| Adam Taggart: …The question I’m trying to get to with you guys, is, would people be better off not just racing to kind of get out of other fiat currencies today into something real? Would it be worthwhile at least keeping some dry powder around, so that if there becomes a time where valuations are lower and more sane, cash is strengthened, you can be deploying that fiat currency at a better exchange rate? And then moving more into assets that might survive the long course of what’s ahead. Jon, let me ask you first.
Jon Najarian: Well, as you guys may have guessed from the panel or from the talk I had this morning, I’m a big supporter of cryptocurrencies. And one of the reasons is that, I see the pressures that you guys are talking about coming. And I think this is a significant driver, privacy as well, I think, are significant drivers for cryptocurrencies and out of fiat currencies. And back in the green room, we were talking about, you can get 5% on Bitcoin, 12% on Polka Dot, all these different coins, leaving them on various exchanges. They will pay you, give you part of that lending process that they use to create markets, because you have to be able to have longs and shorts in the markets.
If you can only buy, the market goes parabolic until it breaks and then it falls apart. So, you have to have people who are there to make markets and some of those people need to borrow to be able to do that. And so, these cryptocurrencies, like the ones I described or Solana or any of these, they’ll pay you 400%, 500%, 1,200%, more than you’ll get in your bank account. And obviously, there’s a lot more demand on that side than there is for cash, for fiat. Otherwise, you’d be seeing rates a lot higher for fiat.
So I think right now, obviously, the Fed has put its hand really hard on rates, held them very low for too long. And this is coming at a price. And eventually, that price will be that, to Danielle’s point, when they need to do something, they won’t be able to do something. Because they won’t be able to address inflation, when they’ve got to worry about the inverting of that 10-year or 30-year.
Danielle DiMart...: That’s right. And there’s no "not QE" coming down the pipeline right now. So, the optionality that was there, I think, in 2019 is no longer there...for the Fed, so some of the tools in the toolbox. That’s one of the reasons that they’ve been so aggressive in institutionalizing and formalizing things like the reverse repo facility, things like the standing repo facility, is that the Fed is concerned that they’re going to be out of ammunition at the wrong time.
I want to add something though, here, because it is somewhat anomalous when you talk about car sales being down for six months in a row, that’s what Cox Automotive is suggesting for the month of October. So, six consecutive months of falling car sales in U.S. history is a 99.4 percentile occurrence event. We saw it in…in March and April of 2008. And in February of 2009. Those are the only three months in US history during the great financial crisis that we saw six back-to-back to back months. So why the hell is the stock market so high?
One thing that we have to bear in mind right now is that on February 19th 2020, the U.S. corporate bond market passed $10 trillion as a milestone. Now, we’re...at about $11.5 trillion. So, you can’t count out the power of all forms of liquidity, especially share buybacks that are being financed by debt. And that’s right now one of the reasons that a lot of people I think are scratching their heads and saying, “What’s going on here?” You’ve got the Fed and corporate America really pumping liquidity into the stock market. And that’s one of the reasons that the bond market and the stock market are in such disagreement right now….
Jim Rickards: …Yeah, you should have dry powder. The question is where do you store it? But I find forecasting Fed policy is the easiest thing I’ve ever done because they can be relied upon to blunder every time. They just figure out the worst thing to do at the worst time…
Adam Taggart: …All right, so I want to move to probably the biggest question, I think, that is on the audience’s mind here, which is, in the long run, looking at the long arc here, what we think is coming and what we think that will do to the purchasing power of the world’s fiat currencies. Where is a better place to store value in the long run? If you’re going to be trading your fiat dollar for better stores of value over time, what are some of the ones that you guys most prefer?...
Russ Gray: ...I’m a big fan of gold. I’m warming up to crypto. I’m starting to get it because I think that…if you go back to the earlier talk and maybe this will help some of you out there because again, this is heady stuff, at least for me. But when you look at all these currencies, I look at it like a ship on the sea, call it maybe the Titanic and you got the waterline, right?...So, you got Zimbabwe and all the failed currencies. You get the dollar, the strongest currency, the world’s reserve currency up at the front. And what happens is when the currencies start to fail, those people will run in to the top of the boat, and it actually creates more demand and you have a temporary rise. But then, the ship is still sinking. All the fiat currencies are failing. And so you get these dinghies on the side, like gold, and maybe crypto, diamonds, anything real that Jim talks about in his books, and....
