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soaring stock markets sound like an
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unambiguously great thing but that's not
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always the case says Our Guest today
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Ryan dce Ryan is our cryptocurrency and
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Tech expert and in today's article he
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argues that investors need to be worried
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about something called a market melt up
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instead of a market meltdown Ryan what
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could possibly be wrong with stocks
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going to the Moon hey Nick how are you
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yeah look you're right uh stocks going
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up doesn't sound like a bad thing but in
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today's piece I sort of tried to frame
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it as a catastrophic melt up and and
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what I meant by that was that H the
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prices of everything isn't necessarily
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good if if it is is happening in a
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situation where economic circumstances
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are bad and and what I was getting at
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was ever since the GFC in in sort of
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2008 and probably before that as well
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central banks and government policy
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makers have always reacted to various
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points of economic crisis by essentially
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money Printing and and look money
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printing is a catch all term and and I
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don't want to Define it too Loosely but
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it's different ways different methods
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they've got to inject uh money into the
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economic system which tends to have the
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following effect sorry of supporting
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asset prices now we saw that again in Co
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if you if you remember Co in 2020 um
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there was a a short sharp crash when
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when Co hit and everyone realized the
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economy was going to come to a
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standstill and yet if you remember the
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two years following from that markets
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had a massive melt up and this is what a
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point remember when people were sitting
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at home businesses were getting paid not
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to work um economic activity was coming
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to stand out and markets were going on a
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crazy run and you think about it how
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does that make sense it doesn't make
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sense from any economic fundamentals but
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what was happening then and what I think
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might happen shortly is more money was
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getting injected into the system that
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money finds it ways into markets it
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finds ways into property markets stock
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markets other assets like gold and
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Bitcoin and it does that because if you
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think about it the denominator from
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which we um Define our wealth is the
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dollar you know we say how much dollars
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if it used to be when I was going up oh
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if you were a millionaire that was the
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aspiration To Be A Millionaire now
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there's a lot of millionaires in
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Australia these days and it's not
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necessarily as rich as it once was I'm
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not saying it's poor by any means but
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being a millionaire doesn't mean you can
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sit back retire and and live your life
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comfortably anymore and so the point I
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was making in today's piece was that
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things are looking shaky and yet it
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depending on how central banks and
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governments reacts we might see markets
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move up even as things get worse so that
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was sort of the broad point I was trying
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to make yeah we'll get into why you've
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identified now as the key risk in the
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next question but first I want to dig
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into this a bit more it feels like
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central banks are forcing everyone to
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invest just to try and maintain some
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purchasing power of their savings and
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that's fundamentally changed the game
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right CU you can't just put money in in
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the savings account anymore you got to
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do something with it uh and this is sort
