RANT: The Next Crash Is Coming. | Inflation/Deflation, The Fed, Shortages, and More

All right, that is it. We're over. We're done. I've had enough. Okay, today we're talking about this: inflation, deflation, the Fed, the next big crash. This is a rant video, so bear with me. I'm gonna be yelling, screaming, but this is insane what is going on. I've been stewing this in my brain the last few months, and finally I said, you know what, we're flipping on the camera today. We'll let the people of YouTube decide what they think of this. So where I put a little list here of stuff, I'm just gonna go and riff. We're gonna talk about negative rates, CPI numbers, inflation, Inflation, deflation, low workers, kind of the everything shortage, Federal Reserve, and margin in today's episode. Hope you guys will enjoy a little bit of rant. All right, so first thing we have to talk about is the Fed. And the Fed last week or 2 weeks ago, whenever, came out and said they're not going to move rates at all. Rates have pretty much been at zero the last few months and they come out May's CPI numbers, okay, May CPI numbers come out and say— this marker, it doesn't even work. Gosh, I'm going on a bigger rant. Give me a better red marker over here. Okay, that one finally works. May CPI numbers, you can see we're getting into this rant here, come out and they pretty much say everything is transitory, right? Inflation is up 75% to 100%. Above the parameters that they thought they were trying to hit. Their benchmarks, they come out and they're way over, but they cover it. Oh no, don't even worry about it. Inflation isn't happening. It's all transitory. It's all because COVID and people are getting back to work and a chip shortage and there's lumber, you know, we can't cross Canada border. And which I get. Yes, there are transitory things. With inflation numbers, but it's not everywhere. I mean, I would understand if they came out, you know, they've got their basket of goods that they measure inflation with. If, you know, let's say you had a few outliers, some things that were really spiked up. Yeah, I get that. I get there's inflation. When everything is up, I mean food and beverage, I mean you have everything is up on inflation, they go, yeah, you know what? It's a little bit, but it's all transitory. It's all going to come back to our limit. And level here. It's really not, uh, they are reporting, you know, near 4% inflation. A lot of economists believe it's usually double, so, you know, 6 to 8% inflation that we're actually seeing every single day of what's going on. And the Fed right now has their hands tied. I mean, their rates are pretty much zero, so they got 0% rates and they set these. We're talking about them in just a minute, what I think is going to happen, um, because they— and they come out and said, well, we plan— this is where everyone's given hope from— that we plan Over the next 18 months to years, you know, 2023, we plan to raise rates back to, you know, 1.5%, you know, 2%, whatever they plan to do. I think there's no way they can do this. I just don't think it's going to happen. Money has to be cheap. Now, let me give you a few other things. The Fed as well, let's go back in history a little bit. All right? The Fed, 2019, this is pre-COVID, 2019, They came out, I think it was the end of 2018, end of 2018, early 2019. They said, we're going to raise rates throughout 2019. We plan to raise rates and we're going to slowly taper back things on this cheap money supply. Almost 60 days later, the beginning of 2019, they go, whoops, just kidding. We actually are going to lower rates. The smartest people on the planet, the Fed, I mean the most powerful Private organization. By the way, the Fed is a private organization. It's a private business, which has got to be the greatest business model of all time. Printing the money for the world's superpower is a pretty good business model. Kudos to the Rothschilds for figuring that out. But I digress. The smartest people with the most economists, the most data, everything they have, 60 days later, they go, whoops, we were going to raise rates, but we're actually going to lower rates. And they lowered rates and lowered, and they call it Powell's pivot. They've coined it online, Powell's pivot, when he pivoted on his rate increase and lowered it. And then COVID hit, COVID and 2020, they went bam, pretty much to zero, right? A little bit above zero, whatever. During the same time, okay, then COVID hits, the Fed then goes, we gotta save everybody, right? So they start printing money. Now, I don't know what the numbers are. I have heard, Anywhere from 20% to 40% of our money supply, U.S. dollars in circulation were printed in the last 14 months, were created in the last 14 months. 