This week in Stansberry Investor Hour, we're welcoming back a legendary trader who's never afraid to sugarcoat things...
Folks, Todd "Bubba" Horwitz of BubbaTrading.com is back. According to Dan, he and Bubba are "brothers from another mother." They share some of the same views on plenty of topics... like commodities, green energy, and the Federal Reserve and "the absurdity of its existence."
Bubba flatly says that the "moronic Fed has no clue"...
Never has the Fed raised rates into a recession... Don't get me wrong, rates should be higher. But [the Fed] should let the free markets determine what the rates are.
As for banks, they are undoubtedly the biggest headline-makers right now. Shockwaves from the collapse of Silicon Valley Bank and Signature Bank are rippling through markets – from stocks to oil and to cryptocurrency. And Bubba warns that bank bailouts aren't far off.
Bubba then covers the looming threat of a global grain shortage and its underlying catalysts, which range from a war-torn Ukraine (a major grain exporter) to high fertilizer costs that prevented farmers from planting more crops last year. He isn't happy about Bill Gates owning a lot of U.S. farmland, either... "[If you] destroy the small family farms and turn them into corporate farms, it changes the dynamics of who's in control," Bubba warns.
He shares how he's trading soft commodities and mentions how it could be daunting for most investors. But for the brave who buy these assets at good prices, they're in for a reward. As Bubba explains:
I think we're due for a big market across the board pretty much in all commodities, especially the consumable-goods commodities. Gold and silver, I think they're going to go higher but they're not consumable – they're going to be needed for money pretty soon."
Bubba also explains why the "Fed pivot" narrative is a myth... why the 10-year Treasury yield could run up to 6%... and why you should sometimes take a break from financial media, leaving listeners with his final words: "Don't let the day-to-day news get to you."
Founder & CEO, BubbaTrading.com
Todd "Bubba" Horwitz is the chief market strategist of BubbaTrading.com. He is a regular contributor on Fox News, CNBC, BNN, Kitco, and Bloomberg.
Dan Ferris: Hello, and welcome to the Stansberry Investor Hour. I'm your host, Dan Ferris. I'm also the editor of Extreme Value and The Ferris Report, both published by Stansberry Research.
Dan Ferris: And in today's rant, Corey and I don't want to talk about the Fed again, but we kind of have to. So that's what we'll do.
Corey McLaughlin: And remember, if you want to send us a note send it to [email protected] and tell us what's on your mind.
Dan Ferris: That and more right now on the Stansberry Investor Hour. Do I really not want to talk about this? I actually – I really do want to talk about it. If I'm being honest, I want to say that I don't want to talk about the Fed, but I can't stop myself.
Corey McLaughlin: But you really do.
Dan Ferris: Yeah. I really do because there's just the absurdity of its existence gnaws at me. So every time Jerome Powell or somebody – this week it was Jerome Powell – talks in public, all of that just comes right back up to the surface again.
Corey McLaughlin: And he certainly talked this week or recently in the past week, the four congress, the semiannual required testimony before the senate and the house of representatives. And we got the Fed meeting coming up. So it was timely too as far as what he was saying. So yeah. He said a lot. These guys love to talk. They really do.
Dan Ferris: They do and they love to talk in a very particular way, which it sort of – I will say this. Jerome Powell does talk in Fedspeak or whatever you want to call it, but I think he's clearer. He's not a big obfuscator like Alan Greenspan was, for example. Greenspan, you never really – you were parsing every other word, but I feel like Jerome is pretty clear.
Corey McLaughlin: Yeah. No. I agree with that for sure. You know what he's saying. It's just... sometimes what he's saying contradicts other things and you got to make sense of it, of that part, of what's the most important part that he's saying, but what he says is pretty clear. What he said recently was we're going to basically take the totality of the data and if higher rates are appropriate, we'll do that. The market puked a little bit the day he said that down about 1%, 2%, depending on what you want to look at.
It's what we've been saying. This higher for longer story. Does everybody believe it still or not? It seems enough people don't that the market reacts to these things still. After 14 months now of this story, the inflation peak is sure behind us. Well, as you've said, inflation is never gone. The pace of inflation may have short-term peaked, but it's still sticky, parts of it, and the rate plan is still higher until further notice. The pivot is a long way away.
Dan Ferris: Right. I'm on the same page with you because I think that they are working on this paradigm of not changing the status quo until it just becomes painfully obvious, which happened when they shifted gears from easy to hiking to – from transitory to not so much transitory as real honest to goodness inflation that's going to be around for a while. So I think if they jack rates up high enough and enough people suffer for long enough, sure. We'll see a slow down or a stoppage in hikes and maybe even a cut or something somewhere down the line.
I don't think it's as emanant as anybody seems to believe and actually to be fair, this last round after Jerome talked, the market went and discounted a 50-bps cut really fast, as soon as those comments. Which I did this once with four charts in The Ferris Report, the first issue that came out on December 1. I showed the crazy volatility around 2 p.m. It's like they dropped the statement and then he reads that statement. Then he starts answering questions and the market goes nuts because it's a little worse than – it's a little more extreme than what the statement was.
