Grant Williams: What’s Next For The Global Financial Markets? | Solomon Investor Today’s special guest is Grant Williams. Grant is the author of the book Things That Make You Go Hmmm, host of The Grant Williams Podcast, and a widely respected visionary in the financial industry with over 35 years of experience as an investor, writer, interviewer and advisor. He has lived and worked in 7 different major financial centers spanning from London to Sydney. Grant is here to talk with Zach about his history in the market and what's next for the future of the Global Financial Markets.
Grant Williams: What’s Next For The Global Financial Markets? | Solomon Investor
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Today’s special guest is Grant Williams.
Grant is the author of the book Things That Make You Go Hmmm, host of The Grant Williams Podcast, and a widely respected visionary in the financial industry with over 35 years of experience as an investor, writer, interviewer and advisor. He has lived and worked in 7 different major financial centers spanning from London to Sydney.
Grant is here to talk with Zach about his history in the market and the future of the Global Financial Markets.
Key Takeaways:
00:00 Episode Preview
00:37 Introduction to Grant Williams
02:32 How Grant got started in the industry
04:12 Grant speaks about the bust in ‘87
08:38 The importance of quality people around you & the Fear of missing out.
14:42 How the DotCom crash played out & how Grant handled it
18:31 The problem with drawdowns
21:15 What’s next?: How Grant makes decisions about the future
30:57 Grant shares about The Endgame Discussion
39:51 Final thoughts from Grant on Gold and other assets that have potential
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00:00
I wasn't brave enough to take the action I felt was necessary. Being able to tap into other people's experience is the single greatest shortcut to to kind of broadening your own experience putting your own expertise because it helps you avoid making mistakes
00:18
are you working with what does your team look like? And that's part of the preparation that each person should be considering whenever they're weighing their decisions as they move forward. Avoiding big draw downs are the single most important thing an investor can do.
00:34
So we're now at a point where the US has $23 trillion of debt. There's $8 trillion on the Federal Reserve's balance sheet, the biggest budget deficits we've seen in our lifetime, how are they going to fill that hole?
00:46
All right, everybody. Welcome to today's show of The Solomon Investor Podcast. And guys, today, my guest is grant Williams, and I'm so excited to have him on the show. He's the author of things that make you go Hmm, and one of the most widely read financial newsletters in the business in the host of the grant Williams podcast, again, one of the most listened to podcasts in the business. And grant is a widely respected as a visionary in the financial industry, with a career spanning 35 years as an investor, advisor, writer and interviewer. And during that time, he's had the opportunity to live and work in in seven major financial centers from London to Sydney. And now he's joining us from the Cayman Islands. And through that time, he's been able to build, build an incredible network with many others that most people only dream to be able to network with, and grants been a leader in all those industries. And we're so excited to have him join the show. And grant super excited to dive in to your history. And for everyone listening as grant and I were visiting right before we got started. I told grant, one of the things that I love most about him is his ability to dissect a framework of thought and actually to process things and understand how to think about situations rather than what to think. Because one of the biggest things in today's market or any markets in general, historically is we don't always have all the information and there's not always a historical precedent. So we're dealing with new information all the time. And understanding how to think is one of the greatest tools we can all have. And so today we're going to learn a little bit about Grant's history, where he's come from, and discuss some of the hot topics of the industry today. And then learn how grants processing those and how you can take those same frameworks to process things in your life and in your financial portfolios in decision. So grant, welcome to the show. So excited to have you look forward to diving in. Please. I Thanks for having me. It's a real pleasure. Yeah, wonderful. Well, Grant, man, before we dive into all of the how to think and what to think and all that sort of stuff, I'd love the audience just get to spend time getting to know you a little bit. And so if you could share a little bit about how you got started in the industry, and some of the time and experiences you've you've had since starting.
03:04
Sure, I'll give you the potted history and we can dig into it to bits with you like I was I've been on an equity and convertible bond, and even Japanese government bond trader for, as you say, 35 odd years, starting in the mid 80s, in the in the height, the Japanese bull market. And from there I've lived and worked in New York and Hong Kong and Sydney and Singapore and mostly in equities, sometimes in fixed income convertible bonds. And, you know, it's my I've been very fortunate my job took me all over the world. And I kind of have front row seats to say that the bursting of the Japanese bubble after the I saw the last year, a couple of years of the craziness and then saw the bubble burst, had a front row seat for the.com bubble burst. When I was working in New York. I was in Hong Kong for SARS. I was in Sydney for the global financial crisis. So I'm something of an albatross, I think so if you if you see me coming, you know, something bad's gonna happen.
