Bond Market Crash Warning — Full Breakdown & Transcript

[00:00] Look out, Katie Parvador, we could be on the verge of a crash in the bond market. A real crisis is coming where we have high debt and high interest rates. That is completely unsustainable, and it's the worst of all possible worlds.

[00:16] Mortgage rates are headed a lot higher, and eventually it's going to cause a drop in home prices, which is going to cause banks to lose a lot of money like they did in 2008.

[00:28] No more refinancing. That gravy train is over. I don't think we're going to get saved by AI. Before we get to the AI promised land, we got to cross this desert here of debt and inflation and complete collapse, which can unravel in the next few years.

[00:44] The Fed is out of tricks. There's no rabbits in any hat. There's nothing you can do to stop this. It is inevitable. If you wait till after the crisis, well, then it's too late.

[00:58] Well, here we go again. Another day, another new high in long-term bond yields.

[01:10] Today, the yield on a 30-year U.S. Treasury got as high as 5.62%. So above 5.6, although it ended up settling just below 5.6 at 5.59.

[01:25] the 10-year it hit 5.29 so a little resistance temporarily at 5.3 but we closed at 5.26 which is above five and a quarter it was just two weeks ago yesterday that the 10-year yield

[01:45] hit five percent and two weeks later instead of five percent being the ceiling like a lot of people thought it was just a stepping stone to another level because we're up 25 basis points

[01:59] in two weeks. At the rate that bond yields are rising now by the November midterm elections, the 10-year will be 6% if the current trajectory continues. The five-year hit 5.09, so almost 5.1,

[02:19] and it closed at 5.05, and soon the two-year is going to be at 5 as well. But more relevant to the average American relative to the Treasury bond yield is going to be the mortgages, which, of course, mortgage rates are a function of Treasury yields.

[02:36] But now the 30-year fixed-rate mortgage is 7.4%, headed, I said, 8% probably by Election Day, but much higher than 8%.

[02:49] Now, the yields were up again yesterday, so it's been two days since I recorded my podcast over the weekend, so you had two more days of rising yields. As a result of the increase on Friday and what happened Monday,

[03:05] the gold market got clobbered yesterday. Gold prices were down about $170 an ounce. Silver was down about $3.50. Now, today, the metals bounced back a bit.

[03:18] Gold recovered almost $70 of that gain, but still down $100 over two days. And silver is bouncing a little bit as well today. Looking at the prices, gold is at $41.80, $4,180.

[03:34] And silver is around $61.40. But what was significant about the sell-off is that gold held comfortably above $4,000. And I've been saying on the podcast, $4,000 is the support for gold.

[03:48] Could it go slightly below? Sure. I wouldn't expect it to stay there that long if it even gets there. And silver's got a lot of support around $60. So we're holding the support areas.

[04:01] But the markets were wrong, again, to assume that these rising bond yields are bearish for gold and silver. They're not. They're actually bullish. bonds are falling in value people are losing money in bonds that's why the yields are rising

[04:18] and if you're losing money in bonds if you want to avoid losing more money and you sell your bonds what are you going to buy you're going to buy gold central banks certainly who are selling

[04:30] treasuries are going to buy gold but the main reason i believe that bond uh yields are rising It's not because there's such great economic growth and there's so many opportunities to invest in AI capital spending, which there are, but that's not the primary driver here.

[04:47] I think what is driving yields higher is the supply of debt and the specter of rising inflation and the fact that we're now in a long-term bear market in bonds.

[05:00] Bonds are going to keep falling. Rates are going to keep rising. And in that type of environment, you want to own precious metals. You want to own gold and silver. Because that's how you hedge bonds.

[05:12] Up until recently, people looked at bonds as their hedge. But bonds, over the last 10 years, they've had the worst performance over the last 100 years. And you ain't seen nothing yet.

[05:25] Bond prices are going to keep falling. So if you need a safe haven from what used to be your safe haven, if investors were seeking out stability and safety by buying bonds

[05:37] and they can't do it anymore because they're losing too much money in bonds, especially when you adjust for inflation, where do you go next? Gold. It is the last safe haven standing.

[05:49] I've been saying this. And you just got to take advantage of the opportunity that the markets are giving you People are foolish enough to think that stagflation and rising debt is a bad thing for gold.

[06:06] They're wrong, but they give you the opportunity to take advantage of their ignorance by buying what they're selling. So, again, make sure you go to Shift Gold and take advantage of this dip while it's here.

[06:20] Buy more gold and silver. If you don't own any gold and silver, go out and buy some. And if you haven't set up your T-Gold account, I'm not going to spend time again on my podcast going over what's going to be happening at T-Gold.

[06:34] But make sure you open up an account for whatever amount of money. It's the cheapest way you're going to buy gold and silver because it's basically a spot, and we're not charging any custody right now. So you're getting a free custodial account, you're owning gold and silver in your spot,

[06:49] and you're going to be positioned to benefit from all of the applications that we're going to be rolling out over time at T-Gold to allow you to use gold not just as a store of value, which it's an excellent store of value,

[07:05] but to use it as a medium of exchange, as a unit of account in everyday commerce. But getting back to what is going on with the bond market, what is even more significant about today's sell-off in bonds is that it came with weak economic data.

