doesn't matter. That's probably good advice, Ed. Um, okay. So, we are hurdling toward a recession, as you put it in the N/A conversation. I think we're already in one. I was going to ask you, are we in I was like, are we in a recession now? We're in one. We'll find out, you know, a year or two from now when the official when they do the official stats. Okay. Um, so we'll we'll wait on that uh when we get that. I guess we're in a technical recession right now. I had other folks who said similar things or at least put a probability on it that we are in one right now. Um, Dr. Gary Schilling was on a couple weeks, like a week and a half ago. He said 60% probability that we're in one right now. Um, so just throwing that out there. I I I'm I'm at 100, but you know, look, I 60 is very reasonable. I have I have a lot. It's worth a 50. Yeah. Um it's not a 50/50 chance. Okay. So, just to round things out um and you kind of mentioned it earlier like where you want to be N/A like um treasuries and whatnot just from what you can share like how are you thinking about this environment and how you want to be allocated? I I've said, you know, for I I I was early like Warren Buffett and I've said you want to be uh and again, this is up to you personally where you are in your life. If you're young, you know, don't freak if you have a 401k and you're 30, you know, raise some cash so you can, you know, buy at lower prices. If you're near retirement, raise more cash and then once the the storm we're in the in the thick of the storm, you go you go back in. You just want to have flexibility and opportunities to uh take advantage of what's coming so you can sleep well at night. Um I never tell people what to do, but it's called dry powder. And I've done some consulting on the side with people and you know a lot of people who who call me are already well prepared. I guess it more it's more of a psychology handholding uh situation to make them feel good. So uh a lot of the people that have talked to me are already ready. Yeah. Um, okay. What is something N/A that is keeping you up at night? Maybe it's the risk that's not getting enough attention. Uh, Japan could go uh, you know, bye-bye at any moment. We, you know, the Japanese carry trade is out there. Trying to figure out when that's going to blow up is, you know, it's a black swan. You you add that on top of what I'm talking about which is an AI bubble popping and a housing crisis in China that that Katy bar the door. So that you know chi Japan losing control would be devastating for the capital markets because there's so much leverage and in the yen carry trade. Wait, how would that how would that work? I I've had a couple guests who had talked about the Japan carry trade. Yeah, people if the young carry trade blows up, it just means it'll be forced margin call selling. Okay. And that will have ripple effects around the globe here in the US. Around the globe. Yeah. So that's what you know that that and I'm not calling that because Japan is doing everything they can to manipulate that from happening. Yeah. They're doing you know so that may may not happen but you you know it almost happened last August but they they fixed it. And then um before I let you go what what is something that's making you optimistic or hopeful? Well, if these asset prices come down uh and and and you know, look, you know, recessions are N/A painful and bad, but there's also on the bright spot, you come out the other side, asset prices are lower, millennials can participate and get, you know, buy homes and that generates a lot of economic activity. And oh by the way um you know if millennials and young people have a stake in the country through asset ownership maybe they won't elect communist mayors in New York. Exactly. I'm just I'm just saying I think you're right though. Yeah. We wouldn't be electing socialist uh communists or whatever. I'm sitting here in New York. I don't live in New York any longer. But yeah. Um yeah. So that's why I'm optimistic that there'll be good things on the other side. millennials can uh you know finally you know get homes. Um the uh you know when you have these as asset bubbles they really misallocate capital and uh they send the wrong signals and uh deflation in asset bubbles is not necessarily about there's always winners and losers and the winners on this asset deflation will be young people. The boomers have had a good time. I don't know what to tell you. You know it's coming. Well, I got to say Matt and I are capitalists. Just saying. We are millennials. We are capitalists. So, if anyone's wondering, um, card carrying capitalists right here. But anyway, Ed, I have to say I always love having you on the show. You are so wonderful and amazing. Um, I guess in the final 60 seconds here, um, where can folks go find you and support your work, subscribe to your work, get your research, um, let them know. Yeah. So uh on axe you can follow my daily uh musings uh dowed edward ded uh our website is finance techchnologies.com with a ph you can buy our research reports um the China report is not priced for retail so when you look at the price don't yell at me it's for institutions it's it's a big report it's very serious and uh we offer you know two-hour consulting to anybody who buys a report um you can also find me at eddow.com N/A uh if you want to follow me there. I you know as I'm currently platformed on X I, you know, we don't know what's going to happen in the future. So you can sign up for my email service. I won't blast you and uh we'll see what happens if I ever go dark. You can at least find me somewhere. Oh, I don't think they're going to sense you on X. Hopefully not. That would be crazy. Um yeah. Um anyway, Ed Dow, uh founding partner at Finance Technologies, so wonderful to have you on again. I want to get you back on in 2026. Um maybe when you put out your big uh outlook for the year. Really really appreciate you as always and I hope you have a wonderful weekend and we look forward to our next conversation. Thanks again, Ed. Thank you. Appreciate you.