04:03
Well, hey, we're not gonna we're not gonna take it as a bad omen we're gonna, we're gonna look at and say this man has been through a lot. He's experienced a lot and has a wealth of knowledge, wisdom and firsthand experience that we can learn and grow from. And that's one of the, you know, the exciting things about having you here today is being able to, you know, tap into that wisdom and help those listening and watching be able to utilize that and in their own lives. And so, you know, you mentioned the, the bus back in 87. So, for those who aren't as familiar, tell us a little bit about that. I mean, you were relatively early on when that happened. Yeah, tell us kind of what happened. You know, just to recap there, and then I'd love to hear what was happening in your mind as this is going on. And how is that kind of how did that shape the immediate near term and then how did that shape and grow into the future from there?
04:55
Yeah, it was a really, really important event. Not just for for markers, but For me personally in my career, it's funny, you know, if you look back at a chart of the Dow Jones, going back to 1987, as it stands today, you won't even see the 87 crash you were going to see on the chart, but at the time, you know, the market lost 22% in a single trading session. Now, when you talk about that possibility, today it people can't even fathom how that could happen. And of course, it couldn't happen today. And it wouldn't happen today. There'd be all kinds of circuit breakers that were put in after that to stop it happening. But for me, as a guy who really had had his own trading book for a little over a year, then I guess it was, it was cataclysmic in the immediate term. My understanding of what had gone on was way too small. My reaction function to it was way too slow. And fortunately, I had, I had more experienced guys around me who, who helped me to kind of stabilize and get through that one day, you know that one day after, because I was working in London at the time trading Japanese equity market. So the Dow Jones did what it did. And then obviously, it rippled through Japan overnight. So we woke up at four o'clock in the morning in London, to see the Nikkei fall on a similar amount. And then we had to go in and trade the London market. So we kind of had it three weights. And, look, it was, it was bewildering. And but but I learned so much, just from watching the guys around me, both the way more experienced traders, and the guys who were, you know, maybe four or five years ahead of me, but obviously had that experience under their belts. And you know, you realize that when these hacks and when these things happen, you, you don't have a choice, you can't just sit there, because you just get run over. So no matter how difficult it is, you have to make decisions, you have to come up with a strategy, you have to play offense and defense at the same time. And it's, it's a really difficult thing to do. And I think what I really took away from that was the fact that going into it, I realized that my understanding of the broader market, the kind of major cross currents that were affecting markets was nowhere near strong enough, I was focused on on on a very narrow, I was trading Japanese equity warrants at the time, which were, which were crazy, because that market was going nuts. So all my focus was on a very narrow part of, of the global financial system. And, and it meant I got called out. So from then I made sure that I not only read as widely as I could to understand other asset classes, the correlations, their interactions, what was happening in kind of obscure parts of the financial planning, but also history, you know, I'd always been a fan of history, I'd always read history. And that really sent me down a path of trying to learn about financial history more not not just kind of human history and, and that, you know, so that set me on a path that I'm incredibly grateful for to this day. So for me that that whole experience was nothing but positive even though the day itself was shocking, in a true sense of the word, you know, that the market recovered reasonably quickly from that certainly stabilized quickly. And I think the lessons it taught me have stood me in remarkably good stead for the for the next 30 odd years, particularly. So when I look back that this idea of trying to stay calm under pressure and realize that what's happened has happened. You can't sit there worrying about it, and also learning the lesson that equity markets can lose 20% of their value in a day. And once you realize that is a possibility, then you know that this whole FOMO thing, it doesn't get it hooked since you nearly as deep as it does, if you don't realize those things gonna happen.
08:53
Yeah, that's a good point. So number one, it sounds like you were able to extract that you have the capacity. And we all have the capacity that during tough times, we can call a timeout, and actually utilize our skills to go on offense and defense, you rose to a challenge that you weren't ready for. And I'm sure you learned about some resilience you had that you didn't know you had. I'm sure you learned about some capacity inside you that you didn't know you had. But you also learned, like you said about FOMO so you know that's for everyone who's not familiar, the fear of missing out so we see certain markets that are taking a ride upward and people are you know, hustling to get inside of it. And I think grant what you're saying is you don't get as bought into the highs and lows. You're looking at things on a bit broader scale, and trying to win over time. Is that accurate?