Corey McLaughlin: Yeah. I think honestly, if – yeah. The market's reaction during Fedtalk is remarkable. It's stuff you don't see many other days of the year as far as up and down 1% in the couple hours in the end of the day. I think if anything, what was interesting this time around was I think people may be getting more concerned that the higher rates are now actually going to because some serious trouble down the road, which I think what you might see is longer term bond yields falling a bit while the short term, the really short term stay where they're at indicating maybe these rates are going higher and then things are going to get bad after that, which has been different than the past where it's just everything was going higher.
You're – the market was reacting just to the beginning of this higher rate environment. Now it's reacting to what happens next maybe. Who knows? I feel like it's a little – it's a different moment in this bear market era, which we still are in bear market. We're not making new highs in stocks even though they've been up a bit.
Dan Ferris: That's an interesting point, Corey, because I have had discussions recently within the last 24 hours in fact with folks who are saying, "Well, this actually looks like it could be a new bull market that started in the October bottom."
Corey McLaughlin: Well, yeah, since October, yeah. They've been making higher lows, but still within the longer term. We're not above new highs yet. To me, that's my definition, but everybody has got different definitions.
Dan Ferris: Yeah. I don't – I agree with you. My definition would be a new all-time high and it's worth pointing out that during at least one of the sideways markets that has happened in the past, just call it century, since 1929, a market can make a new high and then take – it can make a new high after some years of going sideways and then go sideways again for more years. Put it that way. Boy, that would freak people out I think because right now there's a lot of – it's a new bull market. We're still in a bear market. Do you want to be short? Do you want to be long? The entire market, there's a lot of that.
I think you can see in sentiment, with TD Ameritrade puts out a sentiment indicator. It's actually pretty low. It was super high at the top of the bubble, but now it's pretty low. So I just wonder at this moment after a year plus of this, getting on to a year and a half if you start at the top in November of 2021, with some sentiment maybe not so great, how to think about this. Because at some point higher rates, lower evaluations mean better long-term returns. People keep contributing to 401(k)s. It feels like a war – what I'm getting to I think is it feels like a war in the market to me. It feels like a real war. It could go – to me I still think the potential for it going sideways for a decade is in play.
Corey McLaughlin: Yeah. No. I feel you there. If you look at it you could say we've been in a sideways market already since June if you go back – I'm looking at a three year chart right now of the S&P 500. You peaked at around New Year's Day 2022. Then the selloff June we've had various ups and downs since then around the same way. Then you go back even farther to the spring of 2021 and the S&P's at the same level as it was then, which is interesting because that is when the arks of the world were topping out. So I do think we've had a blow off of the tech bubblicious stuff, but to me maybe this is just one long digestion of that. Who knows? Maybe it'll last 10 years.
Dan Ferris: Right. So I think I saw a recent report from GMO, Jeremy Grantham's firm, and they were suggesting that this was a great time to buy high quality because if we do get a recession they're going to keep gushing cash and not needing to raise money in stock market, in capital markets at all, stock or debt. And this is the time to start thinking about that to buying high quality companies. It made a lot of sense to me because when we say rates are higher, evaluations are lower, returns are better, well, not for the worst garbage.
Not for the garbage you're talking about that's been murdered and some of it is never coming back. That which is coming back will take a decade or more. Dot-com peak was – wasn't Nasdaq till 2015 or something? I forget when it made a new hike. It was a long time. So yeah. Interesting moment. Complex moment.
Corey McLaughlin: Yeah. I think so. It feels like it to me. It feels a little different than it has the last – I hate – famous last words there. Feels a little different, but it does feel a little different I'll say.
Dan Ferris: Yep. It's funny because Chris Mayer is a really smart investor who always says the hardest time to invest is right now. I agree with him, but the sentiment isn't covered by that comment though, right? Because it's whether or not it feels like it's hard. It's whether or not you actually think it's hard. It didn't feel hard in the run up to the peak here. Most people thought it felt pretty easy.
Corey McLaughlin: Right. I would say yes. Now it feels hard. I would agree with that. It makes me feel better that you said from GMO high quality companies because I just keep thinking if you own high quality companies that are going to keep increasing their dividends or at least their cash flow. That seems so – I'm totally comfortable with that right now. So if those companies have fallen a decent amount, are still down 10%, 20%, 30%, whatever, that to me makes a lot of sense right now for the reasons you were just saying too.
Dan Ferris: Yeah. For all my bearishness, I'm making long picks in Extreme Value and The Ferris Report right and left. We're recommending – we're finding – of course in Extreme Value we focus on the high quality companies and The Ferris Report is more of a macro kind of thing. I've put plenty of individual stocks in both of them recently. So how bearish am I? I don't know. All right. Let's talk to somebody who has a very clear view on things, Bubba Horwitz. Great trader, great guy. We've talked with him before and it's great to have him back. Let's talk with Bubba. Let's do it right now.
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Bubba Horwitz: Dan, it's great to be back with you again. I'm sure we have a lot to talk about.
Dan Ferris: And I'm here with my co-host, Corey McLaughlin and of course – well, Corey say hello. You don't know Bubba, do you?
Corey McLaughlin: No. I don't think we've ever met, but I've seen interviews you've done and whatnot. So I'm happy to talk to you in person.
