Welcome to the deep dive. You know, if you felt
recently like the world's major news stories
just aren't making sense on their own. Yeah,
things like central banks hoarding gold on one
hand. And then the actual cost of a Thanksgiving
turkey on the other. It feels disconnected. It
does. Well, today we're taking a whole stack
of sources, global finance, domestic politics,
the stock market, and we're going to connect
those dots. Our mission is really just to give
you that shortcut to understanding the big structural
cracks that are forming. And we are starting
at, I mean, the highest possible level of risk.
It's a genuinely dramatic thesis from our sources.
Okay. Economist Daniel LaCalle argues that we
are witnessing the structural decline of of developed
nations fiat currencies in real time. And he
says, you know, the story isn't new. It's actually
depressingly predictable. History just shows
that whenever governments exceed their credit
limits and ignore the warnings, confidence is
lost and the currency eventually collapses. That
is a staggering claim to start with. The idea
that we're leading a declining empire of fiat
power. All from self -inflicted wounds. OK, so
let's unpack that. In our first segment, let's
get into this global debt sinkhole. When we talk
about global public debt hitting, what, $102
trillion, what's the fundamental problem there?
It's a crisis of credibility. I mean, that's
the core of the argument. Credibility. Yeah.
Public debt, especially for a country that can
print its own money, is basically just currency
issuance. So when the debt gets reckless, the
credibility of the issuer, the country itself,
it just fades fast. Then $102 trillion is, that's
a new record. Yeah, and the historical record,
yeah. And the sources, they're not shy about
pointing fingers, are they? They highlight bitonomics
in the US as a case study. A very clear one.
The administration has run record deficits, increased
spending by over $2 trillion. And this was during
a strong recovery. Exactly. That's the core frustration.
Instead of, you know, tightening the belt during
a good time, the spending just accelerated. And
that kind of imprudent spending means developed
economies have now breached three crucial limits.
OK, this is where it gets really interesting.
Tell us about these three economic thresholds.
Absolutely. So the first is what they call the
economic limit. The economic limit. It's a functional
limit. Once government debt passes a certain
point, piling on more of it just, it stops fueling
real productive growth. You get diminishing returns.
So the GDP numbers might look OK. They might
look fine on paper, yeah. But underneath, productivity
stalls, real wages stagnate. And people just
don't feel any more prosperous. You're just trading
future stability for accounting tricks today.
So we're paying a higher price for less and less
real growth. What's the second limit? That's
the fiscal limit. As the debt gets bigger, the
cost to finance it, the interest payments just
explodes. Right. That plus mandatory spending
on entitlements starts to crowd out everything
else, productive investment, infrastructure.
So even if inflation disappeared tomorrow, we'd
still be in a bind just paying the interest on
the debt. Precisely. And that brings us to the
final limit, which is the one we all feel right
now. The inflationary limit. Exactly. This is
when all that money printing to finance government
spending just completely erodes public confidence.
Cumulative inflation starts to outpace wage growth.
And, well, you get the affordability crisis we're
living through. The sources even call it a de
facto gradual default, don't they? They do. It's
a subtle tax on... anyone who saves money. So
if these major nations are crossing these red
lines how are the world's central banks reacting?
They are acting decisively. We're seeing what
the sources are calling an unprecedented wave
of gold purchases. They're running for cover.
They're running for an asset that is nobody else's
liability. The data is clear. According to the
IMF, the U .S. dollar share of global reserves
is drifting deans toward the high 50s. So gold
is actually overtaking currencies. For the first
time in 40 years, yeah. Gold has overtaken both
the U .S. dollar and the euro as the main reserve
asset for some central banks. The numbers are
huge. How huge? Net buying was over 1 ,100 tons
in 2022, and it stayed above 1 ,000 tons in 23
and 24. That is more than double the average
from the previous decade. Astonishing. But wait,
the dollar still accounts for what? 89 % of global
transactions. It does. So is this gold buying
just a hedge? Or is it a real immediate threat?
