It's Going To Get Much WORSE From Here - Jim Rickards

Well, uh, they're, they're com things. I have a whole chapter on, um, you know, kind of investment suggestions, portfolio allocations, and all that. Uh, but, uh, the, the main thing to do is a couple of things to, they're almost constant, not quite cause it's not a set and forget a type portfolio, but you definitely, you definitely want a 10% gold.

And whether it's. You know, physical bullying or, you know, some kind of fun. I, I recommend physical bullying, but, um, you know, if you have an ETF for something, at least you get price, exposure, um, gold mining shares, and you look at silver might have some of that, but I just don't recommend, um, a big slug of cash, maybe 30% cash.

Um, I recommend lightening up on equities and the equities have a lock for the default. There's been a spectacular rally from March 23rd to September 2nd. We had one of the, we had the shortest bear market and the fastest returned to a bull market in history. But, uh, it doesn't mean this is over. That was sort of, you know, I, I call the S and P 500 called the S and P six, because it's really only six companies that are dragging along the other 494, because it's a, it's a cap weighted index.

So when you look at Amazon apple, Microsoft, Netflix, um, Facebook and Google or alphabet, uh, those six stocks are almost 40%. Oh, the way that the index, so they go up, the index goes up. A lot of people don't pick stocks anywhere. They just buy index funds. So their index funds go up. So it's all sort of going up together.

It's all good. But there are two problems with that. Number one, how sustainable is that? And by the way, there's the six companies I mentioned they're the least affected by the pandemic. Meanwhile, so my point is that the stock market is completely detached from the economy. Used to be that. Stock Martin was kind of a proxy for the economy.

Not exactly, but to some extent that's not true anymore. Those six stocks and others, like it, uh, you know, some of the texts, tech names, uh, they're just in a world of their own, the economy is in very bad shape and I'm happy you brought that up, Jen, because you know, you're absolutely right. The stock market is painting what picture, but the economy is telling us something different.

Um, so what is the real truth here? And that leads me to my other point about the debate of inflation versus deflation. And I know you're one of the few experts out there saying actually, you know, the fed wants an inflationary environment, but they might not right what I've said there for a long time.

And they haven't been able to get it for a long time. It's just, we just, literally the past few weeks that the fed has come out more or less admitted this, uh, in a couple of respects. But so first of all, uh, the idea that. Yeah, money printing causes a place and it's just not true. Now, everyone believes it's true.

The monetarist in the Milton Friedman followers, the Austrian economists, even the Neo, Keynsian say, yeah, if you print a lot of the money, you can get inflation. It's not true. And you know, it's just for empirical evidence. I don't just say things like this without backing them up between 2008 and 2015. Um, you know, when they ended, uh, So 2014, when they ended QE three, at the time, the federal expanded its balance sheet by almost $3 trillion.

And we never had inflation. We never had seriously one month and a half percent, but we never had serious inflation the whole time the fed had a target. This is, uh, you know, 11 years. If you want to go all the way to the end of the expansion in 2019, you know, technically a February 20, 20, 11 years. Uh, and the fed never hit their target of 2%.

A couple of months. Yeah. But not on, not on a sustained basis and certainly nothing about that. So I like to say it's a sad day when the fed wants inflation, they can't get it and they do want, so now they've come up with a new monetary policy. There's sort of, as I say, given up on the money printing thing and they said, we're just going to let the economy run hot.

We're not going to worry about, um, you know, money supply as much. Uh, we're just gonna, you know, basically let. Let unemployment drop, hopefully and let in place you go. And if it goes above 2%, uh, we're going to let us stay there for awhile. So that, so the blow 2%, they bought 2% kind of average out to 2%.

That's new. Here's the problem. You can say it. You can take a vote and make that your policy. It doesn't mean you can make it hot. They fell oh years. I mean years. Why do we think they're going to succeed? Now? The greatest danger in the macro economy today is deeply. Because of declining labor force participation, declining productivity, and most of all velocity velocity is the turnover of money.

It doesn't matter what the money supply is. If it's not turning over, if there's not lending and spending the people, aren't chasing the goods that you're not going to get the inflation. And so, but velocity is a, as you just described it, it's a psychological phenomenon. It, how do you feel? Do you feel prosperous?

Do you feel competent? Do you want to go out and. Buy a dinner someday or drink someday or whatever, uh, buy a new car set or do you feel cautious? Do you feel concerned? You, so your neighbor lose her job. You're worried about losing your job, et cetera. So you say more well, the evidence is people are saving more we're in the liquidity trap.

Saving was sort of, kind of working his way up from 5% to 8%. Uh, in, uh, April is 33% and Nao was still 25% in June of 17%. So savings can be, yeah, a good thing. But in the long run, if you have production, so investments, and that's a big question, but in the short run, the savings come out of consumption. I don't make money.

I'm either going to save it or spend it. Well, if I say more, I'm spending less. So all the signs are pointed deflation. If I can sit at one place yeah. And they can print all the money they want, it doesn't mean they're going to get it. So despite the zero rate environment, Jim, you're saying that people are still saving the evidence.

So they're not just still SIM you're right about that. Danielle they're saving more than ever. These are like Chinese levels of saving stories. Now it makes sense, right? If you washed your job, Um, you're going to, Hey, I gotta pay the rent. I gotta pay the mortgage or the kids' tuition or healthcare. So I'm going to say more.

I'm going to cut out, you know, uh, dinners and vacations and, uh, club memberships and discretionary items. If you didn't lose your job, but your neighbor did, you might be wearing one. How do I know I'm not next to, you know, look at the companies who've gone bankrupt, you know, appear on Neiman Marcus, JC Penney Brooks, brothers, Gold's gym.

I mean, the list goes on and on. So, so let me ask you this, Jim, the last time we spoke was in April, um, is it safe to say you're more worried today than you were then or even say a year ago? Uh, well now a year ago I was saying that the economy was weak in my last book. Uh, aftermath came out in, uh, July, 2019.

So it's just a little over a year old. It's not going to get rid of five years ago that book's a little over a year old. Go look at page two 88 to 91. I talk about pandemic. I said a hundred percent chance, uh, it, or two other scenarios. So a hundred percent chance. One of them happens in the next three years and pandemic was on the list.

So, uh, and I also talked about civil unrest and, uh, armed militias in the streets, which was saying every night. So everything is happening now. I forecast in my book aftermath, which came out in July, 2019. You can just go look it up. So my new book, uh, the new grade depression is going to take the story forward and tell you what's going to happen in the next couple of years.

But the deflation story is not new. Danielle it's been persistent, uh, and it's getting worse. The fed does. I can tell you how to cause inflation 15 minutes, but unfortunately the fed kind of, uh, forgot how to do it.