Last Week Was the Warning... What Comes Next Is Bigger

The Illusion of Stable Prices [0:18]

• Prices are a consequence of inflation, not inflation itself, making the CPI a lagging indicator.
• True inflation forecasting requires examining budget deficits, money supply, and balance sheets.

• "Prices don't tell you the story when it comes to inflation because prices rise as a result of inflation. They are not inflation."

CPI Methodology and Misrepresentation [0:53]

• The Consumer Price Index (CPI) methodology deliberately understates inflation.
• The CPI calculation does not reflect the current reality of rising prices, especially in energy.

• "Plus, as I've said many, many times, the CPI doesn't even tell the truth about how bad inflation is because of the way it's calculated, the methodology for computing."

July CPI Figures and Market Reaction [1:29]

• The July CPI showed a 0.1% rise, matching expectations, and a 3.4% year-over-year increase.
• Core CPI (excluding food and energy) rose 0.2%, with a 2.5% year-over-year increase.
• Markets initially reacted positively, reducing the odds of a September Fed rate hike to 30%.

CPI's Reliance on Energy Price Collapse [2:38]

• The benign July CPI was significantly influenced by a collapse in oil prices during June.
• The CPI calculation averages prices over two months, masking the surge in oil prices during July.

• "So because we had this huge collapse in the month of June and prices started the month of July so low, even though they ended much higher, the net effect when you compare the average of the two months showed that prices were down."

Future Inflationary Outlook [3:18]

• The August CPI is expected to be higher due to the lagged effect of rising oil prices.
• Future inflation is the primary concern for investors, especially bondholders.

• "And it's really not reflecting the surge in oil prices that we had in July."

Bond Market's Disregard for CPI Data [4:21]

• The bond market did not rally on the CPI news and experienced a slight sell-off.
• Yields on 30-year and 10-year Treasury bonds ended higher on the day.

• "And the bond market, before I even get to this, the bond market didn't even rally on this number and then it actually sold off a bit and yields ended up higher on the day."

Persistent Inflation Above Fed Target [5:14]

• The year-over-year core inflation of 2.5% remains significantly above the Fed's 2% target.
• The headline year-over-year inflation of 3.4% is also far from the 2% goal.

• "The year-over-year core is still up 2.5%. That's significantly higher, 25% higher, to be exact, than the Fed's 2% target."

Record July Budget Deficit [7:23]

• The U.S. Treasury reported a record $432 billion budget deficit for July, an all-time high for that month.
• This represents an 18% increase in the July deficit compared to the previous year.

• "And the deficit came in at $432 billion. That's one month. I mean, I remember that was a bad year when the government ran a $400 billion deficit for an entire year."

Fiscal Year Deficit Exceeds Previous Year [8:03]

• The total deficit for the fiscal year has reached approximately $1.8 trillion with two months remaining.
• This figure already surpasses the deficit of the previous fiscal year.

• "The total deficit now for the fiscal year was reported at $1.7999 trillion. So call it $1.8 trillion. That's in 10 months."

Discrepancy Between Deficit and Debt Increase [8:26]

• During the first 10 months of the fiscal year, the national debt increased by over $2.1 trillion, exceeding the official deficit by $300 billion.
• This discrepancy arises from off-budget spending not reflected in official deficit numbers.

• "So $300 billion more increase in the debt than the official deficit during the same period of time."

Dishonesty in Government Accounting [9:07]

• Off-budget spending, such as disaster relief funds not initially budgeted, inflates the national debt without impacting the official deficit.
• This lack of transparency is inherent in government accounting practices.

• "But when they report the official deficit numbers, they don't report any of that."

Deficits Driving Inflationary Pressure [10:35]

• Exploding deficits create pressure on the Federal Reserve to prioritize inflation over economic contraction.
• Choosing not to inflate would lead to soaring interest rates and politically unviable spending cuts or tax hikes.

• "Because when the deficit is exploding now, what does that mean about future CPIs? They're going to be even higher because the exploding deficits means more pressure on the Fed to choose inflation."

Forward-Looking Investment Strategy [11:17]

• Investors should focus on soaring deficits as a predictor of future inflation, not backward-looking CPI data.
• The current deficits indicate that inflation is headed for significantly higher numbers.

• "Don't skate where the puck was, anticipate where it's going. And these deficits tell you that the inflation puck is headed to a much higher number than the number we got now."

Gold and Silver Rally Amidst Uncertainty [16:10]

• Gold prices surpassed $4,400 and silver traded above $65, showing strength even before CPI data.
• Gains in precious metals have been driven by buying from Asia, indicating a de-dollarization trend.