09:48
Yeah, I got one one clarification point on what you know, when you say I rose the challenge. I don't look at it that way at all. I felt I was dragged up to that challenge by the people around me and it's you know, it's an important distinction because I'd say I was fortunate enough to have guys around me who were more experienced than me. And instead of kind of cutting me loose, and every man for himself, they realized that I was inexperienced, I realized that I needed help, I needed guidance. So that idea of being able to count upon the people around you, and, you know, in times of stress, be able to ask questions and ask for help is, is critically critically important. But yeah, you know, to your point, that fear of missing out thing is, is very real. And it's arguably never been more real than it is right now with so many things at incredibly stretched valuations. And I think, you know, that there are people who want to chase the numbers and want to chase the hot stocks and get into the momentum stocks. And that's absolutely fine, right? There's, it's a great way of riding a trend and making money that the danger comes not when you're falling in momentum. But when you either have too much leverage involved in the trade, or you're following the momentum blindly, assuming you can get out, you know, if you're, if you're on one of those trains, that's just heading north, you have to constantly be checking around you and looking for reasons why that train might run into a brick wall. Because generally speaking, the more momentum there is behind something, the harder it hits a wall. And the more dangerous it is on the downside when we've seen that recently in in the cryptocurrency space, right? I mean, we can talk about kryptos, all day long, but let's just talk about the price action recently. And you've seen that thing get cut in half and a couple of weeks. And you know that the stories of all the people who were levered long 60,000, who are out, you know, and the kind of leverage being offered in the crypto space is enough that, you know, single digit percent movements will wipe out your equity in the position, you know, multiple times a day. So it's just a great example of understanding that liquidity is important. Leverage is important. And you have to make sure that you have a handle on those things at any stage in any trade.
12:04
Yeah, that's really good. So, you know, I appreciate you clarifying that. And, you know, that's an important point. And, you know, something that we talk about, just as business people is having business allies. And we, we like to, rather than try to become the expert at everything, seek out other experts in other fields. So when we're interested in something new, or we're looking at expansion, or things of that nature, finding the right experts in those fields to add to your team, because the people around you are so important. And so I think that that's applicable for, you know, everyday life, and also in business and investing. So I appreciate you sharing that that's an important point. And for everyone watching, I mean, that's something to consider is who you're working with, what does your team look like? And that's part of the preparation that each person should be considering whenever they're weighing their decisions as they move forward.
12:58
Yeah, no, I couldn't agree more, I understand that those good people are tough to fight, you make assumptions, and you assume you get parachuted into a situation, you assume that everybody around you is good, and reliable, and solid, is not always the case. But when you do find those people upon whom You can depend, and you can rely on who can who can teach you things, you know, keep them close, because that, that being able to tap into other people's experience is the single greatest shortcut to to kind of broadening your own experience bringing your own expertise, because it helps you avoid making mistakes, you know, that if you can learn from mistakes that other people have made, then hopefully, when you get face to those situations, recall that and not make those those mistakes, or even just recognize them sooner, and be able to get yourself out of them. It's it's invaluable. It really is.
13:53
You know, I think my experience has typically been that one blessing we can take away from adversity is it typically reveals who those people are. So, like you're sharing a story. So, you know, that's, that's one thing that, you know, adversity is typically reveals who those people are. So you'll see during the hard times, you know, who's gonna rise up and come alongside of you. So, you know, there's always incredible things to learn, regardless of if it's a good time or bad. And, you know, sometimes the hard times produce the strongest outcomes as far as, you know, Education team and growth towards the future. So, you know, one thing that grant I visited bit about prior to jumping on the show was that he's seen a lot of different ups and downs in the market. And he's still here, he's still hooking in jab and he's still moving. And he shows up with a desire for excellence, you know, every single day and what he's doing and we're going to dive into some more of that as we move forward. But grant I do appreciate that about you. And hey, guys, my apologies for jumping in and interrupting the video real quick. I know it's a pain. But it'll be short and it'll be sweet. So I wanted to let you guys know that what we do is we actually offer a private group, where you can jump in on a text line with us where we share more information about private investment offerings, and different funds that we manage. We do more educational content, and things like that and keep you up to date with everything we have going on in conjunction with The Solomon Investor Podcast. So if that's something you're interested in, pull out your cell phone real quick, and text the word Solomon to 319962. Just play your cell phone, text, the word Solomon, and then in the number spot 31996, that'll connect you to the group, and you'll be plugged in to everything new that's going on and happening. Alright, that's all I got back to the video. As we kind of move forward, you know, and one of the next things he had shared that he had been through was really the.com crash. And I'd love to hear some of some of these sequences about how they played out and how, as, as you went through each one, what was different from your vantage point, and how you handle those and what you had done prior to that, because of your experience, and then maybe how you handled it from a, a thought framework as you experienced those those difficult times?