Danielle DiMart...: Well, I’m a firm advocate of carbon? Yes. Thank you.
Russ Gray: And yeah, diamonds, yeah. So people, when you start seeing people jumping into the boats, you start seeing them looking for an escape hatch from a sinking ship. So to me, the rise of crypto is just a demonstration that the people are trying to find a way out of the system….
…And so liquidity, if it’s not dollars, especially dollars in the bank with counterparty risk, then to me, it’s something real, something tangible, so I think gold has got to be at the top of that list. You could make the argument for energy, if you own it the right way. Farmland would be something. Anything real and essential that people need. Things that transcend financial markets, that transcend currencies, that transcend governments. If they get this great reset, at the end of the day, as long as you have the right to own private property and you own something that’s real and essential…you may not be a winner, but at least you won’t be a loser. If everything is denominated in stuff that is passing, is temporary, like the ships that sink, and they find all the crumpled up paper that’s worthless or contracts that are worthless, but they find a treasure chest of gold that still has value today….
Adam Taggart: …Great. All right, Jon, I can’t imagine what you’re going to add to this list.
Jon Najarian: Well, and I have a much heavier stock portfolio than anything else. I have stocks, I have VC investments, venture capital investments and things like that. And I have probably, it’s up to about 12% now in crypto and for all the reasons that I’ve mentioned. And one of them is, by the way, that there are plenty of ways now, there are very creative people just like on Wall Street, some of them came from Wall Street, some of them are using the same technology or same methods that Wall Street used.
And that is for instance, the Winklevoss twins with Gemini, they have said, “In the future, no one will sell their Bitcoin.” I don’t know if you’ve heard them say that, but I have, at Bitcoin Miami, they said it. And what does that mean? That means that people will borrow against their Bitcoin rather than selling it. Why? Because then of course, you don’t pay tax, because you’re borrowing against that asset and...
Russ Gray: Real estate investors have been doing that forever.
Jon Najarian: Exactly, exactly. So why would you sell that Bitcoin and give half of it to the government? Half of your gain to the government? So instead, you take a loan against your Bitcoin. Yeah, you don’t have any more upside of that particular swath of Bitcoin that we’re talking about, whether it’s $100 or $10 million, you would be able to borrow against it. You don’t have upside on that now, but now, you have, especially if you do it in a corporation, a legitimate business deduction. The interest that you pay for that loan that you’ve got now and you don’t have a taxable event… But so, crypto, my crypto portfolio is probably 12%. Stocks are probably and it will shock Danielle, but probably like 60% in stocks...
Danielle DiMart...: Mamma Mia.
Jon Najarian: ... right now. And then I do have energy, I have property. And gold has slipped down from, it used to be 10%, now it’s about 4%.
Russ Gray: And do you have mortgages on your property?
Jon Najarian: Yes, sir.
Russ Gray: Yeah, so debt is something that’s not a bad thing to have.
Adam Taggart: Talk about that, Russ.
Russ Gray: …If the debt comes with self-services between the tax breaks and the rental income, then it becomes smaller as the currencies fail. So, if you have assets like gold and other things that are going up denominated in dollars relative to the debt that is securing a valuable asset, like an income-producing piece of real estate, then over time that debt shrinks.
Adam Taggart: Danielle, I want to let you close just on a conversation you and I had a couple of days ago. A lot of us tend to think about the central banks as sort of monolithic. We may think of them as a bit of a clown show, as Jim was saying earlier, but we kind of have a sense that they’re all kind of lining up behind a central leader and sort of like the Borg, they will just monolithically decide what to do and do it. But Danielle, talking to you, it sounds like it’s much more like Game of Thrones at the Fed these days. Can you just give a quick answer to that?
Danielle DiMart...: I mean, I was in the right place…I was in the land of Machiavelli. And what is playing out at the Fed right now makes what happened when Geithner and Richard Fisher and Charlie Plosser and Jay Powell, when he still had a spine, it makes that look like child’s play. We’ll talk more about it this afternoon. But what is going on inside the Fed right now is absolutely biblical. And then you have to put that in the context of the fact that they’re the most powerful organization on planet Earth.
So, it is beyond Game of Thrones…
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