Bubba Horwitz: Pleasure to meet you, Corey.
Dan Ferris: So let's – I just want to dive in because I see you often in interviews and things and you and I are in the same place. You've been talking about commodities lately. I just saw a new Tweet within the last several hours, I think it was, about commodities. Is there a specific group or a specific metal or commodity that you like or you just like the space in general?
Bubba Horwitz: I love the space in general. I think the grains are going to have a big up move. They've been under extreme pressure and it's not logical. When I look at what's going on, the cost to plant, the cost to input, and what they're selling at retail there's a problem in between the farmers and the retail stores. They're not making enough money and I think that's going to be a problem. So I think those are going to explode. I like the metals. I've said before I think that gold will make new highs this year. I don't know how much higher they'll go, but it's always one level at a time. I think silver should probably get back into the 30s would be my guess.
The rest, I think consumable goods in a population that, A, is growing and B, is short goods a lot and nobody is accounting for the shortage of goods that we have. At some point there's going to be I think a much bigger demand, plus the fact if you add in the equities sell-off which we're going to have, I think, which I believe is going to be 50% to 70%, maybe not all in one year. I think that that will bring new money into those markets as well.
Dan Ferris: How about that. I did not know – I don't think I've heard you talk about equities recently. Again, we're on the same page there too. I didn't realize that we were.
Corey McLaughlin: Yeah, Dan. I feel like I'm listening to you, Dan.
Dan Ferris: I know. We're brothers from another mother here. So are you – my thesis is simply we're coming out of the biggest financial mega-bubble in all recorded history – bonds, stocks, private equity, venture capital... The whole thing was really inflated and then we have a Fed that is aggressively tightening. What do you see that really –
Bubba Horwitz: Well, I see a moronic Fed that has no clue, which is not a surprise. If you go back to the original mandate they're nowhere near what the mandate of the actual Federal Reserve is. So what – never has the Federal Reserve raised rates into a recession. And you can debate the issue of whether or not we're in a recession or not, we're in a recession. That's the bottom line. You can change the metrics all you want as the government and say, "Well, this is not considered a recession anymore," but it's a recession.
So the Fed, in their own ignorant way, continues to hike rates into a recession. Don't get me wrong, rates should be higher, but they should let the free markets determine what the rate are because if you look at some of the peer lenders or you look at, for example, what farmers are paying, they were never paying very low interest rates to begin with. So who is kidding who? The federal-funds rate is simply the bank lending rate to one another, not to the public. I think that the Fed is dead set on getting a 10-year note up to 6%, although they're collapsing a little bit while we're recording this.
But I think that we're going to see a real mess with a real shot at stagflation, which would be obviously the worst possible scenario that you can dictate here. When you have a government that has no mind on a budget and refuses to stop spending money that we don't have because they have the taxpayer to bail out everybody, what are you going to end up with? You're going to end up with a big mess and that's where we're headed and I think the banks will be – once again have to be bailed out once again because I don't think the banks, despite the news we get on their audits, are actually salvable.
Dan Ferris: Yeah. So the narrative on banks has been, well, after the financial crisis they've all got more capital. So we're not going to go back there again, but you're saying that's not true.
Bubba Horwitz: I'm saying we're going back there. I would put the level at 97%. You can never put it at 100% because obviously that would be silly. I think there's no way – if we had a real audit of the banks and we had somebody who was not the government, not somebody who was the Federal Reserve going into these banks and doing a true audit, I would say they're dramatically over leveraged once again.
During COVID, they allowed them to go past that stupid fractional banking law to begin with. So now I don't think – I think you're going to see this same problem repeat itself. Look what's going on in the housing market already. Housing is collapsing. The mortgage rates are going to the moon. I've never seen this in my life, yet brand new homes are now being reduced in price. I've never seen them drop prices before.
Dan Ferris: Yeah. I guess I'm less clear on housing. I'm foggier on housing because I do see some price decreases, but the supply demand situation is so tight. I just – that fundamental situation of very low inventory with so far still a reasonable demand, I'm less – it's logical to me, but I'm less likely to feel that way I think. But I do agree, the evidence is mounting here.
Bubba Horwitz: Just to clarify my point, the housing no longer has any real value. Housing is based on interest rates. It's based on money. It's how much is it by the month? What can I afford to buy? It's that simple. There is no longer that great American dream of owning a home that would appreciate in value over time during a reasonable market without a Federal Reserve intervention in interest rate. You would sell your home later when you were ready to retire and that was part of your savings plan. You'd move to a smaller house. You'd downsize. I don't see that anymore.
To me, the housing market is all based on artificial interest rates and when rates are low, housing is obvious very fast and moving and I don't see the same demand – now I have two homes. One in Chicago and one in Las Vegas and Chicago I took a beating out of my house I sold. I had to pay up for the house I had to buy. Here in Las Vegas, my house that I bought here is up a fortune, but now I can tell you, I couldn't sell it probably. Of course the new housing developments around me, I just got a note that they're dropping prices everywhere 10% to 12% in retail price.
Dan Ferris: Right. And a lot of people – another point that's valid here is a lot of people are stuck in these 3% mortgages. You can't sell out of that and then go take on 7% unless you live in a shoe box.