It's an important question. It's not an imminent
collapse, but it is a major structural shift.
Right. The buying is driven by worries over inflation,
financial stability and saliency. That's the
key word. They are just not comfortable holding
their peers debt anymore. So we're moving toward
a hybrid system system. Yeah. The dollar is still
king for transactions, but it's going to coexist
with a much bigger allocation to gold and probably
decentralized crypto, too. The empire is still
there, but it's changing. OK, when we talk about
one hundred and two trillion in debt, it can
feel abstract, but the impact isn't abstract
at all, is it? Which brings us to our second
segment, inflation, politics, and the very charged
topic of Thanksgiving dinner. This is where the
macro instability lands right on the kitchen
table, and it created this really weird contradiction
in the data this holiday season. Right, you had
big retailers with these aggressive promotions,
dinner bundles for 20 bucks, 50 bucks. And the
American Farm Bureau Federation claimed the average
dinner was cheaper for the third straight year,
around $55. Which sounds great. Like inflation
is totally under control. But that was masking
a huge price problem with the main event, the
turkey. Absolutely. The fine print is everything.
Avian Flu has just... decimated the U .S. turkey
flock. It's at its smallest size in 40 years.
Wow. So wholesale turkey prices shot up roughly
75 percent year over year. The retail price for
a typical bird jumped over 25 percent. About
31 bucks. So the promotions were basically a
loss leader to hide the fact that the core ingredient
was way more expensive. Exactly. And this contradiction
became a huge political football. Kevin Hassett,
a prominent economic policy chief, he went out
and defended the claim that a big retailer's
meal package was cheaper. But it wasn't the same
package, was it? Not even close. Critics jumped
on it immediately. The lower price was because
it had fewer products, smaller sizes and 15 percent
generic brands. It wasn't an apples to apples
comparison. So why would he defend something
so obviously flawed? Does that just show how
desperate the political need is to to declare
victory over inflation? It speaks volumes, doesn't
it? Hassett tried to deflect. He called the criticism
elitist, said his critics acted. as if having
a generic something is a crime for ordinary folks.
Trying to frame it as being out of touch. Right.
But the pushback, a lot of it from just regular
people on social media, wasn't elitist at all.
It was just... Factual. Yeah, you can't claim
prices are down if you're not comparing the same
things. A $10 savings in a smaller bundle doesn't
solve a two -year cost of living crisis. That
is the crux of it. The whole conversation is
just so polarized now. Even something like the
traditional turkey pardoning ceremony. The sources
remind us. President Trump used that moment,
pardoning Goblin Waddle, to suggest a Ukraine
-Russia peace deal was very close. And to criticize
his predecessor, every single moment is a political
platform. That's a powerful segue. Let's move
from that political capital to capital markets
in segment three, because they also show this.
Illusion of strength. hiding deep fragility.
Total illusion. I mean, the indices have had
a massive rally since April. S &P 500 up 33 percent,
Nasdaq up 46 percent. It sounds like euphoria.
It looks like euphoria, but it's so concentrated.
It's almost entirely AI and the mega cap tech
stocks. If you just look at the headline index,
the drawdowns have been tiny. But that is not
the real story. OK, so what's the risk hiding
under the surface? The devastating drawdown for
the average stock. While the index was flying,
the average member maximum drawdown was Well,
it was huge. For the S &P 500, the average stock
fell 18 percent at some point. And for the Nasdaq,
it was a punishing 41 percent. Wow, 41 percent
for the average Nasdaq stock. That's a bear market
for most of the economy that nobody even noticed.
Exactly. The source is called this lack of breath
helitosis. It looks healthy on the outside, but
it's rotten underneath. Only 17 percent of S
&P 500 stocks actually outperformed the index
over the last six months. A very narrow, very
fragile advance. And that fragility has triggered
a really stark rotation recently. The leadership
that drove the market all year just... vanished
in November. A huge reversal. A huge reversal.