16:10
Yes, it's a great question. I think my third bubble was, what was the one I navigated the best Japanese bubble. I was too young and too inexperienced. And I knew something wasn't right. It didn't feel right. But the markets were going up every day. And you know, the trading desk was making money every day. And it's so easy to get sucked into that. And yeah, and just think you know, it's it. Yeah, it's gonna stop at some point. But when it stops, I'll just you know, it's like you when there's old Bugs Bunny cartoons where the elevator be falling and bugs and step off the elevator right before the ground, right? And you figured you'd be able to do that in a crazy market just Oh, yeah. As soon as the music stops, I'll just step aside. But of course, it just never works like that. And then the second one of these I saw was the.com. Bubble. And yeah, that time around, I recognized it for what it was. I wasn't brave enough to take the action I felt was necessary, I succumb to that kind of FOMO I was I was in New York, I was at the center of it all and everyone was jumping up and down and whooping and wide and and I remember very clearly being in the, in the line at the kind of cafeteria in the office one day. And I was behind two guys who were with the trays getting their lunch. And one of the guys said to me, when I see I see Cisco's data as those loose, loosens down 7% today. And the other guy literally left his tray and said, I've been waiting for chance to get get it. And he just left his lunch and ran upstairs to go, no mobile phones back then to go in, you know, coolers broken and buyers loosened stock. And I remember that really, really clearly. And that was a sign for me that things were were getting a bit kind of squirrely. But again, I didn't have I didn't have the guts to sit out. You know, I'd seen the Japanese equity market, I'd learned what can happen. So I recognize that the second time around, but I hadn't then learned what should I do about it on an individual basis, I was still kind of Okay, I see this now I see that I see what's happening, I'll be fine, I'll be able to, I'll be able to do the Bugs Bunny elevator thing. And I managed to get out quickly enough. But I still got still got my fingers burned on the stove, you know. So when 2007 came around, that one I saw coming a mile away. And you know, I sidestepped that one I had the right positions on I had the right shorts on it. And what what I, what I was more comfortable with after the previous two experiences was being out early in oh seven and missing out on that last run up into the into the 2008 highs. I was okay with that. You know, it didn't bother me at all that I wasn't participating because I could see what was happening. I knew it was a matter of time. I didn't know what the catalysts would be. And that's something that people need to understand. You won't know what the catalyst are, even if there's one red light screaming something, the chances are very high that it'll be something else that kind of tips the basket over and you know, we had this this alphabet soup hedge fund go under in 2007. And that was that was definitely the first kind of Syrah warning going off that things were things were coming unglued. So now you look around the landscape now and you see the reverse repo stuff going on. You see the crazy valuations. You see the the froth in cryptocurrencies, you see the volatility, you see the kind of declining breath all the signs are there again, that we are somewhere near a top now. We can bump around here for a while. But as we saw in last March, you know, people will blame COVID for that. For that for sure. That's not the reality of it. COVID was was the was the trigger. For that fall, all the conditions were in place. And what's happened since with with all the kind of stimulus, both monetary and fiscal, that's been thrown at the problem, will have emboldened the new generation of people to think, you know, no matter what happens, we're good. No matter what happens, they will get this market back up. And we can be long and we can use leverage. And if it falls the federal step and have our backs. And again, you know that that's right until it's wrong. The problem and the big lesson I learned early in my career is you know, those huge draw downs will kill you. If you take a big drawdown. You're behind such an enormous APR, that it makes things very, very difficult to catch up. So of all the things that I would caution your your viewers and listeners to watch out for. It's it's you must avoid those big, big drawdowns.
20:49
Yeah, I appreciate you sharing that, you know, that was that was a quote I actually wrote down from you was that avoiding big draw downs are the single most important thing an investor can do.
21:00
And to me, yeah, I mean, other people will say something different. But to me, I just think, generally speaking, those big draw downs come. And I'm not talking to a single stock, because honestly, anything can happen in a single stock. But in a portfolio, those big draw downs tend to come. When you're either too concentrated, you're too levered, or you're not paying attention to conditions. And so I think if you have money invested in the market, if you're if you're, if you're kind of shepherding it yourself, then you have to understand what a commitment that is, it's fine being a day trader. But if you are investing your own portfolio, there are a reason there are hundreds of 1000s of people are willing for whom that is a full time profession. So if you're, you know, if you have a day job, and you're managing your portfolio, I can't stress enough how much attention you have to pay to what's going on to make sure you you don't get blindsided and suffer, you know, 3040 50% drawdown because to get back, you got to make 100%, if you lose half your money to get back to where you were before making 100% is not easy. So you know, I think there are plenty of things you have to avoid. But to me, those big draw downs are number one.