Bubba Horwitz: Exactly.
Dan Ferris: It's a good argument. I want to talk more about the grains that you mentioned. I know less about this than metals and oil and gas. In those areas we've seen what happens. The investment has plummeted over the last several years for various reasons. In oil and gas of course, the green folks are threatening to put them out of business and their investments are 20-year investments. So you're not going to make that. You're going to pay it out dividends and share repurchases, which is what they're doing.
Bubba Horwitz: How silly is that? I go – I believe oil is going to new highs as well, by the way. How dumb can any human being be to buy into this B.S. climate change? I'm not a believer in climate change, but you are and that's OK. I don't have a problem with it. I don't say we shouldn't do something about it, but at what cost to the American consumer do you want to get to this green energy. They have no plan. All they have is a plan to take more money out of our paycheck and not put us into a real deal yet versus we have the natural resources where we have – we have in this country today without effecting the environment, a 300-year supply of current usage.
That's just in the Permian Basin and all the places that you can get it easily. Yet they continue to talk about this ridiculous green energy program, but they have not come up with a plan of, A, how are you getting done, how are we going to cost, not to mention the power grid, which couldn't support what they want to do anyways. You're already going to have rolling blackouts from the entire – the biggest power grid goes from about 13 or 14 states, from the east to the Midwest. They're going to have to – they're already telling me there's going to be rolling power blackouts during the summer. So how are they going to charge for electric vehicles?
Dan Ferris: OK. Bubba, don't worry about this one. I got this one figured out because when these green folks realize that you're going to need a new Escondida mine, the biggest copper mine in the world, every year for the next decade they're going to go, "Oh, we didn't mean that." They're going to freak out when they realize that what they're calling for is the biggest mining boom in all of history. I think they might tap the brakes a little bit.
Bubba Horwitz: I don't – they don't seem to have the intelligence to put the brakes on it. That I have to be quite honest.
Dan Ferris: Can't argue.
Corey McLaughlin: On a related note, I have to hop in here. It's a different circumstances, but this week national grid in Britain fired on their coal plants for the first time ever because of supply. Now that's a different circumstance with the war going on and everything and the supply there, but still it's in the same vein of they've never used coal before and now it's 2023 and all of a sudden here's the need because – in part because of this whole green energy push.
Bubba Horwitz: You nailed it. You realize that we are burning through more globally a record amount of coal and they're continuing to – new coal plants are coming on every day because of course how are you going to produce electricity that you need to get there? This goes back to Obama when he shut down the coal miners in five minutes. Instead of saying, "Hey, we're going to eventually end out of coal. Here's our plan." See, what the problem is the government is left to make too much of a thing before they give you a plan and how much it's going to cost you to get there.
So coal is going to continue, and if you think that we're going to change the carbon footprint when India and China are 40% of the world's population and they're never going to stop burning coal unless they find a cheaper source. Do you think a cheaper source is going to be more carbon clean than what they have now? I don't think so. I think this is a big joke, is what I look at it is.
Dan Ferris: All right. I want to head back to the grains though. My point was, do you see the same lack of investment in grains that we've seen in new copper mines, new oil and gas?
Bubba Horwitz: I think grains have been pressured by a lot of the funds. I think that they're actually trying to buy and trying to suppress price. I think you have a very light trade right now. The volumes are extremely light. What nobody is talking about is the massive amount of cost and input to these farmers which anhydrous ammonia, fuel, all these costs are rising. Yet on the futures board, you continue to see falling prices. Then you go to the retail store and you pay – I just paid 100% more for a loaf of bread from six months ago.
Again, there's a fundamental problem between that. Now whether somebody is playing some games... Now we know Bill Gates wants to accumulate farmland. Why? Because he who controls the food supply, controls the world. Is the government involved in this? Because what's going to happen this year as we just go right into planting season right now is that a lot of smaller farms aren't going to be able to plant because the ratio of profit potential. Remember, when you're a farmer you're working at potential because you're not guaranteed to produce that crop.
We got to depend on weather. There's a whole bunch of things that go along with it. So if you don't plant – we already have a food shortage. The war, whatever you want to call it now in Russia and Ukraine, which is now about money. It's about nothing else. Is a big factor because not only do they supply 30% of the world's wheat, but they supply a lot of the components to make a lot of these chemicals for fertilizer that have really made great strides in developments to grow these products and we don't have that.
We're already short grains. There's already been food riots in the breadbasket, they call it, which is around the Middle East because they can't grow it there. So there's a lot of problems here that are illogical when it comes to why price at the wholesale end is so cheap when their cost to production is dramatically risen. Not to mention that their interest rates continue to rise, which is a problem.
Dan Ferris: It makes me wonder, there are a lot of variables there. What if, for example, I'm not saying it's going to happen, but what if the conflict in Ukraine works itself out within a year or so and then – that would seem to be a great deal of supply would return and prices might not have the pressure under them.
Bubba Horwitz: You're talking about a year, right? Let's look at it from –
Dan Ferris: Well, yeah.