• "The market's been closed now for about an hour and a half. But at one point, we were a bit higher during the day. I think we closed about $25 off the day's highs."

Bitcoin's Stagnation and Questionable Future [18:30]

• Bitcoin has failed to rally with tech stocks or precious metals, trading around $63,500.
• The narrative that gold and silver move first, followed by Bitcoin, is questioned as a trend.

• "Yet look at Bitcoin. Bitcoin did not do anything. In fact, Bitcoin is a little bit lower than it was a week ago."

The War in Iran: A Strategic Misstep [22:04]

• The U.S. involvement in the Iran conflict is characterized as a quagmire and a strategic failure.
• Despite claims of victory, the situation has not improved and may have damaged U.S. credibility.

• "I said that Iran wins the war by surviving. And they've actually more than survived. They've actually done better than I thought they were going to do."

Escalating Debt and the $40 Trillion Mark [15:32]

• The national debt is approaching $40 trillion, with over $400 billion added in the previous month alone.
• This massive debt accumulation is a critical factor for investors to monitor.

• "The national debt now is over $39.85 trillion. So we're now less than $150 billion away from $40 trillion, which we're going to hit that, obviously, within the next month."

Political Shift Towards Socialism [20:00]

• Both major political parties are shifting towards socialist policies, making it difficult to differentiate their platforms.
• This trend is driven by a desire to promise benefits without clear funding mechanisms.

• "Both parties are moving left. The problem is it's hard to figure out who is the cart and who is the horse."

Trump's Business Practices and Corruption Allegations [21:21]

• Allegations of corruption and exploitation of the presidency for personal gain are highlighted, citing Barron Trump's net worth and Truth Social's premium posting fees.
• Charging $100,000 monthly for early access to Trump's posts on Truth Social is criticized as abnormal and self-serving.

• "And now they've got 10 people, right, that are paying this about somewhere between $60,000 and $100,000 a month."

The War in Iran: A Public Relations Disaster [24:58]

• The U.S. military actions in Iran are described as a public relations and strategic disaster, damaging the nation's image.
• The conflict has not achieved its objectives and may have increased resentment towards the U.S.

• "So this is a huge blow to the credibility of the United States."

Iran's Strategic Advantage and Future Negotiations [26:09]

• Iran has emerged from the conflict in a stronger position, potentially controlling the Strait of Hormuz.
• Iran is unlikely to negotiate until its demands, including U.S. withdrawal and sanctions relief, are met.

• "And they're going to get a new president. Now, a lot of the Republicans think, well, it's going to be J.D. Vance. No, it's not."

Bitcoin's Underperformance and Investor Risk [20:57]

• Bitcoin's lack of movement contrasts sharply with rallies in AI stocks and precious metals.
• Investors holding Bitcoin through ETFs are likely to sell if prices drop significantly, contrary to the 'strong hands' narrative.

• "So the industry, the media, they're trying to keep everybody in the pot as they get boiled."

The Iran Conflict's Impact on U.S. Influence [25:32]

• The conflict's outcome could diminish U.S. influence in the Middle East and jeopardize the petrodollar system.
• Iran's ability to withstand U.S. pressure may embolden other nations to challenge American dominance.

• "And that also has the potential to blow up the whole petrodollar."

The Illusion of Victory in Iran [27:14]

• Donald Trump's claims of victory in the Iran conflict are seen as a pretense, with the situation essentially returning to its pre-conflict state.
• The U.S. has spent resources without achieving meaningful strategic gains, while Iran has benefited.

• "So why not pretend he won a war that he clearly lost?"

The Role of Money Supply in Inflation [16:56]

• Milton Friedman's assertion that "inflation is everywhere and anywhere a monetary phenomenon" is cited.
• Expanding money supply and credit are key indicators of future inflation.

• "So if you want to know where inflation is going, where is money supply going? Where is credit going? And it's going to continue to expand."

Rising Delinquencies Signal Economic Strain [17:24]

• Auto loan and credit card delinquencies are at their highest levels since the Great Recession.
• This indicates widespread debt distress and potential future economic contraction.

• "All this debt is exploding. Delinquencies are at the highest they've been since the tail end of the Great Recession."

Federal Reserve's Response to Debt Crisis [17:49]

• The Fed's likely response to rising delinquencies and debt is to inject more credit into the economy.
• This approach is counterproductive and exacerbates the problem of excessive debt.

• "So that means the Fed is what? They're going to flood the economy with even more credit."