20% to 40%. All right? Which is insane. And for them to come out with the audacity, with the cojones to come out and tell us, yeah, inflation is just 2%. OK, you know, maybe it's gone up to 4%. Are you kidding me? By the way, they keep changing how they measure inflation. Tuition, not an inflationary asset anymore. Phones, cars, not inflationary anymore. We don't count that in our basket of goods. They keep changing the basket of goods. Now, why do I think they change and they're not going to admit to what's actually going on? Because they can't. And if I was in the same position, I probably wouldn't either. A few reasons. Number 1, if they actually admitted inflation was 6 to 8% or more with what we've seen. Social Security checks have to now go up every month for everyone on Social Security. Government workers' wages all have to go up 6 to 8% a year. And they call it, even if it wasn't happening or it was a little bit lower, it's a self-fulfilling prophecy because a lot of companies will read a metric like that. Even right now, they're reading 4% and they're all raising their prices about 4%. Whether it's true or not, the number published causes inflation to happen. It's a self-fulfilling prophecy. So I believe they artificially keep that number low for the health of— and now I want to walk through a few things why the Fed would do this and inflation, deflation, and maybe their plan for the future. So a few things though the Fed has done, and if you guys will bear with me to get here, we're going to talk about margin and actually the next crash, what I think is going to cause the next crash. Is actually based on all this. Give me a few more minutes here to set some groundwork and we'll get into it, alright? And if you guys are liking this, I guess hit the like button, I guess it helps my YouTube guy, whatever. Alright, let's get into this. So the Fed as well took their balance sheet, this is back in 2007, 2008, they took it from about $1 trillion on their balance sheet to $4 trillion. Okay, $4 trillion. Because they were buying equities, trying to keep the economy afloat, trying to inject money into the economy, which, okay, that's one of the levers the Fed can pull. They had a plan. They said, we're going to try to bring it back down to about $1 trillion, maybe about $1.5 trillion. Today, the Fed's balance sheet is over $8 trillion. They own over 20,000 equities. 20,000 equities. They're buying Google. They're buying Apple. They're buying Microsoft equities. It's not like back here, they used to buy bonds. They were buying government, traditional things the Fed buy. Now they're just buying equities. They're buying Microsoft, Netflix. They're buying the FAANG stocks. Why is a central bank buying these stocks? Again, to prop up this economy. to help it in this next revolution. Now, a few things to back up the Fed before we get into what I think this is the next crash, what the next big crux will be. Now, am I right? I don't know. I'm going to play probabilities out for you and you can decide for yourself. The other thing, so the Fed has zero rates. You have right now on this top piece over, I don't know the exact number today, last I heard it was over $10 trillion of zero or negative rate bonds. So, zero or negative rate bonds or central banks issuing money at zero or negative rates around the world in negative interest rates. Do you even— it's hard to compute what a negative interest rate means. My dad has a friend in Denmark. He had a mortgage and it was an adjustable rate mortgage in Denmark. The rate went negative. So his, literally his mortgage company pays him something like $22 a month to have a mortgage. Okay? Just, this is a backwards world where money is in such great supply that rates are negative, right? Or zero. All right? So the Fed, I mean, if they raise rates, let me just play some scenarios for you here of what— Now I've got 2 scenarios that I play through my head. One scenario is I think what the Fed is going after. Now the second scenario is what I think the crash will be. Let's get into that for a second because I think I've been teasing it a lot. Let's talk about it here. This is a rant video, so I'm just going to go off. I don't have a— I mean, you can tell my little agenda here, but we're just going for it. Let me know in the comments what you guys think. Alright, here we are. If you own a lot of stock, let's say you're a tech founder or whatever, you own $50 million in stock, okay, of ABC Company, right? Or if you're Jeff Bezos, it's called Amazon, or Elon Musk, right? You have your stock position. Well, right now, actually, my bank, literally Bridger Pennington, I borrowed money from 1% from my bank off my stock portfolio. Now, they have a rule, you