Bubba Horwitz: But let's look at it from the whole picture. This started well before the Russia-Ukraine conflict started, which a bad crop and bad production out of Argentina and Brazil, out of Australia, which are the other main components. So we're already short now. It's going to take a while to rebuild up inventory. Everything else has not slowed down. One thing about a consumable commodity, you're going to eat it or it's going to go bad. So we continue to consume it and we're not replacing it as fast as we should be replacing it.
Dan Ferris: I see. We're not replacing as fast as we should be. I think that's what I was looking for.
Bubba Horwitz: Yeah. You've got more population and more eating. It's not like gold and silver.
Dan Ferris: So you want to be long wheat, corn, soybeans, all the beans?
Bubba Horwitz: Well, I'd like to be long. I'm concerned. Listen, I'm going to give you a full disclosure. In my trading portfolio, I'm short right here because the trend is lower. In my investing portfolio, in which I'm wanting to hold on and go through the troubles, I'm holding long in all of them. I do think – in commodities they call it a big market. I think we're due for a big market across the board and pretty much all commodities, especially the consumable good commodities. Gold and silver, I think they're going a lot higher, but they're not consumable. They're going to be needed for money pretty soon.
Dan Ferris: Again, same page. Same page, Bubba. So all right. We like all commodities then. We like the consumables better. Salt, sugar, coffee, cocoa, all those things?
Bubba Horwitz: I love them. I love them all. Again, they're much more of a challenge. Listen, for the average investor or the average trader, those are not for the faint of heart. They have some dramatic moves. They trade in the middle of the night. There's a lot of hanky-panky that goes on in those markets, but overall if you're buying at good prices, I could see a dramatic rise in soft commodities across the board. Look at how tight cotton has been recently. It has been unable to move between 80 and 85. At the end of the day, I could see a mass explosion or a big market in all commodities across the board including gold, silver, and oil.
Dan Ferris: Wow. That's a big, big idea, a big market as you put it. I haven't heard that term before. It applies.
Corey McLaughlin: Bubba, what's the biggest thing limiting supply, generally speaking?
Bubba Horwitz: Well, remember you got to have weather. First you have to have chemicals. You got to have money or be able to borrow the money to go ahead and plant it. Then you got to hope that the weather is helpful from planting through harvesting. So those are issues. The massive amount of hike in the cost of the chemicals are used – anhydrous ammonia, which is one of the biggest components for corn, is up 400% yet corn is not.
So we have so many conflicting issues, which leads me more to believe because of the light volume right now that you've got some pressure being put on it and again, I don't name names, but again, I said it. Bill Gates is looking to buy farmland. If you can destroy the small family farms and turn them into corporate farms it changes the dynamics of who's in control.
Dan Ferris: Yeah. That's a sad development. I saw another article about that yesterday. All right. So what about bonds, just structural short, waiting to be short again or what do you think?
Bubba Horwitz: I am short at the moment. I'm assuming that trend is going to change with the number they're putting up this morning right now. They are flying higher. I haven't seen them move this big for quite a while. In my mind, I would love to just be short on them all the time. Interest rates are not going down. We know that the Fed is going to continue to hike. We know that the Fed is so clueless that they don't know how to control themselves and it's a very hawkish tone. I do believe that the tenure is getting a 6%, which would take these bonds down pretty dramatically.
If you look at the inversion of the yield curve, which has never been quite this inverted, you can get three-month CDs now at about 5% versus the 30-year bond is trading at about 4%. So think about that when you talk about inversion. Inversion is never good because the people who need short-term money are overpaying for it and you're not getting enough for the long-term money.
Corey McLaughlin: Yeah, 1981 was the last time the 10/2 was this inverted. Yeah. It's wild.
Bubba Horwitz: Yeah. We got big problems here. They're not going away. No matter what they tell us, they're not going away without some major work. Of course we keep getting away from the things that would help bail us out, for example, producing our own oil again. We should be the exporter, not the import. We shouldn't be depending on the criminals from OPEC and Saudi Arabia that are going to stick it to us. You can put this down and time-stamp this. I bet you we have a shortage of oil starting end of April, early May when we get right in the driving season. When we get in the peak demand, suddenly they won't have so much oil.
Dan Ferris: All right. Time-stamped, Bubba. Commodities, bonds, where do we go next? And equities, we talked about too.
Bubba Horwitz: You go that the economy is in a lot of trouble. That's what you go for.
Dan Ferris: There you go.
Bubba Horwitz: You go that taxes are going higher, although we were promised that they wouldn't be hiking taxes. It's already started. It started with the little old thing that nobody thinks about, the social – the FICA tax increase and yet our government doesn't have to live on a budget. If you and I lived the way they lived we'd be in bankruptcy court or jail. There's one thing I learned in all my years in trading, you cannot borrow your way out of debt. At some point you have to stop it. Because we live in the supply side of economy world instead of demand side of economy world and we allow failing businesses because they're too big not to fail, that's a flawed economic system which is the Keynesian crap.
Dan Ferris: Yeah. When government borrows that's the act of printing. They just borrow new money into existence. I can't get away with that either. I tried it. They won't let me do it.