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of shifted everyone's Behavior around so
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tell us more about
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that yeah so that's absolutely correct
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now here's everyone seems to measure uh
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cost of living using CPI which is the
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broad term of inflation well that's the
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the economic term you probably have some
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quams with that Nick but the CPI level
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usually they try and aim between two and
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3% and so in theory you need to grow
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your money by at least that in order to
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keep up with the cost of living now a
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lot of people think that that is a very
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manipulated or or or not real figure for
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the everyday person but the figure I
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pointed to today was actually monetary
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inflation and I'll use the us because
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it's the reserve currency is approaching
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over the last 11 years about 133% a year
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so so what I'm saying there is the um
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supply of money in the economy is
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growing by 13% a year not not the three
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2 or 3% consumer inflation the money
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supply is growing heaps and the the
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long-term average in the US is actually
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quite High anyway it's about 9 9.2%
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um so you think about that if you're
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trying to maintain your wealth or grow
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your wealth not only do you you don't
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just need to beat the the CPI inflation
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figure whatever that happens to be which
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is very high right now but you you you
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really need to keep it in in uh line
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with the monetary inflation the growth
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and the supply of money and that is
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quite hard to do you know if we're
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talking like you know 13 14% a year how
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how can you do that now in today's piece
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I identified over the last you know 13
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14 years there's only like you know two
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or three asset classes that have managed
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to do that one is tech stocks um large
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US Stocks like the biggest ones are just
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on that 133% average return figure and
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then you've got in more recent years
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gold doing quite well and Bitcoin over
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the last you know decade has been
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clearly a one way to preserve your
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wealth um but your point earlier was
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that in this system of money we've got
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you're forced to become an investor
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because you can't save money in the bank
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and that is that's quite a radical thing
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if you think about history um you know
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what did pirates used to do they used to
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steal gold didn't they they used to they
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used to store money they used to bury
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money on Treasure Islands and come back
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10 years with a map and try and find it
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and that goal would would be worth a lot
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if you did that today uh with with
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dollars with with cash you'd come back
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you know 30 years and it would be hardly
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worth anything you know and I I wrote a
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story about this in crypto Cav the other
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day some guy found a a roll of Nots uh
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under his uh house in America that were
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buried from 1934 and it was like you
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know
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$14,000 worth which at the time would
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have been a whole bunch of money today
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it was worth $4,000 not a bad fine I'd
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be happy to find it if I was digging up
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my garden but it was not nowhere near
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the value it was back in the day so your
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point was you can't save money even with
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interest even if you're putting in the
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bank and earning interest it's not
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enough to keep up with money to
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inflation therefore you're forced to
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become a stock market investor a
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property investor or a Speculator in
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other high growth assets like tech