can't buy the same stocks you have here. You can't invest it back in the stock market, but— They said you can buy whatever you want. So I'll take that money and let's say you can leverage up to 50% of this stock portfolio, so $25 million. I'm going to take $25 million in this scenario over to the real estate markets. And guess what I'm going to do? I'm going to go buy real estate. I'm going to buy more assets. So I'm going to buy real estate. I'm going to buy some, let's just call it real estate here. Bam, I buy properties and apartment complexes and all that kind of stuff. And guess what? I'm only borrowing money at 1% or 0.5% or heaven forbid, 2%, right? Lowest rates in 8,000 years. You know that? They've tracked interest rates for over 8,000 years. They've gone back through the Bible and historical stuff. They believe right now is the lowest interest rates in 8,000 years. The history of the, pretty much since historical data, we've never had lower interest rates than right now, which is insane, right? Money's never had less worth than it is right now. So, what you're doing here is you're leveraging your stock portfolio. And by the way, when you do this, you don't pay capital gains. You're not paying any tax. You leave your stock in here. You're taking leverage, which is a liability, and you pay the interest payments, the 1% you pay a year, you are paying and it's tax deductible. Pretty cool, right? So, you're paying $250,000 a year to have that money and that's a tax deduction. Deductible tax. That's an expense because it's debt interest, right? We can write off interest. Well, great, right? And now I own real estate and real estate's been going up and this is even better. Okay? And vice versa. If you own— I'm going to change colors here. If you own real estate right now and you own a nice position, you can leverage against your real estate and put that money into the stock market and buy more stocks. Now, this is what happens. If then this is what I believe will cause the next crash, and we've just seen this with Archegos Capital. So Archegos, you guys saw them. They were the group. I put a video about them two months ago. Bill Huang, I'll put it over here. Bill Huang, he ran Archegos like family office, twenty billion dollar family office. They were buying Viacom CBS, buying the stock. The stock, if you look at the stock chart, maybe we can pull it up on the screen here. It went from around, I don't know, $10, $15 a share all the way up to $100 a share. And apparently, and Bill was a big proponent of this, he was taking out leverage and rebuying the stock with 6 different prime brokers. Credit Suisse, Deutsche Bank, JPMorgan Chase, all these big banks. CBS had an annual or quarterly meeting, whatever it was. The stock hiccupped. It dropped, I think, 10%. Bill got a margin call, meaning they said, hey, the stock has dropped a little bit over here. You need to cover some of the difference so it gets back to this ratio, whatever the ratio was, it was 50% or 60%. You need to hit this margin call. And Bill apparently was so leveraged, he couldn't meet a margin call. They estimate losses on this whole account, it was $20 billion, over $40 billion. Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan, the largest banks on the planet took a loss from one family in a bull market. Why? Why? This is back to the rant. Why is a family allowed to take up that much leverage on one position in CBS in a bull market? It's not like 2007 happened or this crazy, you know, huge crash. We're in a bull market. There's no reason why. And $40 billion of losses for banks on this one trade. That shows you the amount of risk some people will take. Now guess what happens? in that scenario with back to our— and I'm sorry, I'm using a lot of red here— ABC stock. Okay, so let's say there's a lot of people taking leverage on ABC stock and there's people taking all different types of risk. Okay, there's people way more risky, some people medium risk, some people very low risk. Okay, well, the high-risk people, if they go in, let's say the stocks hiccup just a little bit, they go into a margin call. And if they've levered to real estate, They have to do one of two things. They have to sell the stock or sell the real estate to cover that margin call. Okay? And so they have to sell a little bit. And let's— or even back to here, let's say the Fed increases rates. This goes from 1% to 2%. Okay? Just simple math. This goes to $500K all of a sudden. And some people are so leveraged, oh shoot. I can't make the $500K payment a year on the $25 million. Shoot. I'm going to have to sell some stock to cover margin or sell some real estate. And guess what happens? They sell a little bit. And so the stock price or real estate