The Japan Playbook Is Coming To America — Here's What It Means For Your Money

Key Takeaway

Treat your salary as seed capital, not your long-term wealth plan. Today, list every holding in your retirement and brokerage accounts, then identify whether you are unintentionally concentrated in the same AI and mega-cap technology exposure across multiple funds. Keep investing rather than sitting in cash, but begin learning enough to diversify across businesses and sectors that are driven by different economic forces. Spend one calm, scheduled hour each weekend reviewing—not reacting to—your portfolio.

Episode Overview

Tom Bilyeu and Felix discuss their view that rising government debt, bond-market stress, and likely money creation could erode the purchasing power of cash savings and salaries. They compare the U.S. situation with Japan’s debt and yield-curve policies, examine the yen carry trade, and argue that individuals should protect themselves through long-term investing, diversification, and basic financial education rather than waiting for political solutions.

Full Transcript

Transcript of The Japan Playbook Is Coming To America — Here's What It Means For Your Money from Impact Theory. Auto-generated from episode audio; may contain minor errors.

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Right now, I think we're going through some sort of weird phase transition. And normally, when you get bad economic news or you get bad jobs data, that people are going to fly to safety into the bond market. And then that causes rates to go down. But that's not actually happening right now. We've got long-term rates going up. What broke the bond market? So what we're seeing right now is something we haven't seen since 2007, which is just one year before 2008 global financial crisis. And it's just that the bond market, who I always say are like the smartest, really dull people on Wall Street, who actually control the world, they are saying, we don't really trust the US government because you guys are spending at an insane level.

Now, we've all kind of gotten numb to that because $40 trillion debt just sounds like a ludicrous number. What's $40 trillion between friends? Exactly. It's meaningless if it's an extra trillion or 10 or whatever. But the problem is that the higher that interest rate goes, the higher the cost of paying for that debt. So I think the US paid $1.4 trillion or something in the last year, which is a crazy number. But if that rate goes higher, it's going to cost trillions and trillions more over time.

So what broke it is a bunch of things. It's Japan, the war in the Middle East, it's inflation, it's oil prices. There's a lot of stuff that kind of factors into that. But the panic we're seeing now from the US government, which is we're going to buy our own debt, which sounds kind of like a Ponzi scheme, quite frankly. And it's not that far off. It's sort of a clever idea if you're trying to manipulate and massage the market. So what they're doing is they're basically buying their own debt that's like 10, 20, 30 years long, because that's the stuff that's getting really expensive.

Because the bond market is saying, we think the US is going to be in trouble in 10 or 20 or 30 years because of the way they're spending. So how are they doing that? Well, they haven't got any money. So they are basically issuing short-term IOUs into the market. But nobody wants to buy them. Surprise, surprise. So who's buying them? The Fed, which is basically the US government. But it kind of isn't on paper. So they're buying their own debt, and that's called money printing. Now, the US government will tell you, no, it's not money printing.

It's not even quantitative easing, which is what we did during COVID, which was not going to cause inflation, they kept telling us, and then it did. So they're calling this now, what are they calling this? Some sort of liquidity easing or something. Insert fancy name meant to distract you here. Okay, so you started with the debt. And so there is a knowable set of chain reaction steps in the causal chain of rates going up. And so when I looked at debt, I was like, oh, this is clearly going to be a problem.

And people sort of laughed it off. New guy, doesn't know what he's talking about. Is it really as simple as if you let that debt get out of control, then your interest payments become so burdensome that anybody who understands the way that the economy works knows, you're eventually going to have to default on that, either hard, meaning I'm just not going to pay it, or soft, I'm going to inflate it? Essentially, yes. Now, no one's going to default. That's never going to happen. Hard default. Hard default is never going to happen.

Look at Japan. They've been running this scheme since the 90s, 30 plus years, which they are now in a position where Japan owns all of Japan's debt. And that's probably the path the US is going to go on. But Japan's debt has actually come down. So how the heck has that happened? Well, it's come down compared to the size of their economy. And that's what you were alluding to, which is like deflate this debt away, which is basically you create inflation and you let inflation run at a higher rate than the interest rate, essentially.

So thereby you are growing the economy on paper, and that then overall reduces how much debt there is compared to the size of the economy. So the debt will still go up, but the economy will sort of outgrow it. That's the idea. And that's the only way anybody has ever gotten out of this sticky mess. Like if you look at the US after World War II, that's exactly what they did. If you look at the 70s, that's exactly what they did. And they're doing exactly that playbook again.

Now, it sounds super abstract, but it matters to people. If you take a 1971 dollar right now and you go out and spend and buy something with it, it's worth 7 cents. Jesus. According to the government. Now, if you compare to what the stock market has done since 1971, which is how I measure inflation, by the way, I think. Inflation measures are complete nonsense. Not gold. Use the stock market. I look at the stock market. So the stock market's gone up about 70% the last three years.

That's inflation to me. Because the people with money, they got that much richer. Okay, but wait. Are you saying that the stock market actually hasn't gone up in real sort of growth terms? It's not increased productivity. It's not better companies. It's not what AI is doing or even necessarily the promise. It is simply money has flooded in there to avoid being inflated into oblivion. And therefore, for essentially the same product, the stock, that this is really just the dollar losing value. Mostly. Whoa. There's a little bit of that.

Let's swag it. Are we talking 9010? We talking 982? I would probably say 8020. Okay. So it's mostly money printing. Still massive. Okay. So we're not geniuses investing. No, no. We're just not really, really getting punished by all the money printing out there. Have you ever seen the meme where it's like a dummy says that it's the debt? The mid brain guy is like, no, it's way more complicated than that. And then the super genius says exactly what the dummy says and goes, no, it's just the debt.

Is that like this really does feel like it's money printing stupid. Like if people are going to inflate the money supply. And look, that gets complicated. And I can certainly explain it, but I'm not going to go down that rabbit hole right now. But is it really just watch how much their money printing and that's going to give you the direction of travel? Or are there like far more technical things that smart people pay attention to? So I think there's two ways of looking at the market.

One is like if you're a beginner investor, if you are in the index fund, it's mostly money printing because you're just buying the whole market. Right. Okay. You just get in, avoid inflation and you're avoiding inflation. You could also buy gold. Gold doesn't go up. It's the dollar that goes down. But it still protects you from the dollar going down. The more skilled money, I would call it not smart, but just skilled, which is the guys on Wall Street and the hedge funds and so on.

They will jump around all the pots of gold within the market. Like I always picture the stock market is like a it's like a chessboard, 140 little industries. And they keep moving money around. And that's how they make more money than the average. But essentially what's driving all of this is just money. It's just money being printed. Money will always seek a return. So, therefore, the stock market goes up. Okay. If the people paying attention to the bond market understand that this is just money printing.

Yes. Why can't we just or why can't Besson just let the interest rate go up and then it will hit some sort of normalization period and we're fine? Well, when interest rates go up, government interest rates go up. Again, sounds very abstract. What's tied to it? It's your mortgage. It's your car loan. It's your credit card. It's the cost of building a factory in the US. It's the cost of investing. Everything goes up. So the economy grinds to a halt and you get a massive recession.

You get massive unemployment and people get voted out of power, which is why politicians don't want to tax you more. They don't want to cut spending. So they don't want to take the sort of responsible route out. But at this point, it's too late to take any responsible route out because you can't actually reduce this debt in a kind of rational way like we would just like try to balance the books. It doesn't work anymore. So there's only one route at this point and it's print money.