[07:27] Just like the Friday sell-off, and I mentioned this on the weekend podcast, bonds sold off despite oil prices pulling back. And one of the reasons oil was pulling back was there was some optimism over some kind of deal.

[07:42] The Iranians had proposed some terms for a ceasefire or a reopening of the strait. But Trump, you know, flatly rejected all that stuff over the weekend. So all those hopes were false, as I speculated they would be.

[07:56] But what was significant about the rise in bond yields on Friday is that a drop in oil prices didn't help. you would have expected, based on the last several months, that bond yields would go down with the price of oil

[08:09] because they've been highly correlated. But no, bond yields went up anyway. Well, today's weak economic data would normally be bullish for bonds because the spin that would be put on it was,

[08:23] oh, the economy is weakening. Maybe the Fed can't hike, right, because we've got a weakening economy. It's going to put the brakes on the rate hikes. But the market shrugged it off. And let me go over the data points that were so weak.

[08:40] One was consumer confidence. So the consumer confidence numbers came out. These are September numbers. And the number plunged from 88.6 in August,

[08:58] which was already a downward revision because the original number reported for that month was 89.4. So they revised that to 88.6.

[09:10] The consensus was for consumers to be more confident, and the expectation was for a rise to 90. Instead of rising to 90, the index tanked all the way down to 81.9.

[09:28] That is the lowest in 12 years. So consumers have not been this worried in 12 years.

[09:40] Now think about what's happened over the past 12 years. In particular, the 2020 COVID pandemic, when people were worried that they were going to die, that the whole economy was shutting down. It was like an apocalypse, like out of a sci-fi movie.

[09:55] But even during the depths of the hysteria, people were more confident then than they are now. These are some bad numbers. And one of the reasons is inflation expectations are now, what is it, I think it's moved up to 5.1% for the one year going forward.

[10:15] So, again, you've got the Fed claiming that inflation expectations are well anchored at 2%, yet consumers are expecting 5.1%. And again, they're probably wrong because it's probably going to be higher than that.

[10:30] And in fact, it is higher than that if you don't use the CPI to measure inflation. If you actually look at real prices and what they're actually doing, not what the government pretends they're doing with the CPI.

[10:44] But despite this unexpected plunge in consumer confidence, bond yields went up anyway. So they didn't benefit from this weak data.

[10:57] Nor did bonds benefit from the jolts numbers that were also weaker than expected. And in fact, they were looking for 7.225 million job openings

[11:11] and it dropped to 7.079, which was even below the low end of the range. They were looking for $715 to $730. So fewer job openings normally would be bullish for bonds.

[11:26] Employers aren't looking to hire as many people. Signs of a crack in the labor market or more cracks. Yet bonds shrugged that off. Now, we're going to get more jobs data tomorrow.

[11:38] Maybe by the time you watch this podcast, that'll be out, because we get the ADP private sector jobs report. We get the big one on Friday. the government non-farm payrolls report, I will do another podcast at the end of the week

[11:53] to sum up the week and go over that number. Now, my forecast is going to be a weak number because last month we had a much stronger than expected number, which I expect to be revised down.

[12:07] I don't believe that number we got last month, and I said so, and I expect it to get revised down, and I would expect a weaker job number on Friday.

[12:19] So we'll see if I'm right. But more important, if we get a weak jobs number and the bond market doesn't rally, if the bond market sells off, even with weakness in the job market,

[12:33] look out, Katie, par the door, we could be on the verge of a crash in the bond market. Because so far, the rise in yields, even though it's been methodical,

[12:45] It's been very orderly. It hasn't, you know, the bonds haven't crashed. They just keep grinding lower day after day. It's like a slow water torture if you're in the bond market. But in the meantime, you know, the stock market is ignoring all this.

[12:58] Yes, I mean, I mentioned beneath the surface, 60% of the S&P is in a bear market. So you have this lousy breath, but you do have these AI-related stocks and other tech stocks

[13:11] that are doing so well that it's masking how poorly the vast majority of stocks are doing. And they're probably going to keep getting impacted by these rising rates. But what's going to get hit in particularly hard is the housing market and the economy.

[13:28] And I want to talk about that right now because it's really not getting enough coverage in the media. Yeah, they might cover that mortgage rates are going up. But there's a lot more to the story than just mortgage rates.

[13:42] Now, first of all, in that JOLTS number, they reported that the number of people employed in a housing-related industry,

[13:55] you know, realtors or appraisers or mortgage guys, dropped to also a 12-year low. now of course we have a lot more people living in America the population has grown over the last 12

[14:11] years but we have fewer people are working in the real estate market I think they said was 50,000 or something like that I think that was a number and it's not like you know they've all been replaced by robots that hasn't happened yet the reason that you have so many fewer people working

[14:27] in the industry is because there's so little activity now because nobody can afford to buy house and of course the people that own homes can afford to sell them because they can they can go anywhere because they trapped there with our low mortgages But the people who don own can afford to buy because the prices are too high and

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[15:55] So the downside is zero. Stop trusting a claim. Own the vault. That's proton.me slash Peter. You know, if you look at how the U.S. economy has really been evolving over the decades,

[16:08] we started out as a low-debt, low-interest rate economy. We didn't have a lot of debt. We were, you know, we were flush. We saved a lot. The government didn't borrow a lot.