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stocks and what we're seeing is that is
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what people do people invest via index
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funds via ETFs and they're not really
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caring about what they're investing in
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the stock market and property markets to
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a degree have become savings Vehicles
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because you can't save in cash so you've
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got to store your wealth somewhere else
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so that is distorting markets people in
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Australia wonder why house prices have
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gone up so much and why no one can
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afford a house it's a direct consequence
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of money being debased and you can't
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save in money so people are forced to
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look for other options property
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investment properties have tax
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advantages and other things and they
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have been good store of value assets
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whether you think the fundamentals are
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right or not they've been good store of
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value assets for the past two decades or
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three decades in Australia so um so that
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is the that is the the situation we live
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in that is the economy we live in like
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it or not and um what will happen going
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into the future that's the question do
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do you think governments and central
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banks will let these things collapse let
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these store value assets collapse if
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there's a crisis I don't think they they
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will let them I think they will not even
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wait for the crisis they'll actually try
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and get ahead of it because what they'll
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be doing is they'll be debasing the
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money in order to keep these values high
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and there's a side consequence to that
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as well if you think how much debt
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governments around the world have
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Sovereign Sovereign governments have I
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think again take the us because it's the
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the reserve currency they think they're
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adding a trillion dollars worth of debt
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every hundred days right now it's it's
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nuts and it's it's only been increasing
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exponentially how can they get rid of
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that debt they can default but again
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that's the end of the Fe currency system
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or they can debase it this is the trick
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As Old As Time Henry VI did it you know
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um I think the Romans tried to do it you
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debase your currency and the value of
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your debt in real terms comes down H and
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so I think to a degree a lot of this
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inflation is a deliberate action they
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know what they're doing the the trick is
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to try and keep people thinking oh we're
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trying to fight it and we're trying to
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get rid of it but we'll see actually
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we'll see this Wednesday when the
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Reserve Bank meet um they're going to
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meet and decide on interest rates in
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America and the debate right now is are
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they're going to do a quarter point cut
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or a or a half point be interesting to
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see if they do the the 0.5% because that
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will be a massive move up in liquidity
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again which devalues the currency more
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and that could cause asset prices to to
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spike and the interesting point that
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you've made in the article today for me
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was you know 30% of for gains in the
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stock market sounds unattainable you
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know sort of like if I need to achieve
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that every year then I'm probably you
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know in trouble as an investor and yet
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your point really is that if it starts
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to happen and everyone's making 30% a
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year on the market cuz we get this melt
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up is probably a sign that something's
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seriously wrong and you know it's a sign
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that you might be making these games but
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are they real are they you know when you
