0:05 - Market Conditions Overview
1:46 - Doge and Tariffs Impact
6:35 - Tariffs vs. Income Tax
15:44 - The Role of Safe Havens
20:21 - The Boomer Generation's Influence
20:30 - Resistance to Disruptors
21:05 - The Nature of Disruption
23:13 - Long-term Economic Outlook
We delve into the current market conditions that are affecting investment portfolios, signaling a moment of reassessment and potential upheaval in the economic landscape. I emphasize that these reflections are not to be interpreted as financial advice but rather my personal observations on the intertwining dynamics of emerging trends like Dogecoin and tariff policies, which I believe are both pivotal in shaping our financial future.
I discuss the inherent volatility that often accompanies economic shifts, particularly noting how past transitions saw industries falter before new opportunities blossomed. For instance, when horses and buggies were replaced by motor vehicles, substantial economic reallocations caused short-term losses, a trend likely to repeat itself as existing financial systems undergo restructuring. This transition is likened to discovering that a steady source of profit appears to dry up—there's discomfort before potential benefit as investments realign toward more innovative and sustainable avenues.
The discussion extends to Dogecoin’s role as a metaphorical diet for government spending, proposing that reallocations away from traditional expenditures towards savings and debt reduction have profound implications for capital distribution. As we potentially save hundreds of billions, this capital can enhance domestic investment and shift economic power from ineffective agencies to individuals and businesses prepared to innovate, fostering an environment ripe for growth, albeit with initial uncertainty.
Further, I touch on the tariffs as a systemic approach to transitioning from income tax dependency to a model that prioritizes domestic production and consumption. This historical perspective prompts a crucial analysis of how these changes can stimulate various sectors while evoking uncertainty in others, as the domestic market adjusts to the augmented costs of raw materials due to tariffs while simultaneously seeking creative solutions.
An important point made is the psychological reaction of investors to economic shifts—a phenomenon resembling health changes. Just as individuals endure discomfort when committing to healthier lifestyles, economies often experience a painful adjustment period before emerging stronger. This voluntary and strategic disruption in the economy is set apart from organically inflicted downturns, as it hints at a conscious effort towards enhancing economic health rather than merely surviving through crises.
With the conversation turning to the generational impacts of such economic transformations, I explore how traditionally comfortable positions can be threatened by necessary upheavals, with younger generations often leading the charge toward innovation while older demographics may resist such changes due to fear of losing stability. Disruption, however, is not inherently destructive; instead, it can provoke resilience and adaptation among businesses and consumers alike.
As I conclude, I underscore the unpredictability that accompanies so significant a reallocation of resources, yet remain optimistic about the long-term benefits that can arise from these challenges. The market may face initial turbulence, but addressing inefficiencies and reallocating capital signifies a step towards revitalization rather than prolonged stagnation, hinting at recovery and potential for economic reform that prioritizes sustainability and innovation.
[0:00] Morning, everyone. Just a little bit here and there talking about market conditions.
[0:06] As you may have noticed, your portfolio might be taking a little bit of a dive at the moment. And we are in the deep breath, last breath territory of rescuing capital. So I wanted to share with you my thoughts, usual caveats. Of course, I'm not an expert. This is no, this is not financial advice. do your own research, make your own decisions. These are just my sort of obvious foolish ambitious thoughts on the entire situation. So what I think is going on as a whole is two things, doge and tariffs, and they're kind of related. So one thing that's important to understand about the economy, of course, is that when there's a lot of economic changes, there are always losses before there are gains, right? So horse and buggy manufacturers, there's a lot of investment in that. When cars are invented, horse and buggy manufacturer stocks go down in general before the automobile stocks go up. So there is loss before there is gain because you've got a lot of capital allocated to the existing structure of society.
[1:21] And when that structure changes, is capital has to reallocate. There's certainty in what was, there's uncertainty in what will be. And so you're moving from a place where you know you get profit to a place where you don't know if you're going to get profit. So you think of a well that you go to and then the well dries up. Well, maybe the well you go to find the new well, it will be better, but for sure, you're going to be thirsty for a while.
[1:47] So a doge and tariffs and to a smaller degree ai because that's been coming for a while but the acceleration in ai is extraordinary i mean people are creating entire games in an hour which used to take six to twelve months at least and so.