Why doesn't it work to balance the books? The deficit is what? Two trillion? A year. Yeah. So where would you cut that from? Social security? You're going to get voted out tomorrow. You're going to stop spending on war. So it's not going to happen. There is just nowhere where you can cut this money. So it's not politically viable. We couldn't. We just won't. You get fired. So if you make business decisions, you're not going to take one that's going to bankrupt you or it's going to make you lose your job.

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Now available in Canada and the UK too. That's quints. Q-U-I-N-C-E dot com slash impact pod. Thanks for sticking around. Let's get right back into the action. Ever since I came into this and started really understanding money printing, sort of understanding debt to GDP, without taking into account yield curve control, which you were talking about in terms of Japan. But if we set aside yield curve control for a second, we'll come back to it. You basically run into a problem where I think you end up on a clock.

And for me, I'm swagging that clock at 10 years from when I started counting this, which is a year ago. I figure we're about nine years out from the debt becoming so burdensome that we will have inflated the debt so much that inflation will be even worse than it is today. Which I think is a big part of the reason that we're headed towards. There's a revolutionary energy in the air in America. And I think within nine years that pushes all the way into actual revolution.

Because if we don't do something to change course, the people on the bottom of the K will be in such a bad position that they simply will not tolerate it anymore. And it will probably look something like electing so many socialists that they break the economy. It will be something like that. Does that seem naive or does that seem like a likely path of travel? The way I look at it is that if you earn a salary or if you have savings or both, they will lead to poverty.

In an inflationary environment. Yes. Because the value of that, you know, someone making a good salary, 100K salary. Well, if you look at the example, I started with the 1971 thing, which is now worth seven cents, one dollar. So your 100K becomes 7K. Right. So that's the that's the journey that we're on. So therefore, yes, people are going to get insanely frustrated by this. It's going to make average people's lives very, very difficult. You're probably much better positioned to comment on that. What the Americans are going to do about it because, you know, I don't live in the US, but it's a it's a tax Inflation is a tax on people who earn a salary and on people who have savings so it's your pensioners and it's the people who are just, you know, ordinary people and The problem is though that that is the most acceptable tax a politician can put out Because they don't have to announce it Nobody realizes what's going on and that's why you know I'm grateful we're talking about it because the more people understand this and that there is actually a way out of this To protect yourself because you mean for the individual because the rich are not getting poorer, right?

They're getting richer from this right now. One of the things that I worry about and this will be the ultimately This interview is going to answer the question. What do I do with my money? But I first want people to understand why they should be paying attention to the bond market why precisely it's breaking and then What's going to be done about it? And then what those consequences are going to be so for a mile marker for everybody paying attention So we've got the debt becomes the huge problem.

That's sort of the lead domino. It's not the only domino but it's the lead domino for why The bond market is breaking now. I want to get into what Besson is going to do about it But the sort of punchline of all of this is they're never going to take you didn't say honorable But forget the exact word you use but I'll say honorable like they're actually Fiduciary responsibility to the country kind of way of like we got to do austerity. We got to stop deficit spending.

We won't it's true That's what we should do And if we did that that's one path out of the need to money print Another path out is the soft default of money printing which we're certainly going to do by buying our own debt So you've already explained that I want to go deeper into the the Japan of it all sure So one I want to understand how on earth because I've been to Japan in the last, you know, 20 years It's amazing. It's a great country incredible.

So Why is the just keep racking up the debt if it worked for them What are we doing differently that makes it not work for us We'll start there. Okay, so Japan you know was this booming economy and then it stopped and they Got into deflation. Okay, so we're like what? 1990 ish something like that. You know, we'll burst 89-90 so they just kept the economy going through stimulus more spending basically handing checks out to everybody Sort of type thing and it kept the economy on paper afloat and What it did also is create an enormous amount of debt.

So they're like indebted like a banana Republic. You know, it's 230% or something absolutely it's a crazy amount but who's gonna buy that debt Well, nobody because the currency keeps falling in value and nobody wants to own something keeps falling in value So what do they do? Well, the central bank bought most of the debt and the other part of the debt is bought by their pension funds and their financial institutions So Japan owns pretty much all of its debt So they in theory can keep this Ponzi scheme if we call it that going And what they've that now managed to do lately is they've actually managed to create inflation again Which means the debt is going down compared to the size of the economy, which is the eventual path out the u.s.

Has a Bigger problem because for example, Japan owns a lot of that debt now If Japan starts selling that debt or doesn't want to buy it anymore You need to create new demand for this debt So the u.s. Isn't this sort of purely u.s. Economy where it's all u.s. You know holders of debt because the u.s. Has since 1944 basically been the currency of the world and it's kept your dollar Quite strong it's made because everybody wants it It makes your your iPhones cheap and your imports cheap and it makes it You know feel like you are traveling in a third world country when you go on holiday in the south of France Whereas we think it's incredibly expensive and so it gives you a benefit as a consumer as the American consumer has been very strong which is what most of your economy is but and your vice president said this the other day, he said that being the reserve currency is What was the word he used Called it a resource curse a curse exactly that was the word Because it keeps your dollar strong, which means your exports are really expensive So we had this much bigger picture of you have a government who's actually looking at fundamentally changing your system But it means that eventually Your foreigners are not going to buy you as your debt anymore Because if the dollar goes down, why do I as a non-american want to own something that's going down in value I'm not going to do that.

So central banks around the world have always held dollars That's changing part of that is also the the Russia story, which we can maybe could go into a little later But essentially the u.s. Is in a bind where it needs to create demand for its dollars and for its debt But at the same time they actually want the dollar to go down so they're doing that through crypto Stable coins the genius act. It's a genius way of basically Creating artificial demand for your you own debt explain how that would work So the genius act is a funny piece of legislation.

It's got nothing to do with crypto in my humble opinion it Requires if you own a stable coin like tether or something you have to put that money into US government debt to back it right so you now get your four or five percent interest You are prohibited from paying that interest out which makes it very profitable for you. So the banks obviously lobbied for this But what it's done, it's already created. I think tether is now the 17th largest holder of US government debt you know bigger than most countries right overnight and Expectations are it's gonna hit about two trillion not as for tether But the whole the whole stable coin market as a whole so suddenly you've got two trillion of debt refinanced at home It's compulsory and no one really notices.

That's a very clever way of doing it so they're creating these kind of mechanisms to Protect the system by themselves a little bit of time But ultimately it's it's gonna be money printing like people are gonna pay for this Okay, so anybody paying attention to the bond market right now is gonna have two beats in their head beat number one was besant writes famously on a notepad Clearly That I'm gonna buy five to ten billion of Japanese yen, yeah one who Benefits by us buying Japanese yen and who would be hurt if the yen continued to decline in value.

Okay, so the to understand that and to answer that we need to understand what's called the carry trade and The carry trade is a funny thing where for the last 20 years US hedge funds and funds generally have borrowed money in Japanese yen at pretty much zero interest That's free money and then you take that money and then you buy US government bonds with it you buy US stocks with it and now you're getting your 5% your 10% your whatever and So it's like free lunch basically, right?