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get back to your day-to-day life um you
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might be thinking that you're rich
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because of your gains in the stock
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market but that might not not actually
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be playing out reality in in terms of
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your cost to living and the housing cost
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and so on and so forth you used to be a
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a financial advisor which meant you you
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had to take a really holistic approach
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approach to people not just their
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investment side which is what you and I
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focus on one now it seems to me that
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that's going to be an increasingly
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difficult job be you know whether you're
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doing for yourself or whether you're a
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financial adviser because it's like
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trying to build a house when the number
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of millimeters and a centimeter keeps
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changing over time right there's no
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fixed point of of reference there's no
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way to think about the financial future
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when inflation is happening and you even
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30% gains the stock market might not be
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great and and you know valuations might
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be completely out of children in
00:09:31
property in the stock market because
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everyone's saving desperately in asset
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markets instead of in money how would
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you even tackle someone's personal
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financial situation in a in a time like
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this yeah and you're right it makes the
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job of planning for your future very
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hard when markets aren't reacting
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reacting to economic um um sit the
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economic environment they're not
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reacting because investors are looking
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at economics they're reacting just or or
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mainly to a debas in currency CU how do
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you account for that like you said for
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example when I was a financial adviser
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you would get someone coming close to
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retirement and you would maybe make
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their their portfolio a little bit more
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conservative uh because you know their
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wages were going to stop and they had to
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rely on a on a a more steady income
00:10:13
stream they had less tolerance for the
00:10:14
ups and downs of markets and you maybe
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buy stuff like annuities or or recommend
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they buy annuities which were you know
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fixed term like term deposits
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essentially fixed uh term um income
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streams and look on on a in a good year
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remember I think before the GFC you
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maybe getting you know 7% per anom
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return on that and you eating into a bit
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of the interest and taking some
00:10:34
Capital now I think about that trying to
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do that now you used to be able to say
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well you make some calculations on how
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long that would last you you know you're
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retiring at 65 we put a bunch into a new
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a maybe we have a little bit of stock
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market exposure and a little bit of
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other assets and we could reasonably
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calculate that will see you for the next
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you know 25 30 years if if you live that
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long um and you might have other assets
00:10:54
Elsewhere for inherence purposes doing
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that now um if you look at the long-term
00:10:58
return on bonds which are like a new is
00:11:00
your money is going to go you know on
00:11:01
half that time in terms of its
00:11:03
purchasing power so how are you going to
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calculate for that how does a retire
00:11:07
plan for that because the only
00:11:08
alternative like I was saying before is
00:11:10
is well the tech stocks are happening to
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be one of the only asset classes which
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are sort of taking some of that that the
00:11:17
debasement and and making gains from
00:11:19
that because that makes sense if you
00:11:20
think about it tech stocks are
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deflationary so they they the the they
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manage to suck up that liquidity because
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they growth as well so they've got these
00:11:28
these dual functions um but imagine
00:11:30
being a retiree and having to invest in
00:11:31
Nvidia right now which has gone up
00:11:33
massively then down massively and up you
00:11:35
can't plan your life you can't plan your
00:11:36
future income Stream So the whole point
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of the the gist of the article is that