price goes down a little bit. And guess what that triggers? It triggers the next tier of risky investor. And they go, oh shoot, well, I'm in a margin call now. And so I've got to sell some stock or some real estate. Guess what? That triggers even more people who are even less riskier. Oh crap, I'm triggered into a margin call now, so I've got to sell some stuff. It has this whole trickle-down effect. Both the stock market and the real estate market and other markets, crypto, whatever market it is, triggers this whole collapse because people's debts— Ray Dalio talks about the long-term debt cycle and the short-term debt cycle. This is the short-term debt cycle here. They have to pay short-term debts by selling their assets. And it triggers an entire downfall in the stock and real estate markets. Now, the Fed put rates at zero hoping that Americans wouldn't take out this much leverage, but little do they know, apparently Americans love debt more than anything they can ever imagine. And so they're going to take out more and more debt and more things. And that's why I have a great buddy in the real estate market. Bridger, this is way different than 2007 because people are buying houses 100% cash. These are good buyers. In 2007, we had like ninja loans, no income, no job loans, right? Remember these loans? If you had no income or no job, great, we'll give you a loan. Today, they're credible, you know, credible people, but— and they're coming with cash. And so he's like, there's no way the real estate market falls out. And I go, well, they're buying it with cash to you. You see the cash, but in reality, They borrowed against their stock market portfolio to buy the real estate in cash. And he goes, oh. And so if the real estate or if the stock market hiccups, it's now directly tied to the real estate market and might trigger a lot of selling in the markets. You guys following along? Is that making a little bit of sense how that could trigger? I believe this could trigger And this scenario could be caused by the Fed increasing rates just a little bit. That's why I don't think they're going to do it. Even they've projected 2023. I don't think it's going to happen. They just can't because of how much leverage on the market. There is a hiccup in this economy right now. And I mean, they're already— the Fed is propping this economy up so much, right? Like, that is what I see the next downfall being. Now, let me walk you through. That's scenario number 1, and that's the crash scenario. All right, let me walk you through scenario 2. You guys still following along? Is this okay? Can I keep going? Is that all right? Keep going here. Scenario number 2, all right, is what the Fed, I believe their plan is. The Fed is sitting here looking at inflation and they are projecting inflation's been about 1.7%, 1.8%, somewhere around there. And they're like, let's spike inflation a little bit. We're the strongest country in the world. We have the strongest military. And let's print some more dollars and bump inflation up a little bit because we have a few things happening right now. Let's say, just for example, you owed China $1 trillion. Okay? Trillion US dollars, by the way. Trillion US dollars. Well, if you inflate your currency 10%, you actually really only owe $900 billion, right? It's actually not a bad scenario, right? You actually just saved yourself $100 billion by inflating your currency 10%. If you can keep the public believing that inflation's not actually happening, keeping, hopefully keeping prices low. Now, and the other argument is this. Now, and I know inflationary, they have the invisible hand, it just happens with inflation. If you have more dollars, people tend to spend those dollars. They don't tend to save them. Now, I know savings accounts are higher than they've ever been before and all this great stuff, but that's what happens. Inflation destroys debt. OK? I had a great economist on my show. He kept hounding this. Inflation destroys debt. If you have a house mortgage right now, inflation right now is destroying the debt. So, it's actually a good thing. So, we can inflate ourselves potentially out of debt. And the other side of the coin is this. And let's— I'll use my blue marker here. Is you have deflation happening at the same time. OK. Now, inflation's easier, kind of easy to understand. You print dollars and people, if there's more dollars out there, people, they become less valuable and people, you know, they, it's, you know, it's harder to get a car or assets, things like that because there's more dollars out there, so there's more buyers, so prices tend to rise. Deflation actually happens in a similar fashion, but just the opposite. Right now, you have AI, you have robots building