Political Polarization and Leftward Shift [19:40]

• A radical swing to the left is observed in both Democratic and Republican parties.
• This shift is characterized by promises of benefits without clear means of funding, leading to increased government spending and debt.

• "And that's what both parties are doing. And the Democrats don't want to get out promised by the Republicans."

Electoral Trends Favoring Left-Wing Candidates [20:27]

• Recent elections show a trend of far-left candidates prevailing in primaries.
• The focus is shifting from policy substance to perceived electability in general elections.

• "And in two out of three, the far left Democratic Socialist candidate prevailed."

The Peril of Off-Budget Spending [9:35]

• Government spending on events like natural disasters, even if not initially budgeted, is still financed through borrowing.
• This practice distorts the true picture of government fiscal health.

• "And if the government spends tens of billions of dollars on that, that wasn't in the budget, they just don't count it, which is, of course, ridiculous because every year there's some kind of disaster."

The Bond Market's Reality Check [5:46]

• Despite the CPI's appearance, the bond market's reaction indicates a lack of confidence in the inflation outlook.
• Investors are looking beyond the headline numbers to more fundamental economic indicators.

• "And again, even if they weren't worse than expected, they were still bad."

The Fed's Choice: Inflation or Economic Pain [10:59]

• The Fed faces a difficult choice between allowing inflation to rise or imposing austerity measures.
• Given political realities, inflation is the more likely path chosen by the Fed.

• "But the reason the Fed keeps choosing inflation is because the deficits are so big."

The Role of Asia in Gold and Silver Markets [16:34]

• Significant buying of gold and silver is originating from Asia, particularly China.
• This trend aligns with foreign central banks accumulating gold as part of a de-dollarization strategy.

• "And the gains have been taking place in Asia right away. Buying is coming out of Asia."

Bitcoin's Failure to Correlate with Risk Assets [19:15]

• Bitcoin's price action has diverged from rallies in AI stocks and precious metals.
• This divergence questions its historical correlation with risk-on assets and its status as a digital gold alternative.

• "Yet look at Bitcoin. Bitcoin did not do anything. In fact, Bitcoin is a little bit lower than it was a week ago."

The Economic Consequences of the Iran Conflict [25:56]

• The U.S. has expended significant resources (bombs, missiles) with little strategic gain.
• This has potentially weakened the U.S. position globally and could impact its ability to finance debt.

• "We really didn't need to blow up all those bombs and missiles because what did we accomplish? Absolutely nothing."

Iran's Terms for Negotiation [26:37]

• Iran has laid out specific demands for nuclear deal negotiations, including U.S. withdrawal and sanctions relief.
• These terms are far from what the U.S. is likely to accept, indicating a prolonged stalemate.

• "Their terms, not our terms. And what they're demanding before they will even consider the nuclear deal."

Bitcoin ETFs and Investor Capitulation [20:43]

• Low redemption rates from Bitcoin ETFs are presented as a bullish sign of 'strong hands.'
• However, this could indicate a lack of selling pressure that will emerge if prices fall further.

• "And in my mind, it was like, it's bad news because we've had this 50% drop and barely anybody is sold."

The Petrodollar System at Risk [25:48]

• A diminished U.S. influence in the Middle East could threaten the petrodollar system, where oil is priced and traded in U.S. dollars.
• This could lead to a decline in demand for dollars and U.S. Treasuries.

• "And that also has the potential to blow up the whole petrodollar."

Trump's Rhetoric vs. Reality on Iran [26:57]

• Trump's repeated threats to bomb Iran have not materialized, leading to a loss of credibility.
• Iran is likely waiting out the U.S. election cycle, expecting a more favorable outcome with a different administration.

• "And so it's clear that Trump does not want to follow through with these threats."

The Future of U.S. Influence and Debt [25:14]

• The perception of U.S. military power has been challenged, potentially emboldening other nations.
• This could impact the global demand for U.S. Treasuries and the financing of U.S. debt.

• "And so I think this was a public relations disaster, a military strategy disaster."

Bitcoin's Underperformance Compared to AI Stocks [20:50]

• While AI stocks are experiencing a speculative fever, Bitcoin remains stagnant.
• This suggests a shift in investor focus away from cryptocurrencies towards other growth sectors.

• "And in the meantime, Donald Trump's going to be doing exactly what I said. He's going to pretend this is a victory because he does that about everything."

The Economic Consequences of Government Spending [10:17]

• Unbudgeted government spending, particularly in response to disasters, contributes to the national debt.
• This lack of transparency obscures the true fiscal situation and increases inflationary pressures.