22:14
Yeah, and I really think it's a good time to maybe transition to where we're at today, because you brought up some good points, right? I mean, over the last year, we had the trigger, right from COVID. But it wasn't COVID that caused the problem. It's just a trigger that were the all the situation was already set up. Right. And then here we are. And really, we've just taken that system and exacerbated it right. And now we never hear over 12 months later, the markets are at New all time highs, right? The price to earnings have gone up drastically over what we've seen, you know, historically. And we're in a position where I think everybody's kind of asking the question of, well, what do we do next? You know, where else can we go? And so I'd love to hear maybe a little bit about how you process these types of decisions. Like, what's the framework that your mind is working through?
23:10
Well, I think I think the framework, it's important to understand that investing is, is the business of making a guess about a completely unknowable future. Right? That's it none of us know the future. Those who do that's called insider trading. So it doesn't, it doesn't it's frowned upon. At least it used to be I'm not sure if it is anymore. But um, we're all trying to guess an uncertain future. It's that simple. So you have to understand going in, that the deck is stacked against you. To get an edge in unknowable future is impossible. But that just means that before you, before you make any investment, you need to understand why you're doing it. You need to understand what you hope is going to happen, how this is going to play out. And you need to know what could invalidate the thesis behind your investment and constantly monitor those things. Because if you're buying something because your friends told you it's going up, that's one thing, right? That's a stock tip, you're going to take your friends tip and presumably rely on him to tell you when to get out, which is nine times out of 10 the day after you should have done but lets you live and learn. But if it let's talk about inflation, deflation, you mentioned that, yeah. This debate right now to me is arguably the most important thing that every investor has to consider. And none of us know what the answer is. None of us know whether our future is inflation, deflation, whether this is transient, we don't know except the fed the Fed now everything of course they know it's transitory.
24:39
So, if you have a portfolio that has performed well over the last 10 years, the chances are it is a portfolio that has been set up in a way that will favor a deflationary environment because that's the environment we've had, you know, bond price has been very strong. Yes, we've seen equity prices go up risk parity has worked very well. But let's let's throw this idea of inflation into the mix and acknowledge that we don't know if this is going to continue. And there are very, very smart people who will tell you that it won't you know, Dave Rosenberg and Lacey hunt both good friends of mine, both supremely smart guys have forgotten more than I'll ever know will tell you with great conviction that our future remains deflationary that this inflation is transitory. So that information is incredibly useful to me. So I'll take that information from two guys whose opinions I value enormously. And then I'll start putting in other things, I'll start putting in what I see, I'll start putting in anecdotal evidence that I hear I'll start putting in the thoughts of other people I trust who are on the other side. So Russell Napier being a great example, another good friend who has been in the deflation camp for 20 years, and late last year kind of switched and said, you know, what I think this is I think we are going to see inflate meaningful inflation in the next 12 months. So I'm going to synthesize all that information. And then it's like, it's up to me to decide what I think, is the likely future. But more importantly, what do I need to do for me, depending on what I think is, is in my future, if I believe deflation is still a part of it. If I think Rosie and Lacey are right, then my portfolio is probably okay. It'll need tweaking here and there. But it's more likely that what's what's performed. Okay, so far will continue to perform. Okay. If I think that either Russell's right, or the data points that I'm seeing, right, or the anecdotal evidence or or just, you know, talking to people in the street who run real world businesses, what what struggles are they facing? are they struggling to get finished goods are their input costs going up, you know, all this stuff is incredibly valuable. But it's, it's on me to make that decision. And, and, you know, I've, I've come down on the side of inflation. But here's where you get to another critical input, which is time horizon. If I'm looking at trading for the next month, inflation is probably not my concern. If I'm looking at trading on a three to five year view, then a I think, inflation becomes a much bigger problem. And, and B, I realized that, if that is my time horizon, then inflation, the way my portfolio is set up, is going to cause me some major major heartache. So then you have to figure out okay, what do I do? How do I need to re constitute my portfolio to protect me from the kind of ravages that inflation will cause? If I'm right, once you've done that, you've adjusted your portfolio and you've trimmed some of the things that you think won't work. If we go into inflation, you've added things you think, well, then it becomes a constant state of monitoring. Am I wrong? Am I wrong? Am I wrong? Is it right is Dave Right? I'm going to keep reading those guys, every chance I get and understand their latest thinking, what signs are they seeing that confirms their point of view? And when I when I read those signs, and I read their analysis on it, does that change my own analysis? And it's, it's, trust me being on the other side of an inflation trade to Lacey hunt. And Dave Rosenberg is the scariest place you can be, because those guys are brilliant. But like I said, my time horizons different to theirs. My anecdotal inputs are different today as my potential damage if they're right is different today. So it this idea of responsibility if your portfolio is is a really important thing to understand, you know, it's okay to have a manager look after your money. But that's a constant dialogue, you know, what's he thinking? How is he investing your money? it? What does he think about inflation, deflation? Is he think the same as you, if you think differently to him?