Bubba Horwitz: I tried – listen, they just like to keep torturing the middle class because listen, they're trying to get the great reset. That's what I think that they're trying to get done here. You've got the squad that hates America to begin with and they're trying to fleece the wealthy, but really the middle class because let's face it, the wealthy pay their fair share of taxes. You want to fix and tax more on the wealthy, change the tax code. It's tax avoidance or tax evasion. So if you know how to avoid taxes then you can avoid them, but the middle class, they don't have the money to spend millions and millions of dollars on accountants every year to get those things straightened away.
Dan Ferris: Yeah. The tax code, boy, we could do a whole show on that.
Corey McLaughlin: It's pretty big.
Dan Ferris: Yeah. It's pretty big. That's the understatement of the year.
Bubba Horwitz: It should be 50 pages. It's 50 million pages, right?
Corey McLaughlin: It's 50 million, I think. Yeah.
Dan Ferris: That's right. It's funny. So many of the things that you've said I've actually written them recently and I didn't know we were that much on the same page. It's just hitting me in waves here. So let's try out another viewpoint and see if we agree. I think a Fed pivot is nowhere in sight and people still keep talking about it. They're convinced the Fed will have to cut rates or stop hiking, whereas my paradigm is that Jerome Powell is looking at Paul Volcker and saying, "Look, this guy was hailed as a hero. He caused not one, but two recessions in '80 and then '81, '82." He hiked up to 20% four times. He smashed rates up to 20%. The guys before him, Burns and Miller, they're not hailed as heroes. They're the guys who didn't get the job done. So what's his incentive to stop hiking or cut or anything? I think the paradigm is, "I want to be remembered like Paul."
Bubba Horwitz: Well, he's not – he's going to be remembered like the idiot that he turned out to be. I really thought he wasn't going to be the right choice when he came. He came out of private equity. I didn't realize it, when you go on the ivory tower at the Federal Reserve you become an instant moron and you lose all track of reality. They're not going to stop raising rates. They can't stop because they've let this get too far because they got involved in a bank bailout, because they made all these accommodations.
You can go back to Ben Bernanke, who in 2013, puked when he tried to cut the – he started hiking rates then which was the correct move to make back then, but he cowed out of the market. Now 10 years later, here we are and they're not going to stop. This does not work out logically. It does not work out well. It does not have a happy ending because we have a big problem in the jobs market. That's the next problem. Again, you cannot keep hiding from the fact that you're destroying the people that pay the most amount of money to everything and that is the middle class. And that's exactly what they're doing and in the process of doing.
They really need to get back on the gold standard. If you remember the Bretton Woods Act, before Alan Greenspan, who in my opinion was the worst Fed chair and was the start of this bubble building. He was a big fan of not going off the gold standard, but the minute he became Fed chair he said, "Oh, we've got to get off the gold standard," which we were already done by then. So he started the fueling of all this bubble building and phony assets. Let's face it. I've been trading since 1980. When I started trading, the Dow Jones was $800. Now it's $34,000. Did we really have that much growth and increase? I don't think so. I think it's all era and money supply, which your dollars buy a lot less. I would argue that you look better in 1985 than you do in 2023.
Dan Ferris: It's funny about Greenspan, isn't it? All that is stuff he wrote when he was hanging around with Iran about the gold standard and then man, he gets that job. First of all, it was a tale when he accepted the job. This wasn't an objectivist, gold-money-standard guy. It was like, "Oh, whoa. Wait a minute. How can he possibly accept that job?" Of course it turned out, as you say, he was the godfather of the loose-money era. We know what happened after that.
Bubba Horwitz: Right. Nothing good.
Dan Ferris: Nothing good. Another point that I keep making about the Fed, agree or disagree, Bubba, I don't think their tools are suited to the purpose. This mandate, which is a modern thing too, but this dual mandate of maximum employment price stability, which is a baloney phrase anyway, you can't do that with manipulating – essentially manipulating the bond market. I don't understand. How does anyone think that they can be competent? I think they appear incompetent because the mechanism just isn't right. You don't try to tweak a $26 trillion economy by manipulating the bond market and then be surprised when you blow asset bubbles.
Bubba Horwitz: I think that you are correct. I think you go back – you have to go back. If you go back to 1913, Rothschild, Rockefeller, and J.P. Morgan, three great – four great human beings that can't wait to help Americans, can't wait to steal all your money as they did in the 1600s. So we know that the central-banking system is flawed to begin with. We know that banks never had enough assets for the fractional banking. That's another story that ruins this because not only does the Federal Reserve or the central-bank system around the globe have the ability to create more money, but the banks have the ability to create more money because they're lending out at 10 to one.
Not only are they lending out at 10 to one, but they can borrow $1 million, for example, from the Federal Reserve, turn that into an asset that now allows them to lend another 10 million. So they never pay a dime of interest. Only the customer pays all the money for them. They just make the profits. God bless. They go out of business, they can't meet demand, well, the federal bail is up, which means the American taxpayer will bail them out. What kind of crock is that? In 2008, they should have let the banks that didn't have the financing go out of business. Guarantee the depositors and the investors' money, not the banks.
Dan Ferris: Yep. Most people don't realize – they think the Fed prints money, which it does. They think the government prints money, which it does, but most of it is created in the banking system by that mechanism. Little discussed – we don't discuss this anymore. Why don't we talk about this?