[16:20] And we had low interest rates because we didn't have a lot of debt. We had a lot of savings. We had low inflation rates. So we had low debt, and if you wanted to borrow money, you got a low rate.

[16:32] Then it changed, and we started to get higher rates because the market started to see that debt was picking up.

[16:44] We were printing too much money. Debt was still relatively low, but interest rates really started to soar. in the first of the 1970s and then really in the 1980s. So we had a period of time during the 70s and particularly the 80s

[16:59] where we still had low debt. I mean, not as low as it was before. It went up a little bit. But in the scheme of things, we still had low debt, but we had high interest rates on that debt. Now, because we didn't have that much debt,

[17:12] we could afford to pay the high interest rates on the debt we had. Then we moved into the third phase, which was high debt but low interest rates. Somehow we caught a break.

[17:24] Even though our debt surged, particularly after the 2008 financial crisis, we had an exploding debt, but interest rates went down. So we had high debt, but we had low interest rates,

[17:37] which made the high debt affordable. We are now in the fourth, I guess, quadrant, if you put it all in a box. We're now in Quadrant 4, where we have high debt and high interest rates.

[17:52] That is completely unsustainable, and it's the worst of all possible worlds. The best is low rates and low debt, and you can argue that high debt and low rates may feel better than low debt and high rates.

[18:11] But it's unquestionable that where we are now, when you have a lot of debt and now you have to pay a high rate to service it, that's the worst place that you could be. And that is where we are right now.

[18:24] And America is not used to this. We haven't lived through this yet. That's why consumers are so pessimistic. But they're going to get a lot more pessimistic as the numbers get worse.

[18:36] But where it's going to be particularly heartfelt is in the housing market and the overall economy. Because a lot of people, they underestimate just how important housing has been to the U.S. economy.

[18:49] And not, you know, the real economy, the bubble economy, the phony economy that we've had, driven by debt and consumption. Because the fuel for a lot of that debt-based consumption was the housing market.

[19:04] And that fuel is exhausted. And in fact, now, instead of providing a boost to consumer spending, housing is going to be a drag on consumer spending.

[19:16] We've never experienced this. So here are the facts that you look at. So right now, the average median home price is about five times median household income.

[19:31] That is an enormous amount. And it used to be, back in the day, you know, the 40s or 50s, it was about double. But the government got involved, guaranteed mortgages, Fannie and Freddie, you know, I'm going to get to them later, by the way,

[19:48] but government got involved in housing, and that boosted the market, and that brought it higher. So by the 1980s and 1990s, home prices were 3.3 times household income in the 80s and 3.4 times in the 90s.

[20:05] But look at what's happened to home prices. The median home price in the 1980s was $76,500. That's it. You could barely buy a car for that money now.

[20:17] In the 1990s, the Indian home price was $117,500. Now it's $445,000.

[20:31] Think about that. And that is an enormous increase. But what's more significant than just the fact that the price of the house has gone up,

[20:45] But Americans have to borrow a larger percentage of that price because they don't have the down payment money. So in the 1980s, the average down payment was 25.4%.

[21:00] In the 1990s, it was 22%. Today, the average down payment is just 13.8%.

[21:12] So when you put down a smaller amount of money, you need to borrow a much larger percentage of the purchase price. So the fact that Americans have to borrow a lot of money now is going to be a big factor given how much higher mortgage rates are.

[21:30] And by the way, these rates don't include people who pay cash for their homes. So that would skew the average. These are people who needed a mortgage. and if they took out a mortgage, what did they put down and how much did they borrow?

[21:43] But the key is the mortgage rate. So mortgage rates, like bond yields, peaked in 1981. Believe it or not, a 30-year fixed-rate mortgage in 1981 was 18%.

[22:00] 18%. And people say, oh, how can you complain about, you know, 7.5% when, you know, people were paying 18%? Well, there's a big difference, and I'm going to get to that. But so the rate was 18% in 1981.

[22:15] That was the peak. But all of the 1980s averaged 12.7%. So obviously, if we started the 1980s at 18%, mortgage rates were falling for the decade.

[22:27] 1990s average mortgage rate was 8.1% that's almost where we are now

[22:39] but rates were falling average 12.7% in the 80s 8.1% in the 90s the 2000s 6.3% was the average rate

[22:52] mortgage rates fell for the entire decade Now, the 2010s, the average rate was 4.1, the average. That means it ended the decade lower than that.

[23:07] That was the average. But again, another decade of falling mortgage rates. So, we had one, two, three, four decades where mortgage rates fell for the entire time.

[23:23] Now, mortgage rates bottomed out in 2021 at 2.65%. That was the bottom.