28:49
It's very easy to say, Oh, well, he's a professional, I'm just gonna let him go with it. But be rigorous about it, you know, challenge it, understand why he's different, you and if you really come down on another side, to this guy, then you know, that's something you need to think about you because what it means is you've got someone investing your money, whose outlook you don't necessarily agree with, and that's a very uncomfortable place to be because if he's, if he's right, okay, great, but if he's wrong, you're gonna be kicking yourself for a long time for not having the courage to do the challenging bit more on it or having the guts to say, you know, I just don't feel like this is the right way to invest right now. So this idea of responsibility, weighing up critical inputs, understanding your time horizon, investing accordingly, and then constantly constantly rechecking your, your framework is is just so important to learn.
29:41
Yeah, that's, that's really good wisdom. You know, a couple couple points. One thing was the question you said is, once you arrive at a stance, now, the continuous question from there is, am I wrong? Or what's changed, right? Or has it has has things have things changed and that continuous Dialogue is extremely important. So anybody that's out there, you know, with a stance, finding ways to break your own argument is one that is, is a practice that's very healthy. And then if there is somebody managing your money, like you mentioned, having these conversations with them is extremely important and extremely important as well. And so I think there's a, there's a large part, you know, of the country and people that have placed their money with, you know, advisor at some point, and then they maybe haven't met with them in years, right. It's just been set it and forget it. And it's not to say that where you're at currently is wrong. But it's always important to know where you're at, and why you're there. And that continuous discussion is one that should always be be had. Yeah, but absolutely, right. Absolutely. Right. And so you mentioned that right now, you feel that inflation is one in which is the battle that will we'll be moving towards that correct?
31:01
Yeah, I feel that's the thing that could hurt me the most. Yeah. And, and, and the more evidence, I see that, that, that the chances of inflation taking hold are increasing, then the chance of the damage of that can recur. My Portfolio increases. And so it's something that I feel I need to mitigate. And there is a there are people who believe is transfer, you're happy to just let this pass and, and wait for things to settle down. Again, I just think for me, as I said, over over the medium to longer term. I don't, I don't think that what happens from here, ultimately, in five years time is going to be five more years of deflation.
31:39
Appreciate that, you know, understanding timeframe, it's always important to understand the context in which somebody else is visiting with you about, right. So, you know, if they're talking about one thing or the other, under what time frame, the context is so important, I appreciate you making that distinction. You know, that is that is a discussion that is continuing to be had. And then, you know, if anybody in the audience hasn't seen Grant's discussion in his series on the end game, we'll put a link to it. We'll just put that right up here. And you guys can go check that out. But it's a great discussion about the end game of how things will continue to progress. And so great, we share a little bit on that discussion, and kind of segue into what you guys arrived at. in that discussion?
32:28
Well, the beauty of it is we haven't arrived anywhere. It's an ongoing discussion. Yeah, that was the point was, it's funny that we set out to talk about the endgame. But what we quickly realized Bill Nye was that the end game is is, you know, a great title for the podcast. But what we're looking for is, is what's next, the transition from the current environment to whatever comes next. And so that, you know, those conversations have been trying to investigate that on as many different lines as we can we've, we've we've had the inflation, deflation, right. We've talked about volatility, we've talked about, you know, capital controls, we've talked about repression, we've talked about all kinds of things. And that's, that's I think, an important thing for people to do is is to is to understand the multiple, different pathways that we can travel down from here, and understand that the number of critical inputs that will affect the path that we end up traveling down, and all of these things have something to say, you know, volatility has a tremendous say in the outcome, as does government policy, as does geopolitics, you know, all of these things, which are totally ephemeral, you can't you can't really capture them. But you know, they're, they're, you know, they're a constant threat to the status quo. And as the kind of the current monetary system reaches, it's kind of creaking.