cars. So I'll give you an example, a car manufacturer. I actually toured Tesla's factory a few years ago in Silicon Valley. It was amazing. They had robots picking up cars. It was the coolest thing I've ever seen. Pick up a car, it would like spray it and paint it and add the stuff. It was actually one of the coolest experiences of my life was touring the Tesla factory. And just side note, we were on a tour. We toured Facebook, we went through Google, Amazon, all their little offices in Silicon Valley, and they're all nice and they've got ping pong tables and stuff. We go to Tesla, Dude, people were working. I mean, it was like, you know, we go to like, where was it, like Intuit, these other companies, everyone's like, hey, this is so fun, grab a snack, you know, welcome in, blah, blah, blah, good to have a good tour. I was there with a college group, they were trying to recruit us to come work there. And we go to Tesla, dude, everyone's dead serious. You walk in, it's like, we're here to make money. Walls were gray. People were just grinding away. I mean, you could, it was palpable, the work ethic in Tesla. It was amazing, and I actually wanted to work there. I was like, I don't wanna go play ping pong, I wanna work. And Tesla, it was kinda like the pitch was, hey, we're not here to wipe your bum. If you wanna build the future, come to Tesla. And it was the most amazing pitch I've ever heard. Anyways, Tesla factory, okay? You have robots, you have robots building cars, okay? And they can work 24/7. They typically are less expensive than, employees and you have self-driving trucks, all this kind of stuff, car manufacturing should by definition get cheaper. Because if one company is using workers and another company is using just robots and it's way cheaper to have robots build your cars and you can build more cars, well, car prices, if everyone started to do that, should go down because it's cheaper and cheaper to make and manufacture cars. Same thing with trucking, okay? To ship something from point A to point B, Today, you got a truck driver, you got, you know, he's gotta take rest and stuff like that. In the future, if we had self-driving trucks, a truck can just drive. There's no employee benefits, there's no wages, the truck just drives. So hence, shipping costs should go down because it's cheaper to ship. And in a competitive market, a lot of companies will go down and kind of have a race to the bottom. So you have these deflationary things too, where products actually are getting cheaper. To produce. So I believe the Fed is saying, well, you know, we've been below inflation before. We actually have a lot of deflation happening with AI, robots, self-driving cars, all these deflationary assets. Let's inflate our currency and hopefully we can land in the middle. And what happens is Americans get richer. I mean, everyone watching the show, you are probably richer than you were 2 years ago, potentially, if you have financial assets, if you've bought real estate or stocks or other financial assets, probability is you're up. Everyone's up right now. If you bought crypto, whatever it is, you are probably up, right? And so, they're banking, if we keep inflating a currency and we have deflation happening at the same time, hopefully those will break even and break each other at 2%. And we can pay off debts to other countries, other things. We even become a stronger world power than ever before. Not a bad plan, actually. If you're the chairman of the Fed, it's actually not a bad plan. Now, you run a— you're running a tightrope. You run the risk of hyperinflation, and then you run the, you know, of things, prices getting, people getting priced out of homes. You've seen a little bit of that. They're hoping to taper it back because it's all transitory, right? They can taper it back. Now, I don't think they can raise rates to taper it back. I think it would trigger a whole downfall. There's a few things they can do, They announced a few of them last week, but that's the line they are holding with here and actually isn't a terrible line. It makes— and I, by the way, we used to be on the gold standard, right? US used to be backed by gold and then Nixon took us off the gold standard. Today, I believe we are literally only backed by our military. Like, our military is the only thing backing the US dollar and it's a, I mean, it's pretty good. The US right now has 11 Aircraft carriers that are operational. Okay? 11, an aircraft division. So by the way, when an aircraft carrier leaves port, they've got like 12 ships that go out with them. They've got a submarine. They've got 2 battleships. I mean, it's incredible. Aircraft carrier division. We have 11 of them that monitor the entire world, that we're