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why this is wrong is is in the bid to
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stop volatility which is what central
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banks and governments are doing by
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debasing the currency they're creating
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volatility everywhere else they're
00:11:50
creating volatility in purchasing power
00:11:52
they're creating volatility in your
00:11:54
decision- making as an investor because
00:11:55
you're not just looking at companies now
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you're looking at the currency and
00:11:58
trying to work out how much is that
00:12:00
going to be worth at some point in the
00:12:02
future um and that that and then you're
00:12:04
even getting social volatility on the
00:12:06
back of all this because the economic
00:12:08
Cycles give people chances to buy in
00:12:10
cheap and potentially sell at more
00:12:12
expensive rates that's very hard to do
00:12:14
now you know you look at the the trends
00:12:16
especially from young people maybe
00:12:18
towards more leftwing ideologies is
00:12:19
because they can't afford a house that's
00:12:21
a that's a result of supressing um
00:12:24
Market volatility but you've created
00:12:26
volatility in society and and these are
00:12:28
all natural reactions so um yeah as a
00:12:31
financial adviser I'm glad I'm not in
00:12:32
that industry now cuz that would make it
00:12:34
very hard sorry just got Street
00:12:36
screaming child just come home I don't
00:12:38
know if you can hear that um yeah so I I
00:12:42
think that that my point my point as an
00:12:44
investor it's very hard to do
00:12:46
diversification is is one of the the
00:12:49
things you can do that and I think right
00:12:51
now as an investor you need to look at
00:12:53
hard assets gold Bitcoin you need to
00:12:56
have a portion of them in your portfolio
00:12:58
to at least
00:13:00
provide you some protection if if if the
00:13:02
if the liquidity Taps don't stop then I
00:13:04
think the hard assets we see it with
00:13:06
gold right now it's like record highs
00:13:07
and it's it's it's had a great year it's
00:13:09
up 23% for the year Bitcoin very
00:13:12
volatile but it's up 40% for the year so
00:13:14
far um and I think having a portion of
00:13:16
these types of Assets in your portfolio
00:13:19
at least give you a hedge they give you
00:13:20
a hedge against the ongoing um
00:13:22
debasement that hasn't really stopped
00:13:24
since the GFC it's just fed into the the
00:13:27
economy in different ways sometimes it's
00:13:28
through through asset prices sometimes
00:13:30
it's through volatility suppression
00:13:33
sometimes it's through bailouts
00:13:35
sometimes it's through the price of
00:13:36
goods and services like we're seeing now
00:13:38
but that they're all they're all
00:13:40
symptoms of monetary debasement just in
00:13:42
different
00:13:43
formats I want to give a quick example
00:13:45
of what we're talking about here which
00:13:46
popped up actually on my Twitter feed
00:13:47
this morning the German stock market is
00:13:49
up 50% since 2017 and making an alltime
00:13:53
highs while German industrial production
00:13:55
is 15% lower than at the end of 2017 so
00:13:58
we've got this Divergence between what's
00:13:59
happening on the ground in the real
00:14:01
economy and what's happening in end
00:14:02
stocks and financial markets I promise
00:14:04
to ask you why you've identified now as
00:14:08
a time to be worried about this what
00:14:09
made you write this article um
00:14:13
today look I suppose it's because and
00:14:16
this this was the lead to the piece was
00:14:17
about Nasim Talib and his whole Black
00:14:20
Swan thesis of you know you need to be
00:14:21
prepared for unexpected events and
00:14:24
there's there's always doomsayers in in
00:14:25
the market ever since I've been in
00:14:27
markets there's always people calling
00:14:28
for the next C apse but I have noticed
00:14:30
in recent times the the voices of that
00:14:32
have grown louder there's a lot of
00:14:34
things in a lot of areas that are wrong
00:14:36
there's there's Japanese carry trade
00:14:38
dramas there's burgeoning government
00:14:40
debt which is going nuts there's
00:14:42
deficits all around the world there's
00:14:43
social problems there's there's
00:14:46
political extremism even coming from
00:14:48
governments you know um you know
00:14:50
misinformation bills and I say even from
00:14:53
governments probably that's where it
00:14:54
always comes from but um misinformation
00:14:56
bill has been introduced in Australia
00:14:58
tries uh ways to try and curb free
00:15:00
freedom of expression and Free Speech in
00:15:02
the UK and and elsewhere um so there
00:15:05
seems to be a lot of negativity out
00:15:07
there and and even a little bit more
00:15:08
than usual and yet markets are near
00:15:11
all-time highs so I wrote the piece
00:15:13
because I was thinking of that dichotomy
00:15:14
of all right so you know if if you if
00:15:17
you're going take an external view you
00:15:19
could say look we're going to we're
00:15:20
coming for a big crash and I've seen a
00:15:22
lot of comparisons about 2007 and today
00:15:24
saying you know all these indicators are
00:15:26
saying we're going to have a big crash
00:15:27
and yet markets aren't reacting yet and
00:15:29
and maybe maybe maybe they will but what
00:15:32
might happen is if everyone's seeing
00:15:33
something happening the nature is of
00:15:36
governments or central banks to react
00:15:37
before it happens if they can and my
00:15:40
thesis was maybe the Black Swan in this
00:15:42
event is not a crash in markets in
00:15:45
nominal terms but but maybe a melt up in
00:15:49
nominal terms but still a debasement in
00:15:50
real terms and so that was the the
00:15:52
thesis and I I could be wrong in that
00:15:54
it's just an idea but it seems to be an
00:15:55
idea born of behavior before the GFC but
00:15:59
ever since the GFC it's been a behavior
00:16:01
to try and suppress volatility to inject
00:16:04
money into the system to stop failures
00:16:06
happening which doesn't make the system
00:16:08
more ISO it actually makes it weaker and
00:16:11
with an election coming up in the US as
00:16:13
well I can't see that the the the powers
00:16:15
that be in America will have any
00:16:16
tolerance for a big market crash anytime
00:16:18
soon and yet there's a lot of indicators
00:16:20
like you mentioned Germany Germany's in
00:16:22
the process of catastrophic
00:16:23
de-industrialization due to a series of
00:16:25
bad decisions around energy and other
00:16:27
things and yet there stock markets up so
00:16:30
that's a prime example of things look
00:16:32
good if you look at a a chart of the
00:16:34
stock market but the reality is on the
00:16:36
ground things are really looking bad um
00:16:39
and I'm wondering if that can happen in
00:16:41
our markets uh and in global markets and
00:16:44
if that is the real Black Swan and I did
00:16:46
give the example in the piece today of
00:16:48
the the wymer Republic in Germany which
00:16:50
again back in the 1920s when um when
00:16:53
things went wrong there uh the currency
00:16:55
was getting debased massively and yet
00:16:57
the price of everything the market were
00:16:59
going up people were buying land um