It's amazing But what they then did because the financial industry was a part of a little while is very greedy They leveraged that so they borrowed on top of it and that leverage can be 10 times 20 times maybe 40 times So if you borrowed at 40% 40 X and You then invested that money and say the US stock market goes down 2% You've just lost 40 80% of all your money. Whoa So a single day down of 2% basically wipes out your fund and that's a problem.

So It's a little bit of a problem right now. We're talking Estimates are it's trillions. Nobody knows quite how much it could be 10. It could be 30 Nobody really knows because it's sort of between institutions so we saw this a couple of weeks ago on a Friday where the market dropped very rapidly in 40 minutes and we lost good part of a trillion dollars and That's when the government was like, yeah We need to have a plan B against us because they're worried that too many people will get wiped out and will cause Global recession like what's it because of 2008 banks will fail Right, which is what happens 2008 because the banks themselves are borrowing on margin It's either the banks or the funds are borrowing from the banks, right?

And so if they go under debts become bad Yeah, and nobody knows where the debt stops, which is the same as 2008 say it's 10 trillion You don't really know who's ultimately on the hook for the 10 trillion, but it's too much money. So why is this happening? Because Japan wants to get out of this world where the yen keeps falling in value and If the yen goes up in value, what's the problem with the carry trade? Well, you borrowed at no interest But if you have to repay yen that are now worth more So you need more dollars So what are you going to do if the yen goes up if you are that fund?

Well, you're going to close your trade Which means you have to sell u.s. Stocks and u.s. Bonds to pay back the yen, right? It sounds complex really really complicated But it's really just like you're borrowing from your neighbor at zero percent interest and you invested it somewhere and now you need to pay It back so you need to sell the thing that you invested in So a lot of the stock market and nobody knows quite how much is held up by this Japanese yen trade. Okay, so that's beat number one So we see Besson is like I'm gonna help Japan out But in reality based on what you just said, he's certainly helping the u.s Maybe helping the broader world avoid the rapid unwind of all this first of all much of it borrowed on margin those guys could collapse and then just everybody's sort of pouring back in to Sell off their positions is gonna suck liquidity out of the overall system because everybody's selling stocks That's gonna lower the value you get into a death everyone gets like like Korea Just you get margin called the whole thing collapses and it's and it goes fast very fast Okay beat number two is While Besson is saying that he's gonna defend the Japanese yen He comes out and says that we're gonna defend the US bond market as well So what's going on there?

And why shouldn't everybody read these moves as somebody panicking or should we? Well, I think it is they're blinking, right? They're kind of saying when a government steps in to bail out another country's currency You know, you're not in a happy market right because in a free market this isn't meant to happen and when the government steps in to Artificially reduce its own interest rate not by lowering interest rates, but by buying its own debt with money It's freshly printing again, you know, you've got a problem, right?

So they're kind of like given it away but they are explaining it in such a complex weird way that nobody really realizes right like the Fed has given a Basically lending to Japan They they used one of those Accounts they have that are normally set up for US banks, so they don't go bust FEMA. Yeah, exactly And they've done this they did this to Switzerland a couple of years back and then one of the biggest Swiss banks collapsed the week after I've called it the like world's Pawn broker like what what how does it work?

So it's a it's a pawn broker so Japan walks into the pawn broker, which is the US government or the Fed officially and says we own Your debt your IOUs. I'm going to deposit them here and you're going to give me dollars for them now But I still own them and it on paper therefore doesn't look like Japan is selling US debt Because it didn't sell them. It just deposited them in the pawn shop PAWN, it's for us to be clear about And It is of course ridiculous because essentially Japan is selling US debt and Japan was doing that to prop up its own country Currency and defend its own currency, but Japan is one of the largest holders of US debt They sell a lot of it what happens to US interest rates?

Well, they go up again, which causes all the problems we talked about it crashes your economy and makes your debt even more unsustainable So the US has come up with this weird little scheme that people are not meant to see through But the bond market isn't that stupid Right, they can fool most of the people but the guys running the bond markets are some of the smartest people in the world So they're like, okay, we can see what's going on here. All right, so Besson originally said, okay we buy Every time we go in and buy bonds, we spend 2 billion.

We're gonna up that to 4 billion Yeah, it worked for like a day or 48 hours Yeah And then it went back actually up higher than before he announced that he was going to do this So the bond market didn't believe him or they at least want to test to see how far he's gonna go He's recently come out and said well, actually I've got a call it a discretionary fund the Treasury general account if I remember right and something like that TGA is the initials and That goes up to almost a trillion and he hasn't said he's gonna spend the whole trillion But he's definitely got the bazooka sitting on his shoulder letting people know what he's capable of How do you think that's gonna play out is the if the smart people are in the market Surely they look at that and go.

All right, you want to play? Let's play but that's why he's doing it because actually I Interviewed Jim Rogers about a week ago He's the guy who with George Soros set up that wonderful fund that later broke the Bank of England So with Besson though wasn't Besson involved in that whole thing. He was somewhere in the hedge fund world at the time, right? So Big hedge funds can go against governments and can call a bluff and make a lot of money out of it So he's saying I've got a trillion dollars guys.

Don't try this, which is why he's doing that and a lot of like Financial policy is always about just setting expectations, right? So telling the market this could potentially be what we do and therefore all the lunatics on Wall Street Take back a step back and don't do the thing that they might otherwise do But essentially he's got no choice. He has to win Against whoever is trading against him because otherwise he loses credibility and then your interest rate isn't five point two percent What are this today?

but it could be ten percent or fifteen percent right and then look at what your Mortgage would be or your car payment would be or what would be the cost of building and financing a data center in the u.s It'd be prohibitive compared to the rest of the world Plus if you're because getting the loans that you need will come at such an interest Your bank's gonna charge you 20% impossible. Plus if you have an interest rate that high the entire world's gonna buy us dollars again Right because you're gonna get a really nice high interest.

It's gonna push your dollar Exporters, which is what the US is trying to be. The US is trying to revive manufacturing. You kill that with a high currency. So there's a lot of stuff that hinges on this. But I think for most people watching this, the thing that hinges on this is that they're definitely going to print more money. And you don't have to go back far to understand what that does, because they did it in COVID. And it created massive inflation. And it made people's salaries worth massively less.

And unless you were invested, it made you a lot poorer. If Besson is going to keep buying back the bonds to keep that interest rate artificially low, who gets hurt if this works? Is it just a pure inflation game? Or is there some other gotcha in here? It's pretty much inflation. It's just it's a tax on everybody who has a salary, everybody who has savings. It's just what it is. And it's a it's a free handout for anybody who's got money invested. If the smart investors know exactly what's going on, what is this game going to look like between Besson with his trillion dollars and the hedge funds that are trying to test him?

Well, generally, what governments do in this situation is you try to be more aggressive than the market expects you to be. Like what Japan has done is the opposite. So they keep trying to pop up their currency and it keeps falling. So you do that once, twice, three, four times. Because they're not being aggressive enough? Yes. They're not being aggressive enough. They can't. They're not able to do it or not willing to do it on a large enough scale. So what does that mean? Well, people lose faith in your ability to prop up your currency.

People don't think you're going to do what you say you're going to do. So then the market will price the opposite. If you look at the yen to the rate start going up, they smell blood in the water. They see that you're distressed. They're like, if you want me to hold long term bonds, baby, you're going to have to pay me a fortune in interest. So the great irony and this is the very thing I want people to understand about the US, the great irony of trying to defend your bond market is you can cause it to go the other way because people know the game you're trying to play.