the world's police. Ever since Bretton Woods happened, this is what's happened. By the way, great book plug, The Accidental Superpower. Incredible book. Talks about Geographically, the Strength of the United States. It's a really cool book. It's written by a macroeconomist. I mean, just incredible book. Kind of dry, really great though. I suggest it. The combined world, at least today, according to globalfirepower.com, combined world has, I think, 10 carriers, okay? Which is new. A couple years ago, it was like 3. This is in the last 5 years. And by the way, the US is building, I think, another 6 or 8. It's gonna be up to 19 here pretty soon. Okay, combined world has 10, and a lot of these are old ones from World War II. I would say to match the level of aircraft carriers we have today, like boat for boat, combined world has like 4. These are old ones that like are way small. We have supercarriers. Okay, so what I'm going at this, we are backed by the military. So if Turkey doesn't want to accept it because people are like, oh, people, the other countries won't accept the dollar. Well, what else are they going to accept? Okay, what else? Like, we have really— I mean, Russia, you're not gonna take Russia's currency, not taking China's currency, like no way. Uh, cryptos, maybe there's a chance, but I, I don't see countries— I know you have some El Salvador taking Bitcoin out. I just don't see countries letting go of control over a national currency. Even it's the US dollar for them is better than letting crypto. Now crypto, I believe, will play a role in a lot of transactions. No, no doubt. But as a reserve currency, okay? And I believe, by the way, the Fed is gonna make their own dollar. They're gonna make a Fed coin or a US coin. It's inevitable. It's gonna happen. This is my prediction. Next 18 months, we're gonna have a Fed coin. Bam! That's my prediction live on the show right here. To get back here, but Turkey doesn't wanna accept the US dollar or US Fed coin? Oh, great. Well, we're gonna go park an aircraft carrier division in front of Turkey and you now have a barricade, you can't trade with the rest of the world. Do you think Turkey's going to start accepting the US dollar again? Uh-huh. Yeah, they are. And we've actually done this with other countries and they call it political, but a lot of times it is, I mean, our most valuable product is the US dollar. And over the last 50 years, we keep printing it, people keep accepting it. When COVID hit, everyone sold and went, guess what? They went to dollars. It's not like they went to something else. They went to dollars. Okay, it's the reserve currency. And that's what the Fed is banking on is we've been underplaying ourselves at 1.8%. Let's get it up to 2%, maybe 2.5% reported, and maybe it's a lot more than that. But as long as we keep the numbers low, we have deflation happening as well. We can keep inflation on a steady rise. And guess what? All Americans, people that hold dollars get richer actually because they can buy more assets if they're investing And they're buying more things and in the game, they're going to get wealthier. It's not a bad plan. And we can pay off debts. We can buy more aircraft carriers because guess what? We're buying them in US dollars. We're not using the yen or the ruble to buy these things. We're buying them in dollars. It's actually not a bad— it's not— if I was in the Fed chair, I would probably do the same thing. Now, back to my point though, I think Americans are just greedy. By the nature of Americans in business, we're just greedy. I don't know why we're so greedy. And so I think we have taken out so much margin that, um, it could be a major shift if one thing hiccups in this economy. And right now you see the Fed prop us up. You see a shortage of pretty much everything— microchips, labor. I mean, everything you see a shortage of. And so, I mean, those are the 2 scenarios I see. I see the, the stock real estate game happening all together. You see Michael Burry with his tweets, right, calling this the biggest collapse in global history. We're on the, we're on the cusp of it right now. He's playing that game. Maybe the Fed can pull it out. I don't know. Um, anyways, let me know your thoughts below in the comments. Please like this video. It actually helps the YouTube thing, whatever. Little like button below. I don't know, apparently it helps. So click on that button. It helps us out, I guess. And, uh, subscribe if you guys want to get more videos like this as well. And comment below. I'd love to hear your thoughts. Maybe we'll do a round 2. Maybe we'll bring on some of you guys as a guest. and we can do some of that as well. Thank you guys so much, and I'll see you on the next episode. Bye. Bye.