The End Of Pax Americana

"And that's why some people believe that gold could ultimately go much much higher in the long term."

"But what's happening right now is the opposite. Job openings are collapsing, but the S&P 500 is still going way up. The market is now completely disconnected from the job market. Why? Well, because right now the market is betting that AI will increase corporate profits even if it gets rid of the jobs that created those profits. It's essentially betting that companies will continue to get richer even if their customers get poorer. Now, at some point, I think these two lines will have to reconnect. And it's going to happen one of two ways. Either AI will be so productive and gets us so many more jobs that it boosts the jobs line, which is basically the optimistic scenario, right? or AI is so productive that we won't need the human jobs. So, the lack of jobs drags the stock market line down to it. Either way, I think those lines will reconnect at some point, but no one knows which way it's going to go."

"But over the past 20 years, every single time, credit spreads blew out, meaning the cost of borrowing for companies went up. While the S&P 500 was still near its high and hadn't even corrected yet, a bare market followed every single time, three for three. And right now, credit spreads are blowing out while the S&P is still only in a minor pullback territory. The bond market is pricing in pain. The jobs market is also pricing in the same."

"But I would not be surprised if in the next 5 to 10 years, let's say, we see a huge capital rotation from stocks to commodities like silver, gold, and physical assets."

"So, basically, right now, interest rates on long-term bonds are going up, and that is bad. Why is it bad? Well, it's bad because the US government is now paying a lot more to borrow money than it was a couple weeks ago. And it's happening at the worst possible time because here's how bad the US financial situation is right now."

"Outcome number two, the war keeps going. Hermuse stays closed for another 3 to 4 weeks and that is roughly the point where economists say things start to break and they're very hard to reverse and they take a very long time to rebuild. We could see bond markets in the UK and Europe start to crack. Foreign holders of US treasuries are going to have to start selling their treasuries to pay for their energy and food. And that makes US treasury yields or interest rates go up. So the stock market finally catches up to what the bond market's been saying. Credit spreads blow out, corporate earnings get slashed, and you get a credit crisis that some people compare to 2008, right? job layoffs and all assets go down. There's very little places to go to protect yourself financially except maybe other than things like cash in the short term and gold in the midterm. But it's really hard to say. That's outcome number two."

"Outcome number three, the war drags on even longer. Long enough that bond markets start to break, right? Meaning yields or interest rates go up so fast the US government literally cannot afford to keep borrowing at those rates. And at that point, the Federal Reserve and the Treasury step in because they face a choice. Either let the bond market collapse, which takes the entire Western financial system with it, which of course they will not let happen. So instead, they'll pick option two, and that's what people are calling the big print or yield curve control. That's when the Fed injects liquidity into the system into an oil spike, which has never been done before in modern history. Every other time the Fed printed money, oil was cheap or going down. And what we know is that printing money with cheap oil just inflates asset prices. Printing money with expensive oil inflates everything, food, energy, rent, and every input cost in the economy. And if people can't afford to buy the basic things, that's not good for stocks. That scenario turns into what some economists call a hyperinflationary sovereign debt crisis and stagflation."