Bubba Horwitz: Well, because we hide everything. Listen, when you have too much power and too few people and you have voters that won't get off their ass and go vote at the polls, that won't stand up for what's going on because again, they're basically in a word stealing from the middle class. I always go back to the middle class because that's who I identify with. This is a problem when you continue to jack the prices and you allow a government to propose a $6.8 trillion budget. Are you out of your mind? This is a joke that they don't live on a normal budget like an average person has to live on.
So you let all these things go by while you're reducing value. It's amazing that you always hear in the commodity world especially, the strong dollar is hurting the sales of commodities. Why is the strong – nobody has yet been able to explain to me what that means. If my dollar is worth less, am I not lowering the price of the product I'm selling? So if the dollar is too high, why don't I just lower the price if that's the real problem?
Dan Ferris: Right. Yeah. I see what you're saying. The strong all is an interesting subject too, isn't it, because here it is 60% of global foreign exchange and 80%-plus over a couple decades, 90% of global transactions and one of the sticky points in my head when I think about well, it's fiat currency. So we know where it's going to wind up historically speaking, but it's hard to sell anything in this world without buying dollars. So there's this constant bid under it. I wonder – I almost don't want to find out what breaks that bid. I almost don't want to find out because I'm not sure that world would be a fun place to live in.
Bubba Horwitz: Well, I think you realize this, that there's a development they're trying to create a digital currency, not cryptocurrency, but digital. In my opinion, this is where it really gets murky. In my opinion, not only is it going to be a digital currency, but I think they're trying to make a global digital currency, which who are they really accommodating if they do that? China, because China wants to be a part of the whole package. China would like to be obviously the reserve currency and they're not yet.
They're the second most powerful or maybe the first most powerful right now. That's hard to say. We don't know that for a fact. They're trying to be a much bigger player in that world and this is a way that also helps with the great reset is where now you give – you have no more paper currency. You have no more script. Suddenly you're tracked from the moment you're born to the moment you die. Whatever you do, you do things that you shouldn't be doing, you got to get tracked because there is no currency, which I believe brings in the strength into the potential cryptocurrency market, which I do think it's real and I do think it's a great opportunity. However, it has to be with a risk capital that you're willing to lose in case I'm wrong.
Dan Ferris: Right. I feel the same way. I want bitcoin to work. I love the idea, but that thing doesn't trade like a currency. It trades like a dot-com stock.
Bubba Horwitz: Well, it trades – remember, it does trade 24/7.
Corey McLaughlin: I was going to say, in the middle of the night too.
Dan Ferris: And on weekends.
Bubba Horwitz: Russia is using a lot of it. The Russians have been doing a lot of transactions in bitcoin. Listen, Russia and China have been using the block chain technology for 10 years, which was obviously the whole thing behind this. I think that eventually they'll sell out and there will be a few cryptocurrencies that are going to be there and I think bitcoin is one of them and I think Ethereum is one of them. Again, I think that it's – we're – you missed the first boat. If you were lucky enough to be a part of that, which I was not because I had a partner who was an economics guy that believed in the way that this is set up, which I don't.
You can go back to my radio show back when I said to him, "The Fed stinks. They should let the banks close." Unfortunately, he passed away, but he was an American trained economist, which again, I think economists have no clue. They refuse to say in front we're in a recession. Ten years from now, they'll tell me we're in a recession. I'm telling you now, we're in a recession. I don't know any Americans that aren't in a recession right now. Jobs stink. You got no more benefits because the jobs they're showing are part time jobs that don't have benefits. You've got stores allowing criminals to steal because it's cheaper and because we have no law and order anymore. So you've got an entire collapse, which can't be good for anything long run.
Dan Ferris: Boy, I feel like I need to pull an optimistic message out of my keister after that.
Bubba Horwitz: Optimistic message is that fortunately, in this country, we get to vote every four years if we get off our lazy ass and go do it. We get a chance to make a change. Certainly if we go back in the history of America there's been times, maybe not this exact way, but bad times in the past. However, the equity markets have still been proven to be the greatest investment of all time gaining an average of 8.5% year over year since the inception and over 10% year over year since 1950.
So I think that's a positive message to take and send that this is probably a great buying opportunity and if you don't over leverage yourself you can probably make a lot of money through the next three years once this thing does reverse and turn back around unless we are just too lazy to step in front of it and stop it from happening, which I hope we are not.
Dan Ferris: Yeah. I agree with that. If you have enough, depending on where you are in life, folks get rich in the stock market by waiting till it falls and charging in.
Bubba Horwitz: And with short-term interest rates, the elderly should be able to deposit and get some nice capital as well. So listen, it's not as dire from an individual person, but when you're involved in the market, day to day, and have been so like me for 44 years, I've seen these things before. In the market part of it, it is very dire right now.
Dan Ferris: I see. So it sounds to me like you are, as a trader, as a professional you have no choice, especially in a macro sensitive area like commodities, you have no choice but to pay attention to these things. They mean a lot to you, but an individual investor, they can contribute to their 401(k), wait 10 years, and should be good.