Yes. I mean, at some point, you're going to get to an interest rate which is so high that people are going to be willing to lend you money again. But at that point, you've destroyed your economy. That sounds like a problem, Felix, I'm not going to lie. So let's parallel track. So if you're a betting man, what do you think is going to happen in Japan, which is they're running the scenario where they're trying to do the same thing we're doing in the US, but they don't have the full ability to go as ham as Besson is going to be able to go.

So how does Japan play out? To me, Japan, I don't see the yen going up. You see Buffett is, for example, Warren Buffett is a very big investor in Japan. What has he done? He borrowed yen to buy some stocks. I thought he sold all of his debt. Did he sell all of it? I thought he borrowed yen to buy the stocks, whether he sold or not. Before that, he changed his dollars into borrowing yen and that way he eliminated the currency risk, you see. So if he thought the currency was going to go down and he owns Japanese stocks, but he's paid with yen that he's borrowed, it's not his yen, then he doesn't have that currency problem.

This is a lesson, I think, for the US because you talked about the social contract there. Your Japanese salarymen are not wealthier today than they were 30 years ago. Quite the contrary. So they have suffered this inflation or this money printing, in a sense. And it's just the thing that I think worries me the most is that people understand this. People don't take this seriously, that this weird financial engineering that we're talking about actually really affects people. It makes them poorer over time. Same number of dollars in your bank account, but those dollars buy less.

OK, so if in Japan you don't see the yen getting stronger, do you see it weakening over time and that being how they get out from under their debt? Or do you see them in a death spiral where they're constantly having to try to defend it only to take on more debt to do that, only for it to be fruitless and ultimately the rates go up anyway? Well, if they were successful at what they wanted to do, they would unwind the Japan carry trade. By letting the rates go up?

Yes. But they can't because they own 50 plus percent of all outstanding debt, so that'd be crushing. What would it do to the carry trade? Well, it would unwind it. So they would tank the US stock market and they would make US government debt interest go up. So the US isn't going to be very happy about that. And Japan generally talks to the US before it intervenes. So the US has a tremendous amount of influence on many, many countries, Japan being one of them. So I don't really see that happening.

So I don't think it's in the US's interest to let this happen. So does that mean that the US is just going to let them suffer? Like, sorry, Japan, you guys are going to get poorer. It's one way of putting it. If it's inaccurate, let me know. But I mean, it's certainly mercenary. All economies are tied together, right? You have tariffs and you have imports and so on. Japan is very export led also, right? So they have to make a deal. And at the moment, that's the deal that they're living with.

Don't just act in our own self-interest, because if we did, well, we'd lose our biggest customer. That's wild, man. That is a very dark and gloomy picture of Japan. We're hitting pause for a moment, but there's plenty more ahead, so don't go anywhere. Let's talk about what it means to actually be visible in today's day and age. When you build something public, whether it's a business or an audience, anything on social media, you become a target. This is something that legitimately keeps me up at night, because our data isn't just on the obvious broker sites.

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I'm on the phone with Takeuchi, and I'm like, no, no, no, you're going to keep the carry trade going. We will help you as much as we can, but you're not selling our debt. You're going to keep the carry trade rolling, so you're going to keep your rates artificially low. Obviously, they're going up, but they're not going up nearly enough. We need that. So cool. Your people are going to get inflated into oblivion. Enjoy your internal conflict. That's what I just heard you say. Pretty much, yeah.

And they're doing it a little bit more sort of, it looks a bit more fancy through that sort of pawn shop setup we were talking about and so on, but ultimately it's not, yeah. And occasionally we're going to step in and help you. When the U.S. was just helping them, what did they sell to do it with? It wasn't dollars. Yeah. They sold euros, which was just a kick to the Europeans. They were probably, you know, about something else. Yeah. You worry that people won't understand money printing.

I share that concern. I also share the concern that people are not understanding what's happening in the world right now. I don't have a better way to say this, but what I'm trying, I've got to find a way that cuts to the chase. We're going to look back on this in 20 years, this moment, and we're going to say, what did it feel like to live through de-globalization, where we went from high trust, cooperative to low trust, competitive. We're living through that chaotic moment right now.

It will play out over years, and so it will never quite feel like we're in the middle of it. But this is the in the middle of it. This is Besant going, cool, we're going to sacrifice Japan just because I need it to take longer. I'm never going to be able to stop it. I need it to take longer, and so maybe I get a year, maybe I get five years before people in Japan threaten to revolt, Takaichi's gone, they flip-flop back and forth like we've been doing in the U.S., trying to find who's going to magically solve this problem.

The answer is nobody. You're going to suffer because the debt had to come due at some point. And the number of people, when I began my financial learning journey, that looked at me like I was retarded because I kept saying, guys, you can't just rack up debts forever. And they were like, no, you really can. That's just how modern monetary theory works. I'm like, it's not possible. You're going to default on your debt at some point. So I look at Japan. If you're right, and that's a terrifying analysis, but it seems true, we just say, cool, they're going to suffer.

We'll take as many years as we can get before they revolt. Now back to the U.S., Besant is basically trying to do the same thing here. And as far as I can tell, and this is me, please tell me where you think I go wrong. I have a hypothesis about how Warsh got into office. This is just me. I don't have any insider information. And this is hearsay, my emotional read, whatever my lawyers would like me to say right now. I have a feeling that behind the scenes that you had Besant and Trump sit down with Warsh and say, all right, listen, you're going to have to lower rates, but it's a bad look.

And we know you want to raise rates because that's the only right move to play right now, because otherwise we inflate your everyman into oblivion and only people who own assets are going to come out of this on top. Everybody else is going to get obliterated. But the reason is that we've got to keep running these deficits, because as Felix pointed out, no one is going to do austerity. So I need my two trillion a year, maybe more because I'm at war with Iran, which was ill-advised, but nonetheless, here I am.

And to that end, we need a brief period here in the beginning where you're going to just hold rates steady so that nobody thinks that you're a pawn. But when the time comes, I'm going to need you to lower rates, even when it doesn't make sense. And I don't see any way around that, because we're already at 1.4 trillion and climbing. The service on the debt is our number one line item now, which is crazy. I forget who wrote the document, but he was either at a major hedge fund or at one of the big banks, I forget, but a real player.

And he said the suffering begins at 40. And so we're now at 40, and the suffering begins. And it really seems like you're going to have a battle as Bessant tries to throw enough money at the problem to manage rates. But the market understands, and they're going to find that number, which if Warsh could let the interest rate go high, maybe we find and all would be well. But given that they're going to need to bring that number down so that they can keep running at least $2 trillion in deficits, so we can't let it go up.

And that means there's going to eternally be this battle between Bessant trying to keep the rate artificially low and the market trying to find equilibrium. And that is a very similar story to Japan. And so now, both in Japan and in the U.S., we're running an average person suffer game where we're going to inflate you until you pitchfork. That is so wild to me. This is the thing that makes me want to scream and yell into a microphone every time I go live until my vocal cords are bleeding.

And I don't know how to get people to understand that you have to elect politicians that will balance the budget. I think you summarized it very well. I think what you said at the end, though, is very idealistic. There is no politician who's going to balance the budget. It's never going to happen again. Felix. I hate this so much. First of all, you will never get elected. So don't look for the government to fix it for you. Fix it for yourself. You can vote for three people.