[23:36] So the top was 18% in 1981, and the bottom 40 years later in 2021 was 2.65%. Now, where are we now?

[23:50] 7.4. But this is the point that I'm making that is extremely significant. The U.S. consumer rode that wave for 40 years if they owned a home.

[24:04] Because even if you took out an 18% mortgage, you did not pay 18% for the 30 years. No, you refinanced it over and over and over again.

[24:16] And mortgage refinancing for 40 years was the gift that kept on giving. Homeowners had a way to just get money when they needed it. They could refinance their mortgage.

[24:30] And what a lot of people did is they took out cash. Their home was a piggy bank. It was their own personal ATM. Of course, it was not used anywhere near as much in the housing bubble.

[24:46] That's when it became the ultimate ATM, you know, in the 2000s. But the entire time, people were refinancing. And what people were able to do as mortgage rates fell for those 40 years is every time they refinanced,

[25:04] not only would they get a lower monthly payment, they would cover all the costs. Because it's not free to refinance a mortgage. There's a bunch of fees in there. But as you were lowering your interest rate, the payments were actually coming down, and a lot of people were taking cash out.

[25:26] They were cash out refis, where somebody would take $25,000 maybe, put it in their pocket, because the real estate had a pre-state, right? Real estate prices were going up for 40 years. And so as the price was going up, you had more equity.

[25:41] When you did your refi, you could actually extract some of that equity, get cash out, have that money to spend to remodel your house, to buy a car, to pay off credit card debt, to take a vacation.

[25:56] But not only did you get cash in your pocket, but your monthly nut going forward went down because you got a lower rate on your mortgage. Now, of course, that puts off the day that you would eventually repay your mortgage

[26:11] because if you keep refinancing a 30-year fixed-rate mortgage with a new 30-year fixed-rate mortgage, you're never going to pay off that mortgage. But nobody really cared. Who pays off a mortgage? You just keep making the payments and you keep pulling out cash.

[26:25] That was the American way of life. That's why housing became so important. That's why people describe the American dream as owning a house. Because that was the new American dream. Because if you owned a house, you had to take it to Easy Street.

[26:40] You didn't have to work that hard. Your house did the work for you. All you had to do was live in it. Just sign on the dotted line, and now you have this asset that only appreciates. And you can constantly pull money out, and your payments keep going down.

[26:53] And your net worth keeps going up. The wealth effect. People felt wealthier because they owned a home. Sometimes they bought a second home or a third home to feel really wealthy

[27:05] because everything was appreciating. And so you didn't have to save as much because the house was saving for you. And so a lot of the consumer-based economy was powered by 40 years of falling mortgage rates

[27:21] and serial cash-out refis. Well, all of that has changed. Now, housing is going to be a headwind for the economy.

[27:33] Mortgage rates are going to keep rising. What does that mean? No more refinancing. No more lowering your payments when you find yourself with a lot of credit card debt and you're in trouble. You can't save yourself with a refi.

[27:46] And you can't save yourself by pulling cash out. Nobody can pull cash out anymore unless they just take a home equity loan. but a home equity loan doesn't reduce your payments

[28:00] because you're not refinancing the principal. You're just taking out additional debt, and those home equity loans have even higher rates because they're in a junior position to your primary mortgage.

[28:13] So it's a lot more expensive. So far fewer Americans are going to be willing to take out home equity loans than were able to do these refinancings in the past. But also, real estate prices, they're not really rising anymore.

[28:30] I mean, they're up. If you look at the numbers that came out today from the FHA and from Case-Siller, year over year, real estate prices are up about 2.5%, 2.6%. That's less than inflation.

[28:42] I mean, they're up nominally, but in real terms, home prices are rising more slowly than the CPI. Now, at some point, they're going to start to fall. They're going to have to as mortgage rates really start to rise

[28:57] because we're going to go to 8% to 9% to 10%. Mortgage rates are headed a lot higher. And eventually, it's going to cause a drop in home prices,

[29:10] which is going to cause banks to lose a lot of money like they did in 2008 When people are underwater in their mortgages we know what they do They mail in their keys Even if they still have a low payment if they have negative equity if they upside down by several hundred thousand dollars

[29:29] they may feel like it's a waste of money to pay the mortgage, even if they've got a low rate. But, of course, not everybody has a really low rate. Not everybody had a 30 or 50. And some people had variable rate mortgages.

[29:42] And, of course, there are people who need to sell their homes, even though they have a low rate. They got divorced. Somebody dies. They move. So real estate is going to come on the market, and there's no buyers.

[29:57] Now, one of the things that's been propping up the market has been a lack of sellers, because people don't want to sell their homes because they have a low rate that they can't refinance, and they can't apply to a new purchase.

[30:11] even if they want a bigger home, they're kind of stuck. Maybe they'll add a room so they can keep their initial mortgage. But the other thing that is helping to keep home prices up is the fact that we're not building as many homes.

[30:25] And a large part of that is because of tariffs, which are dramatically driving up construction costs and the Trump immigration policy. So building homes is very expensive.