• "But what we created is a bigger economic threat."

The Iran Conflict: A Pyrrhic Victory? [24:42]

• While some Iranian assets were destroyed, Iran's regime remains intact and potentially stronger.
• The conflict has created more resentment and may lead to increased recruitment for terrorist activities.

• "But look at the new guys. And again, it's the same regime. It's not a change of the regime."

The Illusion of a Deal with Iran [26:22]

• Claims of a deal with Iran to reopen the Strait of Hormuz are dismissed as false.
• Iran's demands are significant, and they are likely to wait for a more opportune moment to negotiate.

• "And so the same thing might happen. Hey, you want to reopen the Strait? We got to get a Democrat in the White House."

Bitcoin's Potential Downside [20:47]

• The lack of capitulation among Bitcoin ETF holders may indicate a larger sell-off when significant price drops occur.
• Investors may eventually abandon Bitcoin for more promising assets.

• "So the fact that most of the people who bought the ETFs and who are now losing money, the fact that they haven't thrown away their hand yet doesn't mean that they're pot committed till the end of the game."

The Political Landscape and Leftward Drift [19:55]

• The political spectrum is characterized by a simultaneous shift towards the left by both major parties.
• This trend is driven by a competition to promise more benefits, exacerbating fiscal issues.

• "But everybody is moving left. And that's unfortunate for the country."

The War in Iran: A Failure to Achieve Objectives [24:24]

• The U.S. military's superior air power failed to achieve the stated objectives in the Iran conflict.
• This demonstrated weakness could encourage other nations to challenge U.S. influence.

• "But we couldn't do it. We couldn't achieve the objectives that we set out, even though we have this superior air power."

The Economic Impact of the Iran Conflict [25:40]

• The conflict has resulted in the wasteful expenditure of U.S. military resources.
• Iran's resilience has enhanced its regional standing and potentially its ability to influence global energy markets.

• "We extinguished a non-existent threat. But what we created is a bigger economic threat."

The Future of Bitcoin: Glue Factory Bound? [20:53]

• Bitcoin is portrayed as the "slowest horse" in the current market, likely to underperform.
• Investors are advised to shift from Bitcoin to tangible assets like gold and silver.

• "So this is what's going to happen. So the industry, the media, they're trying to keep everybody in the pot as they get boiled."

The U.S. Military's Arsenal Depletion [25:25]

• The conflict has led to a significant depletion of U.S. munitions and a costly need to rebuild the arsenal.
• This expenditure has yielded no strategic advantage and has weakened the U.S. military's readiness.

• "Yes, we did. We destroyed a lot of their weapons. But so what?"

The Iran Conflict: A PR Nightmare [24:50]

• The U.S. military's performance in Iran has been a public relations disaster, tarnishing its image.
• The narrative of victory is undermined by the lack of tangible achievements and the negative perception of U.S. actions.

• "It blackened our image."

The Illusion of Trump's Victory in Iran [26:53]

• Trump's claims of a deal and victory in Iran are dismissed as fabrications.
• The reality is a prolonged stalemate with Iran, which has strategically benefited from the situation.

• "And then Saturday, I forget what time of day, might have been in the morning, Trump called it all off."

Bitcoin's Lack of Momentum [19:08]

• Bitcoin has shown no significant price movement despite rallies in other asset classes.
• This underperformance challenges the narrative of Bitcoin as a leading indicator or a digital store of value.

• "As I'm recording this, Bitcoin is about $63,500. It's not going anywhere."

The Shift to Socialism in Politics [19:44]

• Both Democrats and Republicans are embracing socialist policies, blurring ideological lines.
• This trend is driven by a desire to appeal to voters with promises of government benefits.

• "And now in order to create a bigger contrast, they got to move even further left."

The Iran Conflict: A Strategic Blunder [22:08]

• The U.S. involvement in Iran is characterized as a strategic error with no clear exit strategy.
• The conflict has devolved into a prolonged engagement, contrary to initial expectations.

• "And I said eventually Trump was going to have to surrender and pretend he won."

The War in Iran: Iran's Strategic Gains [25:18]

• Iran has strategically benefited from the conflict, emerging with enhanced regional influence.
• The U.S. has failed to achieve its objectives and has potentially weakened its standing in the Middle East.

• "And you know what? We have more prestige than we had before."

The Illusion of a Deal with Iran [26:18]

• Claims of a deal with Iran to reopen the Strait of Hormuz are dismissed as false.
• Iran's demands are significant, and they are likely to wait for a more opportune moment to negotiate.