33:57
And with so much debt saddled on the world, what happens is most likely to be some kind of reset of some kind. And again, you know, if you've, if you read financial history, you'll see that this, it sounds like a huge deal for us sitting here today, because we're at the tail end of the 50 odd years since the last reset, which is the Bretton Woods agreement back in 1945. So we're at the tail end of a monetary system, one that we've grown up our entire lives. But if you if you were 15 years old, in World War Two, then when you were 16, the monetary system was reset. And if you were 16, then you were 31 in 1971, when the gold peg was removed by Nixon and the monetary system changed again. So you someone who was coming of age in those times, so to monetary system resets in a space of 20 odd years 25 years. So it's very easy to get comfortable with a system that is around us every day and functions without us really ever questioning how and why and and what inputs go into me Can you function, but these things do have a finite lifespan, you know, the average fiat currencies lasted 30 years over over the course of history, we just happen to be at the end of a set of 50 year run here, doesn't mean to say it last forever, it doesn't mean to say it'll end tomorrow. But we are reaching the outer limits of that. And if you're looking carefully, you understand the problems that that enormous debt burdens place on governments, particularly at a time like this, where tax revenues are falling, you read history, and you understand what happens in those case, though, those holes have to be filled, and you can start trying to fill them initially by increased bond sales. And that works for a while, until people want a higher interest rate for the for lending you more money because they've seen that you're fiscally imprudent. So we're now at a point where the US has $23 trillion of debt, there's a trillion dollars on the Federal Reserve's balance sheet, the biggest budget deficits we've seen in our lifetime, how are they going to fill that hole, and everyone assumes that they'll just be able to sell as many bonds as they want, at effectively zero cost to investors. And they're the ones that the investors won't buy the federal just take those, and everything will be fine. And it might, it might. But if you've read history, and you've seen how these episodes tend to end, that will tell you that it probably won't be fine. And all the kind of soothing words that the Federal Reserve governors who are out five of them a day at the moment giving speeches to calm everybody's nerves and tell you how they've got this under control. Everybody had it under control, you know, rule of thumb haven't seen the governor of the right bank back in Weimar Germany, he had it under control, until they had 10,000% inflation. And the speed with which these things happen, once they begin will take your breath away, there's a couple of books that I recommend people read, there's a couple about hyperinflation in the past one is called the dying of money by yen's Oh Parsons, the books are long out of print, you can find a copy for like several $1,000. But if you go to the website of the Von Mises Institute, they have a PDF of the book on their site, you can find that the other one is when money dies by Adam Ferguson, that one you can buy, but there's also PDFs available on the internet. And both of those will give you a real understanding of of how inflation can happen really quickly. And whilst I'm not in any way, predicting that we're gonna have hyperinflation in America, or the UK, or Australia or Canada, anytime soon, because of the size of the debt burden. And because of the starting point of zero, we don't need double digit interest rates to cause an enormous problem we need right 5% interest rates and the game's over. So understanding what happened in previous episodes will really help educate you about how this could possibly go from here. And yeah, and the other book that again, I bore myself to death recommending it, but it's just a tremendous book is the Lords of finance by Liaquat Ahmed, which tells a story of the of the Big Four central bankers of the world between the world wars. And, again, you read these books, and you don't need any help, you'll piece together the similarities with today on your own, and it will really open your eyes to the kinds of possibilities that you don't have to assume will happen, but you have to know can happen and have a plan for
38:21
you, I appreciate you sharing those resources, we'll make sure that they're down in the show notes, everybody has access to them, we'll find some, some options to share that out. So I appreciate you sharing that, you know, having that, in this discussion, I think is a theme that has been continue to come up. So you know, like you guys said, in your in game series. It's a discussion of all the options, right. And the one thing is, is there's it's a continuous moving game, because even though we have historical and certain things, there's variables, because there's a human element to all the decisions that are being made at the the federal government level and at a global level. And all of those decisions have a lot of correlation that can change and trigger things in different areas. And, and so playing out those variety of options and finding a way to prepare yourself for a variety of options. And staying in tune and in touch is incredibly important. You know, that's why guys, you know, that's why we do this show. And that's why Grant has puts out incredible education. You guys haven't connected with him. He has an incredible podcast, incredible YouTube channel and a series of newsletters that you can get in touch with us, we'll make sure that we share all the resources for that. But the continuous dialogue and and being willing and open to look at things not emotionally but in a way that understanding these things can happen and we would prepare for them and be prudent and wise to spend time having the discussion in preparation. And so, Grant I appreciate you taking the time to share some of those frameworks with us today and look forward to being able to dive into some more material. We You in the material that you've shared. And so, you know, kind of before we sign off, I'd love to hear a little bit more about those channels where people can plug into and get connected for, for more information.