[30:37] and the developers can't sell the homes at a high enough price to make a good profit because the buyers can't afford it, because the mortgage rates are now so high.

[30:51] So this is a huge problem. Nobody is talking about this dramatic change where the economy has lost out on really what's been the life support of rising real estate prices and serial cash out refinancings.

[31:06] No more refinancing. That gravy train is over. No way to reduce your monthly payments. No way to extract cash. And no positive wealth effect. And so if consumers are this pessimistic now, just imagine how much more pessimistic they're going to be in a few years

[31:24] when real estate prices are lower, the price of everything else is higher, and mortgage rates are really up. Losing weight can feel a lot like the stock market. You get a nice rally.

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[33:01] weight over a 40-week period. Higher app engagement was associated with greater weight loss at 16 weeks. And, in fact, this week, I think it was this week or last week, Bill Pulte from the FHA, right, a Trump guy in there,

[33:17] says that the GSEs are now going to be stepping up their purchases of mortgage-backed securities, MBS. Now, I spoke about fanning and fanning again on my last podcast, and it continued to be clobbered in the last couple of days.

[33:32] And so Fannie Mae closed today at 417 and Freddie Mac at 380. They're now down 74 and 75 percent from their 2025 highs.

[33:44] Now, they're still up from where they were before Trump won. If you had bought some Fannie and Freddie, many people did as a bet that Trump would win.

[33:56] Both of these were trading under two bucks. It was closer to like a dollar and a half. So even where they are now, they're still double or triple where they were. But if you doubled your money and now you're down 75% from the peak, you're basically even on that.

[34:14] But I guess if you tripled your money, maybe you still have a gain. I don't know. But the decline is huge. And it's not over.

[34:26] because when the Democrats take back the House and the Senate, I think it further complicates the ability of Trump to do anything to get these GSEs out of conservatorship

[34:42] and do any kind of IPO, which was all the hype that got these stocks to go up. And, of course, anything they do to rock that apple cart is going to put more upward pressure on mortgage rates,

[34:55] which is why they're not going to do it, because that's the last thing they want to do when rates are already rising, is create a reason for them to rise even faster. And the problem is Fannie and Freddie are losing a lot of money on the MBS that they're buying,

[35:09] and at some point the losses are going to explode. They're going to be hemorrhaging. All the money that Fannie and Freddie were making since they got bailed out, now they're going to lose it all back. You know, the whole story about why they should be privatized was that they were cash cow.

[35:25] they're making all this money. Yeah, they were taking all this risk, and now the risk is about to blow up, and now they're going to be losing a ton of money, and the government's going to have to bail them out again. Now, of course, they don't technically have to bail them out because they're now part of the government,

[35:38] but the government is going to have to start shoveling money that it doesn't have into the GSEs to cover the losses on their portfolios. And where's the government going to get that money? It's going to have to borrow it.

[35:51] But, you know, Trump hyped this stuff up, Just like he hyped everything up. I don't know if he was ever even really serious about this plan. But I think the reason that he talked so much about how great these companies were,

[36:08] he put out these true social posts, these great companies, these fantastic, great American companies. They're not great companies. They're disasters. They're government-created duopolies that shouldn't even exist.

[36:20] They have a massive moral hazard. They're socialist concoctions. You know, they started with FDR. But to talk about how great they were, the only reason Trump was doing that was to get the price of the stocks to go up, which they did.

[36:35] They went from under $2 to almost $16 in the case of Fannie Mae and almost $15. Like they both went a penny below. The high for Fannie Mae was $15.99.

[36:49] The high for Freddie Mac was $14.99. But I think that Trump, in the early days of his administration, was putting out all this positive stuff on Fannie and Freddie specifically to get the price of the stock up so that his friends and his early donors who already own the stock or who bought more in a week or two after he won the election and they loaded up, so they could dump.

[37:17] I think the public was suckered in to this trade, and they loaded up on Fannie and Freddie at $10, $11, $12, $13, $14, and allowed the insiders who got in early to cash out.

[37:34] Now, Trump doesn't give a damn anymore. He doesn't care about mom and pop who bought these stocks because they read a post from Bill Ackman or whatever they heard or they were reading on Truth Social. He doesn't give a damn about those average Americans who are now the bag holders in this scam.

[37:50] No. His buddies, they knew the score. He probably shared with them, hey, look, yeah, we're going to talk about it just to get the price up so you can sell. Obviously, somebody was selling at those high prices.

[38:04] Who wasn't? His buddies. But that's the way Trump operates. He did the same thing with Bitcoin. He made all kinds of promises and talked big about Bitcoin.

[38:16] That's why Bitcoin went up to $126,000. He was so pounding the table on making Bitcoin the U.S. the Bitcoin capital of the world. We're going to be the leaders in Bitcoin.

[38:28] Why was he talking so positively early on about Bitcoin? Because he owed a lot of favors. A lot of people supported his campaign from the Bitcoin community.

[38:40] They gave him money. They gave him votes. And so he paid them back by talking up Bitcoin so they could sell. That's what happened. In fact, he did the same thing with his own meme coins, with Trump coin and Melania coin.