Bubba Horwitz: A hundred percent. Listen, let's be one thing clear. I am 100% invested in equities with my entire retirement, my entire 401(k), my entire profit sharing. Now I hedge. I have a model that hedges them, but either way, I would be 100% invested. I can trade whatever I want, but I will say that I don't see the pattern of the average of 8.5% to 10% year over year changing any time soon. If you say that it's timing the market, not trying to time the market, you'll be a much happier person. Quit looking at the Wall Street Journal, quit looking at your iPhone, and just let the – leave the market alone. Leave your 401(k) alone, and I promise you, 20 years from now you'll be a happy person. And if you're not, we've got much bigger problems.
Dan Ferris: From a common sense, if you point low evaluations and higher rates are better for longer-term return. That's no brainer.
Bubba Horwitz: Everything is setting up for the average investor that can control themselves and not try to time this market and not get caught up in the nonsensical news that you hear those dumbos report all the time, which is just to get headlines and advertising dollars. If you just understand that you're in – if you're in good companies, you think you're going to be in business for the next 20 years, then you're probably going to be in pretty good shape because history has proven that companies like that make a lot of money and eventually you'll be in great shape.
Dan Ferris: Right. All right. Hey, that's a good message. I think we have come to – it's time for our final question, which is the same final question for every guest, Bubba, no matter what the topic. Even if it's not finance related, same final question. You have answered it once before, but I hope you forgot it because I like to spring it on people. The question is simply if you could leave our listener with a single thought today, what might it be and if you've already said it, by all means, feel free to repeat it.
Bubba Horwitz: I think that the investor is exactly that, investor. I think that because of technology we've gotten too much into looking at our portfolios every minute of every day with every move in the market. I think your best bet is to turn off the iPhone, turn off your computer. Quit looking at the portfolio every single day because you're not going to be able to adjust a lot of these anyways. When you want to sell or when you want to chase them and buy them, you're always going to get the wrong time. Continue to make your contributions to your IRA, your Roths, and do your thing and don't let the day-to-day news get to you.
Dan Ferris: Brilliant. Love it. All right, Bubba. It's always a pleasure, man. I love talking with you and I hope we'll have you back soon.
Bubba Horwitz: I hope so, Dan. Corey, it was nice to meet you as well and thank you guys for having me.
Corey McLaughlin: You too. Thank you.
Dan Ferris: Many maintop stream analysts are predicting that stocks will recover soon, but I say we'll instead witness a cash frenzy unlike we've experienced in 21 years before stocks recover. I'm urging Americans not to buy a single stock until they see it. I predicted the Lehman Brothers crash in 2008 and I called the top of the Nasdaq in 2021, but this, this is the No. 1 most important thing to pay attention to for 2023. I'm not talking about another market crash or politics or inflation or any of these other things. As all this unfolds, the financial consequences of what I'm talking about could last for several decades.
If you don't understand what's happening there will be winners and losers and now is the time to decide which one you'll be. This is why I strongly encourage you to read about my warning totally free today. It's all spelled out in a free report we've put together. Get the facts yourself. Go to www.StockDeadZone.com to get your free copy of this report. You can learn how to get my four steps to prepare for what's coming. Again, that's www.StockDeadZone for a free copy of this new report. Always a pleasure to talk with Bubba. He's been around forever. He's traded everything. As you heard, I had forgotten how much he and I wind up on the same page with all of these topics.
Corey McLaughlin: Yeah. Yeah. You guys are in lock step on a lot of things.
Dan Ferris: Yeah. Like you said, he sounded like me.
Corey McLaughlin: He did, right off the bat.
Dan Ferris: Or I sound like him. I don't know.
Corey McLaughlin: One or the other, which tells you something. It's not – I'm with him on a lot of things too as far as the moronic things happening in the world and also being optimistic in the long term despite all of that nonsense as well.
Dan Ferris: Right. That's a real practitioner. He said, "Look, I am short bonds for the moment here because the trend is down." That's a real practitioner. He doesn't care about having some consistent viewpoint that is a monolithic viewpoint. He's telling it like it is. He's in the trenches every day. Those are the best people to talk to. That's one of the big lessons I learned from reading the Nassim Taleb's books. Talk to people who are there from the bottom up, real practitioners, real risk takers, and anybody who really makes something and really does something rather than somebody who opines into a camera on CNBC for a living and reads teleprompters and stuff. It's a different class of folks.
Corey McLaughlin: Sure is. Skin in the game. You got to – it makes a difference. It was important too that he pointed that out I think at the end because a lot of what we talked about was short-term-ish and different trading ideas and whatnot. He talked about that, but then that's just a part of what the overall investing picture, which I think in most financial media gets lost, just the context and the perspective.
Dan Ferris: Right. They're buying on Monday and selling on Tuesday and saying, "We told you so." They always say, "We told you so." The reality is, "No, you didn't." That's a great point.
Corey McLaughlin: Yeah. These are all trends to watch, obviously within a bigger picture. So yeah. That was good. Thanks for having me along for that one.
Dan Ferris: Yeah. Oh, man. To ride along with Bubba is a good time. All right. Well, that's another interview and that's another episode of the Stansberry Investor Hour. I hope you enjoyed it as much as I did. We do provide a transcript for every episode. Just go to www.investorhour.com. Click on the episode you want, scroll all the way down, click on the word "transcript," and enjoy.
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