You can vote for the guy who's going to raise taxes and promise that he's therefore going to balance the budget. Yep. Now, in reality, A, it's not going to happen. For every new tax dollar we bring in, we spend $1.58. It's literally never going to happen. Some people will argue, well, we just need to raise taxation a lot. Well, all you've got to do is look at the stats in California or in New York and people will leave. Felix, for every new dollar in tax we bring in, we spend $1.58.

You have to stop spending. If for every new dollar we brought in, we spent $0.98, then I'd be like, OK, maybe there's a way that you can tax your way out of this. But until you change that ratio, that's one. We can vote for the person who will raise taxes. That's one. Right. So the second lunatic you can vote for is the guy who's going to say, I'm going to slash spending by $2 trillion a year. I like him. He's got my vote. OK, wonderful. But where do you think that $2 trillion goes?

It doesn't go wasted. It goes into American businesses that provide services and goods. That's part of it. Now is where I find out how much you what you think about fraud. OK. So there will be a fraud element, however big that is, but it won't be $2 trillion. Even if it is $2 trillion, you're not going to eliminate it completely because no system is perfect. I'll grant you it's probably nowhere near $2 trillion. If you were to cut all that spending, you would end up with a massive recession, which nobody is going to vote for.

Because you would just take... Walk me through the mechanisms of why that equals... So the government spends $2 trillion on goods and services. Who provides the goods and services? It's largely American businesses, right? So those businesses employ people. They buy things from their suppliers and so on. It's like money flowing out. But at the same time, those companies are largely also listed on the stock exchange. So they report their earnings, their profits, and their revenues. So if they say profits are down by 20% because the government isn't spending money anymore, what happens to the stock price?

Well, it goes down. So everybody gets poorer. Everybody feels poorer. When everybody feels poorer, what do they do? They spend less money. So house prices go down. Everything just goes down. Companies are gonna lay people off. You get into this death spiral of a recession. How do you get out of a recession? Well, you spend more money, which is what governments have always done, which means you're probably worse off than when you started because you're gonna have to spend a lot more money to make up for that kind of problem.

And you're gonna money print, presumably. And you're gonna money print, of course. So you're gonna create more inflation. Do you know Steve Keen, the economist? Oh my God. You guys have to meet. You're both in my buckets of teach me about things. So Steve Keen has a very interesting philosophy, which is exactly what you're pushing right now, which is, Tom, you don't understand double accounting, double entry bookkeeping, once you understand that every time the government spends a dollar and it's deficit spending, they're creating that dollar and they're putting liquidity into the system.

Therefore, you want the government in deficit spending. You want them to tax less than they spend always and forever. Now- I don't agree with that, by the way. Do or don't? I don't. I think a government should balance its books. Should? Why should, though? That sounds moral. It's somewhat moral because it's what we meant to do. It's how you live a responsible, happy, calm life where you sleep well. And the government is setting a very, very poor example, right, which is, I think, why also so many people are in crazy debt.

If deficit spending juices the economy, why not juice the economy forever? Well, because someone's gotta pay for it. And there is this idea, well, if you can print money, money is free. But it isn't because it causes inflation. Inflation, we talked about this before, is not a law of nature. Inflation is the direct result of printing more money. And therefore, you are taxing the poorest. You're taxing the bottom half of the society the most because they live off their salary 100%. They don't have real estate and a beautiful portfolio that goes up in line with inflation or more.

So what do you say? I'm gonna channel Steve Keen in a way that he probably will be just mortified by. But his argument goes something like this. Yes, Felix, sort of, but the reality is that because they're putting money into the economy, that money ends up getting used to be more productive, to create new things. And in the creation of new things, that money isn't chasing the same goods. It's more money, but it's chasing new goods. And so that's why the inflation will never track M2 money supply exactly.

There will always be a difference. And that difference is, when the money is spent on smart things, you don't get the inflation that you got during COVID, say, where you injected a ton of money into the system that went directly into people's hands so that they were spending it directly. But at the same time that you shut manufacturing and shipping down, so you literally had less goods and more money, which that is how you get 30% inflation in six years, which is what we got. So that is- If you believe the inflation statistics.

Yes. Do you think they're way worse? Oh, way worse, yes. All right. Black film me, Felix. Give it to me. What do you peg it at? It's very hard to measure because governments have- Swag me. Massaged inflation numbers for many, many years. Yep. If it's not 30, it's 32, it's 40. It's 80. I mean, I think it's hundreds of percent. Oh, shit. Yeah, yeah. And all I look at is asset values. Another thing I think is quite good to track is luxury hotel rooms, which probably went up about five times or maybe 10 times.

What? Right? And it's just the reality. And to me, that's a reflection of the asset rich who booked those luxury hotel rooms and they're happy to pay five or eight times more because it doesn't matter because the portfolio went up 10 times, right? So what I said at the beginning, and I kind of mean that, to me, the S&P 500's performance is the inflation number. Okay, dark. Okay, so it is what I said, just much, much worse. Going back to Steve Keen's argument, you're saying Steve Keen's argument is broken precisely because the discrepancy in the inflation numbers is so much bigger that while we would love it to be that those dollars go and they become highly productive, the reality is that a gigantic portion of that does not create new goods and therefore is truly more money chasing roughly the same goods.

That's the definition of inflation. Yeah. I also think, and this is where we get probably a little bit political, there is, if you think the government's going to spend the money in a productive way and put it in the place where it's going to circulate the most and greatest benefit, that's a belief system, right? Some people have that. I don't share that. I think a privately spent dollar is incentivized by a better system to go into the right places and therefore create more value. Meaning a system that's better than the government.

Yes. What system would that be? Well, the free market. Okay. Now, we don't need to get completely into that. A completely free market will also end up very corrupt and all in one place. But the idea that the two trillion deficit spending can sufficiently spend is, I think, fairly ludicrous. Yeah. So you could probably cut that in half and have the private sector spend it and you'd have the same outcome. And I'm making that number up, but you know what I mean. Sure. There is a lot of waste, not in the sense necessarily of fraud, but just like they're just buying the wrong thing or at the wrong price.

So they're building a road nobody needs because it's just a weird bureaucracy that operates it. Yeah. Okay, so we've got two people. We've got tax, everybody guy. We've got cut spending guy. So far, neither of them are going to solve the problem, but you said there was a third crazy guy. Well, there is a third, and that's the guys you keep electing. And it doesn't matter what party they are. And that's the, I will create more inflation. And that way I will make the debt manageable.

And you guys will all pay for it, but you won't notice because we haven't given you any financial education. That's the guy you keep voting for. Okay. Yes. The current set of guys that we keep voting for that are doing the inflation theoretically have a belief system that goes like this. If I was in a private conversation with them, they'd be like, Tom, listen, here's what we're going to do. We are going to do all this crazy, defend the Japanese yen. We're going to defend the US market as well.

We're going to get those long-term rates down because we just need to buy ourselves a few years. And then AI is going to be a productivity miracle. And we're going to look like post-World War II where we used yield curve control to inflate our debt into nothing, but the real economy was growing even faster than inflation. So we held interest rates intentionally below the inflation rate and AI helped us grow the economy faster than even that inflation rate. What say you, Felix? Well, I hope it's true.