[38:54] He made a fortune hyping that up. Look at where they are. I mean, look at how much you're down. Everybody who participated in a Trump trade is losing money. the people who made money on the Trump trades

[39:09] were the people who front ran them who were already positioned for what Trump was going to promote and hype up and they were able to sell into the hype that the president created

[39:23] now who knows if the Democrats are going to start investigating this stuff when they win not only the House but the U.S. Senate and they control all of those committees and have all of that investigative and subpoena power.

[39:38] But that's what's coming. Now, by the way, one of the things that Trump is doing now to try to help the Republicans, it's probably going to backfire like most of what he does, but he's running this so-called public service announcement.

[39:54] I don't know if you've seen this. You can go and look at it on YouTube. But it's a black and white short ad. I don't know, 30 seconds or something like that. And the president is walking through corridors, I guess, of the White House or Congress or somewhere.

[40:08] But it's in black and white. And then he's reciting this speech on, you know, how he's fighting a good fight, how he's going to rid the country of the communists, of the fascists, of the people who hate our country.

[40:24] And one of the things he promises to do is eject the warmongers from government. Right. Well, at this point in 2026, if Trump wants to get rid of all the warmongers, he's got to resign because he's one of the warmongers.

[40:41] Of course, he was rallying against warmongers when he was running for president a second time. And then he became a warmonger once he got back as president. But the thing about this public service announcement is that it's not a public service announcement.

[40:58] It's obviously a campaign ad. He is asking voters to stand with him this one last time in my final battle. Help me take it over the finish line.

[41:11] I'm going to make America great. I'm going to drain the swamp. Clearly, this is about the midterm elections. The president is saying, hey, I need help. I need Congress. So you got to come out and you got to vote for me.

[41:26] This is not a public service announcement. But he's pretending. It's not about the country. It's all about Trump. But the most ridiculous part about it is the words that he is speaking were lifted verbatim from his campaign ad from 2024.

[41:44] That's why they didn't even take out the warmonger stuff. They didn't even realize, oh, wait a minute, Mr. President, maybe we should take this part out because, you know, now you started a war. Right. So you really you really want to leave that in there. But I guess they didn't even bother to edit that out.

[41:58] They just, you know, cut and paste the entire campaign ad into this public service announcement. And now they're saying it's a public service announcement. Well, if it's the exact same verbiage as the campaign ad. Well, clearly this is a campaign ad. But, you know, it's not going to work.

[42:13] It's just probably going to make people more angry at the misuse of public funds by the Trump administration. Now, of course, the Democrats are not going to be able to deliver on their promise.

[42:29] The voters are going to be disappointed. Once again, they're going to buy another bill of goods. But, you know, the Republicans have teed it up. You know, it's easy for the Democrats to hit this thing off the tee.

[42:41] You know, I was listening to an interview on CNBC. Andy Ross Sorkin was interviewing Hakeem Jeffries, who is the minority leader now in the House, but he's going to be the next Speaker of the House.

[42:55] And, you know, one of the things that Sorkin was asking him, because he was criticizing the deficit spending and the big run-up in the $40 trillion debt, right? And so, well, how do you criticize that?

[43:09] And he said, well, a third of the national debt was run up by Trump. And that might be the number, you know, because Trump's been in office for six years. That may be. But Biden still holds the record for the most debt in a four-year period.

[43:24] So Trump hasn't beaten that record yet. Now, he might beat it in his second term. But how can a Democrat talk about how much debt Trump has run up when proportionally Biden ran up even more?

[43:39] But, you know, he didn't bother to say that. He didn't bring that part up. But what Rorschach did do is he asked him like three times before he gave up. Okay, what are you going to cut? If you are upset that Trump is running up these big deficits how are you going to stop it What Trump spending are you going to eliminate He would not answer the question

[44:03] Now, of course, he didn't say, I'm not going to answer the question. He just didn't answer the question and started going off on his own campaign talking points. I mean, that's what these politicians do. That's what they're trained to do.

[44:16] They never answer a question that could get them in trouble. So if you ask him, what are you going to cut? He's not going to say because if he points out something he's going to cut, that's going to be used against him

[44:29] because some other politician is going to find out whose benefits are being reduced by that cut and say, hey, this guy wants to take away your benefits. You know, don't vote for him. Look, he wants to take your money away from you.

[44:41] So nobody wants to give their opponent an opportunity to run that ad. So nobody will admit. But after, I think he was asked like three times, he finally said something about, well, you know, we're always against waste, fraud, and abuse.

[44:56] Yep, they eventually go there. Waste, fraud, and abuse. Nobody is for waste, fraud, and abuse. So if you just promise to cut waste, fraud, and abuse, you haven't left yourself open to anything.

[45:09] Because what is your opponent going to say? He's threatening to cut waste, fraud, and abuse? Yeah, what's wrong with that? I mean, nobody is in favor. Imagine a politician saying, I'm in favor of more waste, more fraud, and more abuse.