[2:11] With Doge and with tariffs, so Doge is putting the bloated state on a diet. Now, not a huge diet and not a strict diet and certainly not a crash diet, but it is putting it on a diet. And what that means is that hundreds of billions and perhaps in the long run, trillions of dollars will be reallocated from existing government spending. And that is going to change the economy. So with the money that's saved, let's say that the money will be used to pay off the debt. Okay, so that moves money away from massive NGOs and all of the other crap, bullshit, and nonsense that has characterized Doge spending. It moves it from there to banks, to people who hold bonds, to just the sort of grab bag of lenders that have given money to the US. China, of course, is a huge one. And so what that means is that the money is going from economy and liberty destroying NGOs to money people.
[3:16] So the money people, what are they going to do with that money? Well, they're going to have to do something with that money and they're going to have to invest that money in something. So what that means is that there's going to be a flood of investment if the debt is paid off. If some aspect or even if the deficit is reduced. Or yeah so if the money goes to the money people then the money people have to invest in something that's going to create economic growth if the savings are result in tax cuts then the government forces spending on particular things and there's a certainty in that right there's a sort of understanding of that in this sort of existing economic configuration when the money is no longer flowing to NGOs, to crap science, to like all of the nonsense, there's a social engineering foreign aid, when the money no longer flows there, but rather it is left in the hands of the American taxpayers. Well, it's easy to predict how the NGOs are going to spend the money. It's much harder to predict how the American public is going to spend its money, right? Because one is a forced spend, or at least it's a forced allocation, the other is a voluntary allocation. It's sort of like if a woman is forced to get married, then you know who she's going to marry. If she's no longer forced to get married, you don't know who she's going to marry. So there's an uncertainty factor there.
[4:42] So, Doge, reducing government spending, puts the money to varying degrees into more voluntary channels. Let's say it goes to the money people. Well, if it goes to the money people, you don't know exactly how the money people are going to spend it. If it goes back to the American taxpayer, you don't know how the American taxpayer is going to spend it. If it stays with the NGOs, you have a fair certainty of how they're going to spend it, right? Because the NGOs have a history of spending and a lot of their books are kind of public and so on. So who knows, right? You're moving from a place of relative certainty to radical or significant uncertainty, and that is going to cause the economy to lose before it gains, right? I mean, if you've ever gone from a place of physical complacency to exercise, it feels bad before it feels good, right? You ache And there was a very funny three's company many years ago with John Ritter who went to a gym and couldn't even walk standing up afterwards, right?
[5:45] So anything you do that is going to improve your life when you've got bad habits is going to feel bad before it feels good, right? If you go on a diet, you feel hungry, tired, irritable, and don't sleep very well until you start to feel the health benefits months down the road. You're quitting smoking, you feel bad, and then you feel better later. You know, that kind of stuff, quitting drinking, same thing. So when you have bad habits, changing bad habits is a trough before there is an increase. And the addict, of course, looks at the trough, imagines it's going to go on forever, just keep crashing and so on. Whereas the person who's more sane and reasonable says, well, I'll feel bad for a while and then I'll feel better, right? So if you have a sort of chronic health issue, like if you've got a bad knee, right, then you go and get it dealt with and you'll feel, let's say you get your knee replaced, well, you're going to feel a lot worse before you feel better in the long run.
[6:35] So that reallocation. Now, the tariff thing is interesting as well, because the tariff thing, again, in my obviously amateur view, the tariff thing is it is signals a desire to move away from income tax towards tariffs, which was, of course, the original American model. Up until the early 20th century, the original American model was like 98.5% of federal money came from tariffs, and there was no inflation. So, moving to tariffs.
[7:05] Is, tariffs are better than the income tax. I mean, if you have to choose between the income tax and tariffs, you would choose tariffs, thank you for the tip, you would choose tariffs every day of the week and twice on Sundays, because tariffs are going to stimulate domestic production and consumption, and it makes the tariff-imposing country stronger economically. Now, again, I'm a free market absolutist in a state, in a stateless society, in a stateless world, there would be no tariffs. So I get, I mean, I get all of that, but economic and ideological puritanism has not led to a freer world. So you're going to, you got to be able to, you got to be able to leverage, right? I don't like threats as a whole, but threatening to quit can get you a raise. So, you know, that's, that's, that's kind of important, right? So the tariffs will stimulate domestic production.