It's a really nice fairy tale. I mean, AI is real. AI is incredible. I'm sure you use it in your business as I do in mine. It's incredible. But is a technology going to fix everything? If you go back to, say, 2000, the internet came about, which is an incredible technology, arguably has been probably the most impactful thing since, I don't know, electricity or something. But has it fixed any of the financial problems? Has government debt gone down since Bill Clinton years? Of course it hasn't.

It's only gone up. So I think this idea that there's one magic pill you can take and everything will go away, we just have to wait a few years, I just think it's just what politicians are telling you. Yeah, no, I agree. Do you know Ray Dalio's beautiful deleveraging? I don't. I mean, I read some of Ray Dalio, but I'm not quite sure. Yeah, so basically he's saying what you're saying now, which is it's going to be a messy basket of things that we have to do in the exact right order and basically nobody ever gets this right, but we're gonna have to do additional taxation, we're gonna have to do some debt forgiveness, we're gonna have to do money printing, and we're gonna have to do austerity.

We're gonna have to do all four. And you have basically two sets of opposing levers. Some are stimulatory and some are recessionary. And so you just sort of wiggle these back and forth, and try to get your way to the other side of this. And he's been saying that for a long time, that that's gonna be the only way. And I really want to believe that we can do it, but it doesn't seem as believable in the reality of what people are like as the inflate right up until revolution, stop just shy of Marie Antoinette, and then you have to have AI grow your way out of it.

And if you can't do that, you're gonna be in trouble. Right now, you've got Trump, probably viabescent, trying to do a Hamiltonian model, which is now is the time to be protectionist. We've got it, we're gonna take on debt, we're gonna do some crazy things with money printing, but we're going to block China, and we're going to start getting manufacturing here. Between getting manufacturing back here and AI, real wages are going to grow, and we're gonna be able to get on the other side of this.

And it feels like such a long shot, but it is actually coherent. And I think a big part of the reason people don't want to acknowledge that it's coherent is that Trump said it. Yeah, I think that's true. I think people get very divisive with politics. I would say, I don't care at all about politics, I just care about how it's gonna impact my money. And there's some sense in that, that you reduce cheap competition, and you bring things back at home, and so you can actually build things again, without being dependent on somebody you may or may not like.

When I studied economics, we were taught boom and bust economics, which was, you have a boom, you have a recession, because interest rates went up, and that sort of thing. They stopped doing that around 2008. And we do less and less of it. It actually stopped happening? No, the government stopped allowing it. Because they stimulate. Exactly. Before, you have a massive boom, inflation goes up, interest rates go up, now we get a recession. A recession does something quite healthy. It kills off the crap companies, right?

Now the good companies buy the good bits of the bad companies, and it sort of creates a new fresh start. But they stopped doing that. They just gave money out, especially since 2008. So you bail out the big company that you don't want to go under, the big bank you don't want to go under. COVID, we just gave everybody money, right? Just hoping it would somehow protect us. And it creates an expectation, both in people and financial markets, that, well, they're gonna bail us out. So let's take whatever crazy risk we want, just like the financial institutions have always done, because it's gonna be fine.

And that creates a problem, because now we're gonna do really, really crazy stuff. Look at all the, I mean, look at the AI spending. Like, how many, is it 700 billion this year or something? The top five US companies are spending. That's insane, just purely insane. And then there isn't enough electricity to power it. So it's just insane. So, but they're doing that because they kind of know nothing really bad's gonna happen if it's a bad bet. They're gonna get bailed out, right? Open AI basically saying, if we go under, I think the government will give us some money.

So you get into this world where you always have Uncle Sam writing a check if you need it. And it doesn't create necessarily the healthiest economy. So I think it makes it harder to create this nirvana that Trump is describing, which in theory is possible. Okay, there's one little mile marker that I wanna put down, and then I want you to walk us through how people save themselves. Because largely, I think you and I agree, saving the system is tough, if not impossible. But anybody can save themselves.

Most won't, but it really is pretty straightforward. The mile marker is something you alluded to earlier, but we didn't sort of push to the end of it, which is this idea of a moral hazard. When the government is reckless with its money, when it gives everybody the indication, for corporations it'll be, we're gonna bail you out, and it causes them to do really irresponsible things that hurt a lot of people, but their business will survive. And then the moral hazard of making sure that everybody has a safety net, regardless of whether they do anything to earn it or not.

Do you have a way that you think about that moral hazard? Is this part of why empires always fail and there's no way to stop it? Or why worry about the moral hazard? Well, I think it's, you know, you call empires, I think the Romans used to give out free bread after they sort of won a victory or something. And then it became such an expected thing to happen that I think during Caesar's time, it was like 300,000 people would queue up for the free bread.

So it became a welfare state. And so it started off as a, let's do something nice for people, too. It's an expectation. And it changes how people behave. I'm not saying there shouldn't be a welfare state. I think we all agree there should be some element of a welfare state. But I think the way we're going is that everyone's gonna get paid, universal wage or whatever you wanna call it. And I think the sad thing about that is, is that for many, many people, it's gonna take away the incentive to do something meaningful and impactful and satisfying, which is really what life's all about, I think.

You can do something, you do something incredibly impactful for people, and it must be incredibly satisfying to have millions of people benefit from that. So if you take that incentive away from people, what are they gonna do, right? So they're gonna sit around, smoke pot and drink or something, right? And it's a very sad existence. So that's kind of, I think for me, the sort of sad part of where I see this going. But what I always try to bring my brain back so I don't go depressed about the state of the world.

It's just like, well, let's just focus on what we can do about it. And I think that's what I would say to everybody. Just don't get scared and stressed by all of this. It's not, everything is not gonna be terrible for everybody. It's gonna be very difficult for most people who don't understand. on this, but we can actually go back and help ourselves. Okay, so we know that they're going to print money. I mean, that really is sort of the basic punchline, right? It's, they're going to print money.

There's no way out of it. There is no alternative. I mean, unless people are suddenly going to vote for the guy who's going to increase their taxes to a ludicrous degree, and you already said mathematically that doesn't do anything, and no one's going to vote for the guy who's going to shut down the schools and the kindergartens and the welfare and, you know, cut all the government spending so everyone's unemployed around you, then no one's going to vote for those people. Okay, so if the core of saving ourselves is understanding that they're printing money, what, how is it that we take advantage of that to save ourselves?

Well, if you look at all the periods in history where we've printed a lot of money, and just look at the US history, you know, after World War II, because they had a similar amount of debt, then if you look at 1971, kind of sort of post that story, which was hangover of Vietnam War and just the welfare state getting bigger, decoupling from the gold standard and all of that, what's always done well in those moments? Well, I mentioned gold, actually, it's a physical hard asset you can't print.

That has traditionally done well. But to me, gold isn't an investment, and it's probably going to upset the gold bugs. Gold never goes up, it's just the currency goes down. But there isn't a currency in the world that has survived. Right, we don't have a 3,000-year-old currency anywhere in the world. So there is a value in that, but it's an insurance. It's like car insurance. It isn't going to make you wealthy, but it's going to protect you from the inflation madness and the money printing. So that, I think, is one place one can be.

I would warn against being in just one thing, and like going, I'm just gonna hoard gold under the mattress or whatever. Why? Because if you look at any asset class, it fluctuates, it goes up and down. Why does it go up and down so much? Well, people trade it. So in the short term or the medium term, the price of gold or silver is determined by a bunch of lunatic traders on the COMEX in New York. So those guys are not interested in it going up because they make just as much money if it goes down because they trade both directions.