[45:23] I don't think they have enough of it, and if you elect me, we're going to have even more fraudulent spending. I'm going to waste even more of your money, and I'm really going to abuse you. Nobody is going to take those positions. So it's very easy to say you want to cut waste, fraud, and abuse.

[45:38] What is impossible to say, or they won't say, is, okay, give me an example of this waste, fraud, and abuse that you're going to cut. See, then they go silent. Or instead of going silent, they just talk about something else. That's what makes a good politician.

[45:51] You can pretend that you're answering a question, but not answer it at all. You kind of make your answer sound like it's somewhat related to the question, but you don't answer it. You just say the things that you want to say.

[46:04] And that's what Jeffries was saying. But a few of the things that he did say he wanted to do during this interview, and he wants to reverse Trump's Medicaid cuts.

[46:16] So he wants to increase spending. Because if you reverse a cut, that means you're going to spend more. Because he started the interview criticizing the deficit. But the things that he said he wants to do are increase spending on Medicaid.

[46:30] He wants to restore subsidies from the Affordable Care Act. So that's increased spending. So he wants to increase spending on the Affordable Care Act. He wants to increase spending on Medicaid.

[46:43] And then he wants to roll back the Trump tariffs. Okay, well, that reduces revenue. I disagree with tariffs, but I recognize one thing. They are providing the U.S. government with revenue.

[46:56] So if you get rid of the tariffs, the deficits that you are criticizing are going to get bigger. So he spends the whole interview criticizing Trump's deficits. and then the only stuff that he says he wants to do

[47:09] will make those very deficits that he's criticizing even bigger. But that's exactly what the Republicans did. How did the Republicans get elected in 2024? By criticizing the Biden deficits.

[47:22] And what did they do in 2025 when they got power? They voted to make the deficits even bigger. They increased spending and they cut taxes and they called it the Big Beautiful Bill. Well, it was the Big Beautiful Fraud.

[47:35] And it wasn't beautiful at all. I mean, it was ugly, but it was big. So they got one B right. Or I guess it was a bill. But two out of three is not good. But now the Democrats, they're borrowing a page from the same playbook that won for the Republicans,

[47:51] just criticized the deficit because the deficits are enormous. So criticize them, promise to do something about it, and they're not going to do anything. Now, of course, the other big thing is affordability.

[48:03] They keep talking about affordability. Yes, you know, things are less affordable now than they were when Trump took office. But they would be just as much unaffordable as Harris won.

[48:17] But the voters don't know that. It's very easy just to blame all the problems on whoever's there. I mean, look how much ground Trump makes blaming problems on Biden. I mean, no matter what goes wrong, it's Biden's fault, right?

[48:29] But the further we get from the Biden term, the harder it is to sell the voters on, you know, it's all Biden's fault because at some point, you know, you broke it, you own it, it's your fault. But the Democrats are promising that they're going to cut the deficits because the Republicans failed to do it.

[48:50] Now they're saying we're going to solve the affordability problem. This was the same lie that Trump told. Vote for me. Prices are going to fall on day one. I'm going to reverse the Biden inflation.

[49:02] Well, now the Democrats are saying the exact same thing. Vote for us. We're going to get rid of the Trump inflation. We're going to make things more affordable. How? The only example I think that he gave on affordability was we're going to make it easier for people to get low down payment mortgages.

[49:20] And I've heard more. There's another Democrat, I think, for veterans. And they already have all these veterans benefits where you can get a no down payment mortgage. But helping people buy homes with little or nothing down,

[49:37] that doesn't make things more affordable. That's what's keeping home prices high. It's just artificially stimulating demand. And if you've got to create more money, you've got to create inflation in order to provide that stimulus.

[49:52] You're not addressing the affordability crisis. You're exacerbating the affordability crisis. In fact, everything that the Democrats are proposing to help solve the affordability problem will make the affordability problem worse.

[50:08] Now, the main, I think, campaign strategy of the Republicans seems to be to criticize socialism. Oh, you don't want to vote for the Democrats because socialism is lousy.

[50:21] And it is, but the problem is so much of what the Republicans are doing is also socialism. And so it makes it very difficult to knock the very thing that you've embraced yourself.

[50:33] And in fact, I think once the Republicans decide to accept a little socialism, well, then what's wrong with a little more socialism? You know, it's hard to criticize it when you're on the same team

[50:45] and just say, well, they've taken it to the extreme. You know, we've found the correct mix of socialism and capitalism. You know, those Democrats, they just want too much socialism. They want more than we do, and that's really bad. We want just the right amount of social.

[50:59] See, once you've already compromised your principles, then you really can't stand. And you can't outbid the Democrats. When it comes to buying votes with government spending, the Republicans are not going to outbid the Democrats.

[51:12] They're just not going to do it. They're not going to out-Democrat the Democrats at their own game. So they basically conceded the fight by rejecting real capitalism, limited government, the principles that Reagan espoused.

[51:27] And now they've moved so far to the left that it makes it difficult. The criticism doesn't really ring true with a lot of the voters. And you know what? Hey, if we're going to be a socialist, let's really do it.