00:17:01
debts were getting wiped out because the
00:17:02
ninal value of the debt was worth zero
00:17:04
and people were even buying pianos the
00:17:07
the quote I gave in in today's piece was
00:17:09
even non-m musical families were buying
00:17:11
pianos so in order to have something a
00:17:14
scarce asset that could store some value
00:17:17
uh and so I I think that today's piece m
00:17:20
is about that idea of if currency if the
00:17:23
if the preference is markets collapse or
00:17:25
currency is going to debase if that's
00:17:27
the two choices we have my feeling is
00:17:29
policy makers central banks governments
00:17:30
will go for the debasement of the
00:17:32
currency and if they see what's if they
00:17:33
see something bad on the horizon they
00:17:35
see things are getting worse they will
00:17:37
try and get ahead of that by printing
00:17:39
more money um injecting liquidity into
00:17:42
the system reducing interest rates uh
00:17:44
finding other devious means of
00:17:46
supporting asset prices like currency
00:17:48
swaps and other things that they can do
00:17:50
um and that might mean that we live in a
00:17:52
time where there's an economic strife
00:17:54
and yet markets are going higher and and
00:17:55
people won't understand it and the
00:17:56
doomsayers will be confused but that
00:17:58
that is an at least it's an idea worth
00:18:00
having in
00:18:02
mind other than grand pianos what
00:18:05
investment ideas do you think benefit
00:18:07
under this thesis of yours that is one
00:18:09
of the few ways to explain what's going
00:18:11
on in this Divergence between markets
00:18:13
and reality on the
00:18:15
ground yeah so like I said like if you
00:18:18
if you're thinking about this as a terms
00:18:19
of uh infinite fear infinite money
00:18:22
potentially um then you need to look for
00:18:24
the the opposite of that which is hard
00:18:26
assets which can't be created at at will
00:18:28
uh and you're seeing that in Gold
00:18:30
markets already gold markets are
00:18:32
touching on your highs I saw a report
00:18:34
last week that said the Saudi Arabian
00:18:35
government bought a lot of gold we've
00:18:37
seen reports all year that the Chinese
00:18:39
government's been buying gold and that's
00:18:41
a a a a sign of less confidence in US
00:18:45
dollar as a store value because in the
00:18:46
past they would they would invest their
00:18:48
surpluses into us treasuries the fact
00:18:51
that they're diversifying into gold
00:18:53
suggests they are looking for other way
00:18:55
places to park their money um Tech stock
00:18:58
you know I'm a big fan of AI as as a
00:19:01
real Revolution not everyone agrees with
00:19:03
that but I think that will take place
00:19:06
the pathway is a bit maybe unclear but I
00:19:08
think over the next two or three years
00:19:10
certain AI stocks will come to dominate
00:19:12
uh certain industries and if we look at
00:19:14
the history of tech we know that Tech
00:19:16
monopolies emerge out of these moments
00:19:18
like like what happened with the
00:19:19
internet and Tech monopolies are very
00:19:21
viable things Google micros Microsoft
00:19:23
even been around for decades still got a
00:19:25
monopoly on Microsoft Word and Excel and
00:19:28
all those other products um so I think
00:19:31
uh strategic buying in the right kind of
00:19:33
tech stocks makes sense maybe not as a
00:19:35
catch all but looking for stocks in
00:19:38
technology that are winning this AI war
00:19:41
and then of course the the the last one
00:19:43
is Bitcoin to me Bitcoin is a new form
00:19:45
of digital gold it's an asset you can
00:19:47
hold in your own wallet uh you no one
00:19:49
can no one's custody it for you you can
00:19:51
transact with it at will um you can take
00:19:54
it with you anywhere in the world it is
00:19:55
a true self- Sovereign asset with a
00:19:57
fixed Supply um it's getting more scarce
00:20:00
by the year and and and last last uh
00:20:03
week we saw Michael sailor who's the
00:20:04
micro strategy CEO he's just bought up
00:20:07
another you know $1.1 billion dollar
00:20:09
worth of billion of of of Bitcoin and
00:20:12
his company which has been doing this
00:20:13
Bitcoin treasury strategy for the last
00:20:15
four years is one of the best or the
00:20:17
best performing stock over the last four
00:20:20
years and only because they've been
00:20:22
buying Bitcoin at tops and at bottoms
00:20:24
just continuously buying it and they've
00:20:27
grown their balance sheet from something
00:20:28
like they've grown from a$1 billion
00:20:30
company to something like a $29 billion
00:20:32
company today um and I think the less in
00:20:35
from that is those four uses if you if
00:20:37
you've got a saving strategy if you've
00:20:39
got some allocation to bitcoin that is
00:20:41
your all weather um asset that is
00:20:44
leverage to currency de basement but
00:20:47
also technological innovation as well so
00:20:48
it has those dual um
00:20:50
uses if I were to sum your ideas here
00:20:53
it's that during an inflationary period
00:20:56
like this one way to outperform
00:20:59
inflation in order to grow your savings
00:21:00
and wealth is to invest in quite
00:21:02
highrisk assets um it's like just
00:21:04
Bitcoin and these tech stocks the idea
00:21:06
being that you that during these melt up
00:21:09
booms they are not just going to match
00:21:10
inflation like you might expect the
00:21:12
wider stock market to but to outperform
00:21:15
um there's certainly one way of doing it
00:21:17
um you're also Pro gold I believe which
00:21:19
would be in like a lowrisk way that's
00:21:20
why you said diversification I think
00:21:22
earlier on but these high risk
00:21:24
opportunities are certainly the way that
00:21:25
allow you to actually get ahead of
00:21:27
inflation and continue to grow your
00:21:29
wealth that's what makes them so
00:21:30
interesting um I'm going to close here
00:21:32
by saying what I think sums things up
00:21:35
governments and central banks are going
00:21:36
to sacrifice the value of money instead
00:21:38
of allowing markets to crash in that
00:21:40
sort of environment the risk of a
00:21:42
catastrophic Market melt up is something
00:21:44
that investors do need to actually worry
00:21:46
about and to position themselves to
00:21:49
profit from or to benefit from I hope
00:21:51
Ryan and I have made you aware of this
00:21:52
risk in this video and giving you some
00:21:54
ideas on where to look for solutions to
00:21:56
find out more check out Ryan's article
00:21:58
on Our fantel Daily website and
00:22:00
subscribe for free to receive more
00:22:02
insights about Market mops and similar
00:22:05
topics we talk about all sorts of things
00:22:07
at fat tail daily if you're already
00:22:09
aware of all of this and you're already
00:22:11
worried about it I can only encourage
00:22:12
you to watch our presentation called
00:22:14
decade of decimation which takes Ryan's
00:22:16
ideas and others and packages them
00:22:18
together in a more comprehensive view
00:22:20
about what lies ahead for the for
00:22:22
Australia and what you might be able to
00:22:24
do about it Ryan thanks for coming on
00:22:27
and to everyone watching at home thanks
00:22:28
thanks for
00:22:30
watching before you go I have another
00:22:32
announcement our publisher Woody has
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00:22:57
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