So people need to understand that it isn't going to be a straight line. If you look at the stock market, you zoom out like a hundred years, it looks like a straight line, but there were like 50, 70% drops in it, right? Dot-com, the tech stocks went down 78%. So you alluded to AI. Well, the spending is even way more crazy than dot-com. Now, the good thing is that the company spending the money actually have income, right? Microsoft's a good business. Facebook is a good business, and all these kind of things.

They have real money coming in. But the likelihood of something going wrong there and the likelihood that they're misspending a lot of that is pretty high. So you could see a very large correction. So the problem then comes if you are 100% in gold and it goes down 70% and you're trying to live off that, if you retire it, you're screwed. And if you're 100% in tech stocks, and I see thousands and thousands of people's portfolios because we teach people. And what do I see? Well, portfolios are usually 90% tech.

And then the responsible people come in and go, no, no, no, I'm mostly in index funds. Well, the S&P is 50% AI. Yeah, it's all one big bet right now. It's all one big bet. I literally, I built a tool for it so you can put your portfolio in and you can see your AI exposure. And everyone's like, yeah. Really? Send your boy a link. Actually, there is a, it's an app I built. It's called checkwinston.com. If you guys go on that, there's a two-month free use to it.

Because I know who Winston is. Winston is my golden retriever. He has a large nose for sniffing things out. But yeah, literally you log into that, it's free for two months. Cancel it if you don't like it. And you put in your portfolio, you can just do a copy-paste job and it'll tell you what your AI exposure is. And for most people, it's more than half their money. Way high, way high. And the problem with that is if, say you did get that dot-com bust, that was minus 78%, right?

That's painful for most people if they are about to retire or they are retired because now they can't. So the whole system gets pushed back by a few years, which isn't much fun. You can avoid that. The guys who know how to invest don't have their exposure. I have- What are they looking for? So like, okay, so I have about 30% AI exposure by that metric. So Donald Trump put out his filings yesterday of the 1,000 trades he did in the last quarter. Presumably he has someone who does it for him.

But the most actively, I think Obama did about 12 trades in his entire time in office. Yeah, Trump's on a whole thing. Another level, trader-in-chief. But what has he sold? He sold the AI companies. What has he bought? Visa card, MasterCard. And they are, what kind of businesses are they? They're like a toll booth, right? You can't leave your house without basically giving them some money because every time you beep your phone or your card on somewhere, they're going to get a tiny amount of money.

So it's a very like, you know, financial world calls it a business with a great moat because try competing with Visa. Try getting, I don't know, a billion cards into people's hands. It would be an incredibly expensive thing to do. No one's going to bother doing it. So it's a business that is very defensive. It's a business that's going to survive pretty much anything. And if you're going to print more money, well, they're going to just get a cut of more money, aren't they? So I always say, don't follow what people are talking about.

Don't look at what people are pushing on, you know, the news or financial channels and so on. Just look at where the money is actually going. Now looking at a politician's filing isn't the ideal way of doing it because it's old. They don't have to file the day they buy it. They file, I think, is it two months after? I think something like that. So you could have sold it by now, presumably. But looking at what the people with inside information actually are doing, which is the funds, it's the guys running the country, is a pretty good place to look.

How do you track that? Like what is the, is it like the Pelosi tracker? Obviously I don't- So there's a bunch of free trackers. Again, see that link I just gave you, we also track it. So we'll give you an alert. You can follow Trump or Pelosi or whatever. But I wouldn't follow his trades because you're not Trump. But how do you see the flows of money? Like who's trading in and out? Okay, so get a bit more technical there. Essentially, if you look at the stock market, the media tells you the market's up 1% today, but it's not really.

So the way Wall Street looks at the market, it's 150 industries and we look at each one separately. So energy might be up, oil services might be up, and AI might be down, that sort of thing. And that's telling you where the money is going from where to where. And you can actually see it literally on a stock chart. So I'll give you an example. In the last 20 years, we did some research on that, all the stocks that went up more than 10 times, so there's, you know, people call them multi-baggers.

Every single one of them had the same pattern before it happened. And I call it- This is on a technical chart. Yeah, it's on a stock chart. I call it the heartbeat pattern. It literally looks like a heartbeat going sideways. And it did that heartbeat for about a year and a half to four years. Generally speaking, the longer it does it, the more the stock goes up if it goes up. So the heartbeat isn't causation, but the heartbeat and then breaking out of it tends to produce quite good results.

So it's a pattern. It's a pattern every trader gets taught. It's a pattern every guy in a hedge fund knows, right? And then we look at the moment it goes out above that heartbeat pattern, do we see lots of buying volume? Which is just a candle at the bottom of a stock chart that nobody understands because we haven't been towards any financial education in school, right? Which is a scandal. So we look at that and we see, yeah, everyone else is looking at the same thing.

Everyone else is buying the same thing. So it's not rocket science how to see where the money is flowing. But yeah, you do need to know how to look for it, right? So for most people, it's be in assets that are either hard assets like, say, gold or silver, but they're still going to fluctuate a lot. You can be in good companies. And by that, I mean companies that actually have a good hard business model. Visa MasterCard would be examples of that. Or like a Microsoft or something or a Google.

I mean, you probably used Google this morning, right? So they made a bit of money on you. Cash cows with moats, basically. Cash cows with moats, exactly. Or you can take it one step further and you can actually learn where the money is flowing, which is what the skilled money does, right? So that kind of your scale of options. But if you're not invested, and a lot of people I talk to, they say, I'm scared, I've sold everything. And I'm just like, oh my, that's the, that's the, you're guaranteed to lose money.

Because- Because they just put themselves into inflation territory? Yes, money's going to get printed. And we're going to go back to 1971 dollar. If you had, compared to someone who had invested it, is worth a third of a cent, right? That's so crazy. So you can either have a third of a cent or you can actually have a tremendous increase in value. And I just wish it was taught in school. So what you talked about, okay, be careful being in gold, careful being in AI, just like the, when gold draws down, it can draw down by 50, 60, 70%.

Stock market went down by, I think you said 78%. So it takes years and years for those to go back up. So if the answer isn't, just hold blindly, if the answer isn't just sell, how does one figure out the ultimate skill, which is knowing when the right time to sell is? I think there's two things of doing. If you're not invested, buying the S&P 500 is a thousand times better than not being invested. Even though it's 50 whatever percent AI? Yeah, I would not want to discourage that.

Much, much better, because you're in cash, you're guaranteed to lose money. So it's much, much better to be in this. The S&P 500 in the longterm is likely to keep going up. Just there's more money around, right? Now, how do you actually do it smarter? It is, it's a bit of a skill. I don't think you can learn it in 30 minutes. I think you can learn it in a couple of weeks. But essentially, we're looking at, what I look at is just like, I just follow the money.

So I look at, every Saturday I sit down for about an hour, and I look at what industries are going up and going down. You have a series of charts. And you can do this at home, you can do it with index funds. You can just look at the semiconductor index fund and the software index fund and the utility index fund and the energy index fund and so on. You can look at that, and that'll give you a bit of an idea. And I imagine you could just ask Claude or OpenAI, hey, I'm trying to track money flows essentially using the stock market.

Give me the 10 or 15 index funds. That would give me a broad understanding of what industries are working and not. And you can do that, and it might elucidate the numbers and make them up, so be careful. But... But even if you're just asking for what industries are important, it'll probably get you close. It'll be better than not doing it. The danger I see with people is that they, so most people will own the S&P 500 in a 401k or some sort of pension fund, which is half tech.