[8:05] But what kind of domestic production will it increase? Well, that's hard to say. Now, of course, if it's like you put these big tariffs on sugar, then sugar manufacturers can increase. But a lot of the tariffs that are going up are on raw components, right? So if you put a tariff on steel, then for sure, steel production domestically will probably go up.
[8:31] But there's a lot of reallocation because steel is used in so many different things. What are the ripple effects, right? And the other thing too, of course, with tariffs, sometimes the price of raw materials, if that's what the tariffs are on, goes up to some degree, but then people find workarounds, right? So if the price of steel goes up enormously, people will find some way of working with less steel that stimulates a lot of innovation. But where to what degree because nobody knows nobody knows the geniuses who are out there right like when the price of uh some let's say gold when the price of gold goes up it's staggered because when the price of gold goes up people say oh my gosh we've got these this gold jewelry that's been sitting in our basement we kind of need our money and you know it wasn't worth even digging it up and getting it appraised and sold but now the gold has gone up 50 you know so all of this stuff emerges out of the shadows and nobody knows about it you know grandmother's jewelry collection has been sitting in the basement forever is it worth selling well nobody knows right so so it summons a lot of brilliance a lot of workarounds and it summons other ways of dealing with the issues and that can't be predicted that can't be predicted now of course a lot of people are over leveraged as well so when the price of things goes down.
[9:53] Then they have to sell other assets to cover their losses, right? So this is why there generally tends to be a ripple effect. And normally when there's an economic contraction or depression or recession or something like that, people flee to safe havens, right? They flee to bonds, they flee to gold. I think the wise among people flee to Bitcoin, right?
[10:13] But that's when the economy is tanking because like for non-chosen reasons, right? So some general malaise or exhaustion or you know in in the uk when i was a kid it was like all of these massive coal strikes and all of that just crippled the economy so when the economy is going down without an upside right then people flee to safe havens right bonds maybe cash uh and and precious metals bitcoin crypto so people flee to those but but this is a different situation this is an so think of um you know betting on a guy dying right i mean this is a dark way of looking at it but i think it illustrates it fairly well so let's say you're betting on a guy dying and because you're betting on a guy dying which i suppose is life insurance as a whole but because you're betting on a guy dying when he gets really he's really unwell you monitor his vitals let's say he uploads it to the cloud and you can see all of his vitals and you know his his uh stress levels are through the roof uh his he's he's he's just doing bad his blood pressure is up he's just doing badly now.
[11:25] If you're betting on him dying, you might be like, ooh, he's going to, because it's not chosen ill health, right? It's not chosen bad things, right? It's just his system seems to be crashing. So you're going to bet that he's going to die. So then you're more likely to bet that he's going to die. If, however, you find out that his vitals have changed considerably because he's quit drinking, he's quit smoking, he's taken on a personal trainer and a nutritionist, he's losing weight and he's exercising a lot and so on, well, then his vitals look bad in the short run. His blood pressure is up, his cortisol levels are up, you know, his heart is changing in its rhythm considerably, but not because it's trying to fight its way through sewage tank blockages in the Widowmaker, but because he's going to the treadmill and so on, right? So his sleep is poor, his heart rate keeps changing because he keeps exercising. So if it's involuntary change in health data, then it's probably a very bad illness or dysfunction in the body. However, if he's voluntarily changing his health habits, diet habits, whatever it is, then his stats, his vital statistics, asterisk style are going to be all over the place.
[12:39] But it's because he's chosen it. So the fact that it's not an involuntary tank in the market, but a voluntary and top-down and chosen reallocation of resources in the economy through doge, through tariffs, and so on, means that it's complicated. You're not necessarily going to go to safe havens if the economy is going to experience some pain.