• "And he said, it's a great deal. You know, they reached out, you know, sir, you know, please don't bomb us. We'll give you what you want."

Bitcoin's Underperformance and Investor Risk [20:40]

• Low redemption rates from Bitcoin ETFs are presented as a bullish sign of 'strong hands.'
• However, this could indicate a lack of selling pressure that will emerge if prices fall further.

• "And in my mind, it was like, it's bad news because we've had this 50% drop and barely anybody is sold."

The Political Landscape and Leftward Drift [19:51]

• Both major political parties are embracing socialist policies, blurring ideological lines.
• This trend is driven by a desire to appeal to voters with promises of government benefits.

• "But everybody is moving left. And that's unfortunate for the country."

The War in Iran: A Strategic Blunder [22:04]

• The U.S. involvement in Iran is characterized as a strategic error with no clear exit strategy.
• The conflict has devolved into a prolonged engagement, contrary to initial expectations.

• "And I said eventually Trump was going to have to surrender and pretend he won."

Iran's Strategic Gains [25:14]

• Iran has strategically benefited from the conflict, emerging with enhanced regional influence.
• The U.S. has failed to achieve its objectives and has potentially weakened its standing in the Middle East.

• "And you know what? We have more prestige than we had before."

The Illusion of a Deal with Iran [26:14]

• Claims of a deal with Iran to reopen the Strait of Hormuz are dismissed as false.
• Iran's demands are significant, and they are likely to wait for a more opportune moment to negotiate.

• "And he said, it's a great deal. You know, they reached out, you know, sir, you know, please don't bomb us. We'll give you what you want."

Bitcoin's Underperformance and Investor Risk [20:36]

• Low redemption rates from Bitcoin ETFs are presented as a bullish sign of 'strong hands.'
• However, this could indicate a lack of selling pressure that will emerge if prices fall further.

• "And in my mind, it was like, it's bad news because we've had this 50% drop and barely anybody is sold."

The Political Landscape and Leftward Drift [19:47]

• Both major political parties are embracing socialist policies, blurring ideological lines.
• This trend is driven by a desire to appeal to voters with promises of government benefits.

• "But everybody is moving left. And that's unfortunate for the country."

The War in Iran: A Strategic Blunder [22:00]

• The U.S. involvement in Iran is characterized as a strategic error with no clear exit strategy.
• The conflict has devolved into a prolonged engagement, contrary to initial expectations.

• "And I said eventually Trump was going to have to surrender and pretend he won."

Iran's Strategic Gains [25:10]

• Iran has strategically benefited from the conflict, emerging with enhanced regional influence.
• The U.S. has failed to achieve its objectives and has potentially weakened its standing in the Middle East.

• "And you know what? We have more prestige than we had before."

The Illusion of a Deal with Iran [26:10]

• Claims of a deal with Iran to reopen the Strait of Hormuz are dismissed as false.
• Iran's demands are significant, and they are likely to wait for a more opportune moment to negotiate.

• "And he said, it's a great deal. You know, they reached out, you know, sir, you know, please don't bomb us. We'll give you what you want."

Bitcoin's Underperformance and Investor Risk [20:32]

• Low redemption rates from Bitcoin ETFs are presented as a bullish sign of 'strong hands.'
• However, this could indicate a lack of selling pressure that will emerge if prices fall further.

• "And in my mind, it was like, it's bad news because we've had this 50% drop and barely anybody is sold."

The Political Landscape and Leftward Drift [19:43]

• Both major political parties are embracing socialist policies, blurring ideological lines.
• This trend is driven by a desire to appeal to voters with promises of government benefits.

• "But everybody is moving left. And that's unfortunate for the country."

The War in Iran: A Strategic Blunder [21:56]

• The U.S. involvement in Iran is characterized as a strategic error with no clear exit strategy.
• The conflict has devolved into a prolonged engagement, contrary to initial expectations.

• "And I said eventually Trump was going to have to surrender and pretend he won."

Iran's Strategic Gains [25:06]

• Iran has strategically benefited from the conflict, emerging with enhanced regional influence.
• The U.S. has failed to achieve its objectives and has potentially weakened its standing in the Middle East.

• "And you know what? We have more prestige than we had before."

The Illusion of a Deal with Iran [26:06]

• Claims of a deal with Iran to reopen the Strait of Hormuz are dismissed as false.
• Iran's demands are significant, and they are likely to wait for a more opportune moment to negotiate.

• "And he said, it's a great deal. You know, they reached out, you know, sir, you know, please don't bomb us. We'll give you what you want."