Information technology, the runaway winner for
most of the year, suddenly became the worst performer.
It dropped almost 9 % month to date. And what
took its place? Health care. It was a major laggard
all year. Then suddenly it jumped to the top
spot in November, up over 6%. So investors are
rotating out of that narrow AI trade and into
more defensive sectors. Health care, utilities,
energy. Correct. Utilities and energy now have
the strongest breadth. It suggests the market
is getting wary. The tactical advice from this
is to focus on factors, fundamentals, over just
pure momentum. Which is funny, because you recommend
fading taking profits in unprofitable small caps.
Yet the unprofitable 40 % of the Russell 2000
is up nearly 46 % since April. It just shows
that these speculative pockets still exist. But
they're vulnerable. Incredibly vulnerable. When
you see a rotation this sharp, you have to focus
on quality. You know, earnings growth. reasonable
valuation, companies that can actually withstand
these huge macro shifts. OK, let's pivot now
to our last segment where we see that same zero
-sum fragility playing out on the domestic policy
front. The health care gridlock. Right. And this
is all about the Affordable Care Act subsidies.
A looming political time bomb. It really is.
Yeah. These enhanced ACA subsidies, they're set
to expire soon. If they lapse, premiums could
just skyrocket for millions of people. It could
throw the whole insurance market into chaos.
And renewing them needs bipartisan support to
get past the Senate filibuster. But the whole
thing has hit an ideological wall. A massive
wall. And that wall is abortion restrictions,
which the GOP sees as a red line. Absolutely.
A broad swath of the GOP says this is a must
-have. They are demanding that any insurance
plan getting a federal subsidy be prohibited
from covering abortion services. So applying
the Hyde Amendment to the entire ACA marketplace.
That's the goal. And it's a powerful political
weapon, especially now. The expiring subsidies
give them a ton of leverage over what is basically
a must -pass spending item. A high -stakes moment,
for sure. It is. And the White House tried to
just skirt the issue entirely. Their proposal
had some conservative limits, like a high -income
cutoff for subsidies, but it completely excluded
the abortion issue. Which ironically just made
it a bigger problem. Precisely. The silence was
meant to avoid attention, but it just focused
the opposition. Meanwhile, the Democrats are
equally dug in. They say any abortion restrictions
are a non -starter, so you have paralysis. And
this gridlock has immediate real -world consequences
for states right now. It does. Currently, the
ACA let states decide on abortion coverage. 25
states either allow or require it. If the GOP
restrictions pass, those states would have to
change their laws or risk losing billions in
federal subsidies. It shows how hard it is to
solve a basic funding crisis when it runs into
these non -negotiable political and moral lines.
It really does. It feels like everything we've
looked at today, global finance, consumer costs,
the market. domestic policy, it all points to
the same theme. A structural lack of resources.
Exactly. Whether those resources are fiscal credibility
or political capital or even just market depth,
there's not enough to solve the big problems.
That's a synthesis we're left with, isn't it?
We've gone from the risks and fiat money and
the flight to gold, to the painful inflation
hitting your grocery bill, to the fragile equity
market, and finally to total paralysis and core
domestic policy. All these systems are under
pressure at the same time. So let's leave you
with a provocative thought. that really ties
all of this together. If that massive global
public debt and the loss of confidence in fiat
money, if that reflects a kind of structural
exhaustion of national resources and credibility,
how does that fiscal unsustainability then stop
governments from being able to navigate major
political crises? Think about it. whether it's
securing a complex international peace deal,
like the Ukraine -Russia situation mentioned
in our sources, or breaking a critical domestic
stalemate like the ACA subsidies. Every single
solution relies on future funding promises. And
political compromise. And political compromise.
So what happens when the political capital, the
willingness to give ground runs out at the exact
same moment, the fiscal capital, the ability
to actually pay for the solution? You are suspended
in a state of high fragility