[13:08] And then get better, right? So recessions kind of have to, it's an organic way of working out real dysfunctions within the system, almost always to do with force and fraud, right? It's an overabundance of force in terms of unions charging too much, or an overabundance of health and safety, or environmental protections, quote protections, or a wide variety of crazy tax things or massive debts or whatever. So when the economy is just going through its paroxysms because of deep structural issues, then you kind of have to go to a safe haven. However, if the economy is going through paroxysms because people have voluntarily voted for, chosen, and are very much behind massive reallocations away from inefficiencies to efficiencies, then the whole thing, there's no safe haven because you don't want to lock into a safe haven, first of all, you don't exactly know how far down things are going. This is sort of unprecedented.
[14:11] This is one of the largest reductions in government spending outside of wartime. One of the largest reductions in government spending and one of the like voluntarily imposing tariffs as a negotiating tactic to reduce tariffs as a whole, which I think will be the long-term is a long-term goal this has not been done in u.s economic history and this is sort of one of the biggest capital reallocations in a modern economy outside of, the end of war so.
[14:47] There's not any particular safe haven that people are going to flee to.
[14:54] Because an economy is when a ship takes on water and it might sink, or it's going to get real low in the water, and nobody knows exactly why. They've got to figure out where the hole is in the water. But if somebody is like, we have to repair this hole, we have to repair this hole in the ship, so we're going to take on water because that's necessary, to fix the hole inside of the ship. Well, if nobody knows why the ship is leaking water, and then people might get in the lifeboats and go away. But if people are like, no, no, no, they're taking on water and they've got a plan to deal with it because they want to fix the hole in the ship and the only way to do that is to take on water, people are less likely to head for the lifeboats. But there's a lot more uncertainty, right? So safe havens are uncomfortable in the way that lifeboats are uncomfortable. They are a refuge and nobody wants to do it unless they have to.
[15:44] So I hope that makes some kind of help And it's not going to be a long show, but, uh, I did want to sort of share my thoughts about it in that this is a very much a different situation than we've seen before with the economy. And, uh, again, none of this is any kind of particular useful, or again, I don't give investment advice or anything like that.
[16:20] But i think that's what's going on with the economy all right uh if you have any um obviously if you find this helpful tips uh very much welcome uh somebody says uh hi steph i saw your poland documentary which was really impressive and informative do you think poland is heading to a different direction even though even though the eu pressure well i mean the eu this is another huge factor that is happening because of Trump. And this is one of the reasons why a lot of moneyed interests were anti-Trump, because the existing aristocracy of money is based upon the existing configuration of the economy. So, when, with Trump is a classic disruptor, right? He's a classic disruptor and classic disruptors harm the aged and benefit the young, right bitcoin harmed the aged or the age the old it harmed the boomers and it benefited the young so all disruptions are youth beneficial and old negative all disruptions right.
[17:33] So, most money clusters and is invested in current economic configurations. However, to save the economy requires radical change. Now, normally, in the past, people in the economy would be perfectly willing and happy and satisfying to take the hits to benefit the next generation. With the boomers, and it's hard to say because the younger generation is not there yet, But the boomers are the first to break the age-old sacrifice for the young. So the boomers were the first to basically say, to heck with you, we're going on cruises, we're going to spend all our money, and don't you dare touch our social security, even though it is destroying the generations, it is destroying the next generations and so on.
[18:25] So normally, if you go to the old in the general population and you say, you have to make some sacrifices on behalf of the young, then most people, most people would say, yes, that's okay. Like, I mean, if you, if there was a new mother, right. And she said, well, I'm going to put the baby in a soundproof room because I don't want to bother getting up at night. You would say, because I'm tired or whatever, then you would say, well, that's really selfish. That's really bad. That's really terrible. And it's going to be incredibly harmful if not fatal to the baby, right? So you sort of give, right, the young. Or if, you know, if there's a father who plays a bunch of video games rather than interacting with his children, you would say, well, it's kind of selfish. You're doing what's best for you in the moment, but you chose to have children. You should do what's best for the children.