So the top five companies are now 30% of that market. So you basically own five companies and a bit of everything else. They will then go out and they'll buy those top five companies again, because those are the companies that are in the news. So they'll buy Microsoft and Apple and Nvidia and Tesla and so on. And it just means that they are increasing their risk to this one thing. Whereas when you look at people who actually manage money in institutions, they don't care whether it's a famous stock.

They don't care whether it's popular, right? They're just looking for the return and they're looking for a relatively smooth ride. So how do you get a smooth ride? Well, you buy stuff that isn't necessarily in the news. So that could be a utility stock, or it could be a, I just bought a railway, for example, stock about two weeks ago. Now that's again, it's a business. No one's gonna build a competing railway in the US because it's physically impossible. So it might not make you 100% return, but it's also unlikely to get you a 70% drawdown like a tech stock might.

So I think it's looking at the market as a, I always say it's a chessboard and try to be in more of the fields rather than just in the top row, which is where most people are sitting right now. And do you think of it as being on more of the fields is about being uncorrelated asset classes? Yeah. Okay. That makes a lot of sense. So what I look for, I buy stocks once a week. I do nothing Monday to Friday. I don't look at a stock chart.

I don't buy anything. I don't sell anything. Why? Because you get emotional when the market's open. Like you try to buy a stock before and the stock price goes up and down a little bit, the numbers change and you're like, should I buy, you get a bit like itchy about it, right? Well, if you do it on a Saturday, it doesn't move. Markets are closed, static. That's interesting. I've never heard anybody say that before. So I used to do it on Sundays, now I do it on Saturdays because I don't have to think about it on Sunday.

So I just do it, and I just look at what's happening week by week. And if I want to buy something, I look at, well, what do I already own, right? I already have tech. I have a software company. I have a railway. I'm not going to buy a second railway. I want to look at something else that I don't own yet, like a different universe that isn't going to get impacted by the same news story so much. And I know this will be unique to you, but I'm curious how you discover those new things that you're not already thinking about.

I basically build a scanner and I say, you can do this with index funds that just flags to me what industry is going out of sort of like base level, going sideways to actually starting to move up. And then I will look into that industry. So it cuts down looking at 5,000 stocks, which is what the US market is approximately, which would drive you nuts. But are you going to like showmethemoney.com? Like where are you going to find these charts? Well, I build them myself because I'm a bit of an art.

Like you actually build the software using what, AI? Yeah, nowadays we do. Well, I have about a dozen developers still, but yeah. It's more and more AI. But you start to tell it to grab APIs or something. Yeah, so you got to feed it the right data and you got to feed it. Is that publicly available? Is there? We don't make that scanner available because I feel it's dangerous. It's going to give you, I'm not a fan of selling people stock alerts because unless you know how much of your money you should put into it, how it relates to the rest of your portfolio, and most importantly, when you should sell it, you are going to be in trouble.

So, you know, I put videos out on YouTube. We talk about stocks and I don't tell people, I tell people specifically don't buy this, right? But I don't know, it was a year ago or something, we did a video on a stock called Aiva or something, sort of nuclear, whatever. Went up, I don't know, 500%. I got angry messages from people who lost money on it. So it isn't about giving people. They lose money. They just got in at the wrong time at the top and then it went down obviously after that, right?

So You have to look at it as a skill and You know if you play a sport You don't become great at the sport at lesson number one Right, you really suck at it. And this is a skill like any other it's like walking or cycling or swimming or playing Basketball or baseball or whatever? It takes a little bit of time to learn it. It's not difficult But I do think you need to actually learn it and to me that's the biggest hanging fruit that everybody has Because your salary is it's like your seed money Your salary is not what's going to make you wealthy Your salary is the money you're meant to use to invest it and then that's your actual business Yeah, very smart, right, but we've not been taught that we've been taught just work Really really hard and then go home watch netflix drink a beer and then do it again the next day but if you actually just spent Not 40 hours or 50 hours or 60 hours where most people are working but like an hour a week On actually learning the skill of how just how investing works a little bit better I think the impact on people's lives is tremendous.

And that's that's why I I do what I do I mean, actually if you go on my channel, there are five six hour long videos on on on just exactly that What is your channel felix? It's very kind you asked tom. It's called felix and friends The goat academy. Yeah, I found you through your content Was literally just really trying to wrap my head around how all of this stuff works I have a deep desire to understand the Cause and effect of the economy. I don't know that people need to follow me down that road But certainly getting to the point where you understand where to put your money Understand inflation well enough that you're scared straight if you will that you know You're going to lose if you're saving money that you've got to find a diversified portfolio diversify against economic forces I can't stress that enough So being in seven different tech stocks or ai stocks even worse Uh is not being diversified against economic forces felix, uh if people were going to take away one lesson from you because This this stuff even the stuff that you said about saving which is really boiled down pretty concretely into I think roughly four steps Uh, people can rewind it.

Let's do it again, but you made that very tidy But if they were going to take just one core principle away from you What would it be uh beware inflation be in the market like what's that core idea? I think it's See your salary or your income as your seed money Invested if you don't you're guaranteed to lose the salary isn't going to make you wealthy unless you're you know, I'm one of the 10 jobs in the country or something that would and Focus just a little bit of your energy on that investing part Because most of us go through life spending 70 80 percent of our waking hours working For somebody else making somebody else wealthier and we spend basically zero time Actually managing the money that we have and if you look at just look at the wealthy families in america Why are they wealthy because somebody figured this out two or three or four generations ago?

And once you understand there's just a basic principle like stay invested and compound your money It's incredibly easy or hard not to be wealthy actually It is just a game and the government in a sense is going to make it easy for you because they're going to print money So therefore asset prices stocks real estate gold and so on are very likely to keep going up in the long run They can crash massively in the short term have fun. Um, so have fun with that But you need to understand that they will just print more money to fix the problem and therefore it's going to keep going back up So if people got a little bit more confidence in that process And managing their money, they will not do what everybody did in covet which is set at the bottom Yeah, right and then watched it go up 200 Right.

So lots of people get richer and you are left out because you're scared and it's natural and it's that No, that's why I do my investing on the weekend because I get it too. We all get it. We all are emotional beings That's a good dodge, man. Very smart, bro Thank you so much for just the content in general and thank you for taking the time to come on the show today Uh, I assume you want people to go to felix and friends. Sure Com, um, just check out the youtube channel.

Yeah, that'd be the best thing to love it. That's great. I can attest to it Thank you very much. All right, everybody if you have not already be sure to subscribe and until next time my friends be legendary Take care. Peace Why does progressive work hard for truckers because truckers unite the world? They unite kids with their first drum sets and parents with earplugs but truckers can't do this if they're not on the road That's why progressive has over 360 heavy truck employees to help truckers stay on time and on track Quote truck insurance today in as little as eight minutes at progressivecommercial.com progressive casualty insurance company and affiliates Support for this podcast comes from progressive america's number one boat insurer We've all made mistakes on the water But there's one mistake you shouldn't make being uninsured with progressive boat insurance You can choose coverage for most mistakes you or other boaters can make helping you float carefree all season long quote today progressive casualty insurance company and affiliates number one rating based on 2024 filings with state departments of insurance