[51:41] Let's not do a half-assed job at socialism. Let's just go big. Go big or go home when it comes to socialism. I don't want this mandy-pandy socialism. Give me the real thing. If socialism is good, then I want a belly full of it.

[51:55] That's where Americans are right now because they've never really experienced a belly full of socialism. They don't know how bad it tastes. They haven't had a chance to barf it all out yet like they did down in Argentina.

[52:09] Now, that's coming. That day is going to come. I don't think we're going to get saved by AI. That's the hope. You know, the president was in the White House, I guess, today, with all the big rigs of all the big tech companies,

[52:24] a who's who of the Mav-7 and, you know, about another couple of dozen tech companies. These are all the ones that are in these bull markets. These are all the ones that are spending massively on the CapEx related to AI.

[52:40] And, of course, yes, that's pretty much all of our economic growth. I mean, they point to this great period of economic growth. It's all capex spending. The economic growth is supposed to come later.

[52:53] This is the cost of future growth. The money that we're spending now, this is not the growth. This is what we have to pay to eventually get the growth because all of this infrastructure, all this compute,

[53:07] has to ultimately be used to raise our productivity. If it doesn't, right, well, then we just wasted a bunch of money. Now, I am very bullish on AI,

[53:19] but I don't know exactly how it's going to roll out, what the timetables are going to be, how long it's going to take to deliver a meaningful impact. But in the short run,

[53:31] the consequences of a blow-up in our debt and a debt crisis, a sovereign debt crisis, and a currency crisis, and what might happen. Because before we get to the AI promised land, we've got to cross this desert here of debt and inflation

[53:50] and complete collapse, which can unravel in the next few years. And when the Democrats get Congress, what do you think they're going to do with Congress? especially with the economy continues to weaken

[54:05] and interest rates are higher they're going to pass some of the biggest spending bills ever sure they'll have some tax increases in there for the rich

[54:17] but it won't come close to offsetting the spending for everybody else and of course one of the big problems with the way Democrats tend to structure the taxes on the rich

[54:30] is that they end up getting less revenue from the rich because the rich adjust their behavior so that their income goes down and so their taxable income is lower and so their taxes are lower.

[54:43] You have different incentives. There you're now operating on the Laffer curve when you just jack up marginal rate of tax. And look what's happening to all these blue states

[54:55] that are jacking up their income taxes. The wealthy people are leaving. And so they're not even there anymore. So that really blows up their tax revenue. Now, it's harder to leave the United States, but it's not impossible.

[55:08] But it's a lot easier to move from one state to another. In fact, it's very easy to move from one state to Puerto Rico. Maybe people will start doing that again, even though it's a very corrupt government, as you know from what I said.

[55:21] But if you ignore all that corruption and just mind your own business and just come down here and just, you know, earn money tax free and don't care how much the Puerto Rican government oppresses everybody else.

[55:34] Right. You know, you can you can you can run your life and run your business and do very well to escape these kind of taxes down here. But the point is that the Democrats, they're not going to get a lot of extra revenue from their tax hikes,

[55:51] but they're going to spend a lot more money from their spending increases. The deficit is going to blow up, and the upward pressure on rates is going to intensify.

[56:03] And as I said on my last podcast, this is a long-term bear market. The Fed is out of tricks. There's no magic trick left up the sleeves at the FOMC.

[56:15] There's no rabbits in any hats. We had a 40-year bull market in bonds. They were able to ride that wave. They were able to continuously lower rates and expand the balance sheet and expand the money supply

[56:27] because there were no consequences. They can keep on borrowing, and the markets didn't care. The bond vigilantes were dead. Well, they're all back. The markets care. They're going to care more and more.

[56:39] You can't put that genie back in that bottle, and this is going to snowball. A real crisis is coming. That's why you've got to be prepared. A political crisis, an economic crisis, a currency crisis, a bond crisis,

[56:52] all of these forces are converging for a perfect economic storm. I've been warning about this for a long time, and now you can see we're very close to the end game.

[57:05] So again, take precautions, protect yourself. There's nothing you can do to stop this. It is inevitable, but you can choose what you do, how it impacts you as an investor,

[57:18] what you do with your portfolio, your savings, your investments, in anticipation of this major economic, political, and financial event. Anyway, that's it for now.

[57:30] I'll be back again at the end of the week to wrap up the week and go over the jobs report. In the meantime, don't forget to subscribe to my YouTube channel, like and comment on this podcast.

[57:43] And if you haven't already signed up to be a subscriber to Shift Sovereign, make sure and do that at shiftsovereign.com and check out our newsletter on Plan B because a lot of people are going to need a Plan B

[57:58] given what's about to happen. and you've got to get your plan B organized before the crisis. If you wait until after the crisis, well, then it's too late. You can't plan in the aftermath of a disaster.

[58:12] You have to have your escape plan just in case you need it all together in advance of that event. And if the event never happens, well, you know, it's like having a gun. There's an old expression, it's better to have a gun and not need it

[58:28] than need a gun and not have it. Well, the same thing applies to your plan B. Bye for now.