[19:13] And the boomers, it's really interesting to me that the boomers don't care about their lineage that much. They don't care about the continuation of their bloodline because they are demanding that conditions be created, and they demanded in the past that conditions be created and now they're demanding that conditions be maintained that are very specifically destroying their bloodline and price of housing has to remain high because that's their piggy bank and they all of these other things that they demand and and vote for like if they're white boomers then dei by not allowing their grandchildren to get jobs or lowering their that possibility it's time you can't really have a family without a job so it It's sort of like winding down the whole bloodline, which is pretty wild to me as a whole and kind of incomprehensible, but whatever, that's sort of the way that it is. So the aged, normally the aged lose influence in society when they retire because they kind of go off and do their thing. it. But because of the concentrated voting block of the boomers, they have a vastly disproportionate power to configure society to their own often selfish and narcissistic preferences.
[20:22] So, sorry, long sort of rant here, but what that means is that.
[20:31] They, the boomers strongly resist disruptors. They strongly resist disruptors. I mean, the boomers are paranoid of AI, even though AI is generally fantastic. And the boomers are skeptical and hostile towards Bitcoin and so on. And they just don't like disruptors. Of course, right? Old industries don't like new industries. The horse and buggy industry did not enjoy the automobile industry coming in and elbowing them aside. So.
[21:05] So what's going on at the moment is that Trump, the tariffs and Doge, these are all disruptors and disruptors are uncomfortable to the old and exciting to the young, right? It's kind of like, uh.
[21:30] Snowboarding. I was trying to think, wakeboarding, surfboarding. It's like snowboarding. So snowboarding is exciting to teenagers, but you strap your average 65-year-old on a snowboard and push him down a hill. He's horrified, right? So the young love risk and excitement, and the old are more conservative. It's a traditional thing, right? So people resisted Trump coming in because Trump is a disruptor, but in every disruption in the economy that is chosen, and this is a chosen disruption, this is not an organically inflicted destruction, right? This is a chosen disruptor, this is a chosen disruptions, right? And disruption, of course, is close to destruction because it feels that way to the older people.
[22:13] So people knew that Trump was going to be a disruptor, which meant he would benefit the young and threaten at least the complacency and comfort of the aged. And so this is why young people tended to be pro-Trump and old people tend to be anti-Trump, because they just don't want... Like, everybody wants the world to freeze in the stuff they're best at, right? That's sort of inevitable. Yet the world has to progress, which means you have to consistently lose your skills. And of course, with AI, which is going to displace a lot of coders, well, that's going to be a huge change. I'm very glad to be out of A space that can be replaced by AI and in a space like philosophy, which can't be replaced by AI. I mean, AI can recreate, I mean, I've got AI bots for myself, but AI can recreate things from the past, but it can't generate new things for the future.
[23:14] So, the economy is going through a disruption phase, but it's a chosen disruption, which means that there's going to be temporary pain, but I think fairly significant long-term upside. And so, it might just be a matter of hanging on and holding on.
[23:35] So, all people are anti-AI. Yeah, for sure. For sure. Well, it's new. And, you know, I remember my mother referred to a CD player as a phonograph. You grew up with the phonograph right you know put a sock in it is you know put a sock in it which means keep it down uh comes from putting a sock in the old speakers of the phonographs anyway, any other last questions comments i just wanted to dip in and give you guys my thoughts because they were rolling around in my brain and i was hoping that it would be helpful and of use to you if you find what i'm doing of course to be helpful and useful free domain.com slash donate, to help out the show but yeah don't don't be uh don't be shocked that there's going to be a big change in the economy there will be more winners than losers but the losers get to vote first by selling off and there is no particular safe haven because it's going to be a shorter downturn in my opinion because it's chosen rather than a longer recession or depression type downturn and of course this is really after the amount of debt that was incurred through covid there is going to be a hangover and there needs to be a quick and decisive realignment of things but yeah it's it's painful. Don't eat seed oils before podcast.
[24:42] I actually, uh, I kind of forgot to eat today as a whole, 12 or 7 PM. And I forgot, I haven't eaten anything today. I've had one cup of coffee, but I kind of forgot to eat this morning because I was thinking about the economy. So I appreciate everyone dropping by today, a little short, but sweet show. And we will see you tomorrow night, of course, for the Wednesday night live. And if you find this helpful, freedomain.com slash donate, would really really appreciate it have yourselves a beautiful lovely wonderful day my friends lots of love from here i'll talk to you soon bye.
Support the show, using a variety of donation methods
Support the show