40:13
Sure, yeah, it's, it's, it's really nice and simple. Now I've finally, after many years of putting it off and putting off have finally sorted my website out. So if you go to there we go. Great. Yeah, right. Grant dash williams.com, you'll find the podcast there, you'll find my writing there. It's all in one place. There's a lot of videos, some of my previous presentations are on there as well. And I'm on Twitter TT myth, which is caught remembers the acronym for things that make you go home. Nice and simple. I'm very easy to find in two places only.
40:44
Yeah, I appreciate that. Well, we'll make sure everybody, the links are up here. And everybody has access to that. And, you know, before we sign off, I wanted to bring up you know, one thing is, as we've been talking about a lot of different scenarios, right? And everybody's kind of always, always ask the question, like, what do you do? Well, what's going to be best? You know, one that I've heard you share, and this is something that I appreciate is, is understand the relationship between different asset classes in different industries. And a point that you've made in the past that I appreciate, is one thing to evaluate is how things perform against other assets. So when things are moving in different directions, you know, you'd mentioned you know, in the past, you know, you'd mentioned in the past that, you know, one thing that you like, is gold, and there's a discussion is, you know, one point he had moved into gold, and things had dropped off in the s&p, and every single gold drop, too, but it didn't drop in the same relationship, right. So whenever we're looking at hedging risk, and what grant is shared is one of his positions being that the best thing you can do is avoid massive drops in your portfolio is asking the question, as you're preparing it, how can I put myself in a position where based off of these scenarios and these potential outcomes, where can I move money into? Where can I invest in a way that's going to help maintain value when other things may lose? And so if you could just kind of touch on that real quick, before we jump off? I think that'd be something that is an important consideration, because we're not just looking at what stock is it? Or what industry is it? But how how things are performing? on a wide scale?
42:29
Sure, yeah. I think the example you're talking about what was a conversation, I was having someone about gold, and we were talking about gold as a hedge as liquidity reserve. And the point I was making is that everybody fixates on the price of gold, and ever the question everybody wants to know is, what's the price of gold, gold is going to go to another 1000? Is it gonna go three? 510? Where's it going to go? And, you know, I've owned gold in various percentage of my portfolio since the early 2000s. And it's performed tremendously well. But the price is really not what I'm looking at as as a barometer. And we talked about 2008. And the fact that gold fell, you know, in the initial stages of 2008, post, Lehman got the gold price fell. And, you know, the point was made that will help, how's that a hedge for your portfolio. And if you understand what happened there, people were selling their gold, to pay for the losses that they actually suffered elsewhere. And their equity portfolios were bond portfolios, for example. So the the gold did its job. But then I made the point that, you know, going into September 15 2008, an ounce of gold would bind, I forget the numbers now, but I would buy, let's say, three units of the s&p. And yes, the gold price fell. But the fact that the s&p fell 60 odd percent meant that same ounce of gold would buy you almost 60% more units of the s&p is even though the price fell, people disappointed with the price, if you think of it as a liquidity reserve, and you didn't deploy that liquidity, you are able to exchange it for 65% more of the other unit that you're trying to compare it with. So I think that's a really good example of how to think about something like gold as as a liquidity reserve as a form of cash that you can deploy in times of stress and it's really the purchasing power that's the most important is not necessarily the price of that unit itself. And those those correlations hold across all kinds of things, you know, if you if you if you are long volatility, if you have an investment in volatility fund, you know, my great friend Steve Daigle in in Singapore had a fund called artritis, which was, which was long volatility, in short credit going into the financial crisis. And, of course, that was a hedge for people, which for the previous number of years, had basically kind of bumbled along doing nothing when everyone was making fortunes and all their other portfolios. But as a hedge when when the time came when the markets collapsed, that fund performed incredibly well. But because it performed incredibly well, the guys had huge redemptions. Because people came to them and said, right hedges paid out, we want to redeem. So it was it was perfect. You know, the fund had maximum redemptions at the high watermark, because it had done exactly what it was supposed to do, and offset the losses elsewhere. So having that understanding that it's not always about price, it's about what something does for your portfolio. And what it offers you in terms of purchasing power, I think is a really, really important thing to understand.
45:35
All right, Grant, I just want to say thank you so much for being on the show. It's been incredible having you diving into all these different topics, and so appreciative of your time, and I know our audience will be thankful for everything you've shared today. So other than that, everybody thank you so much for tuning in to another episode of The Solomon Investor Podcast. We look forward to seeing you next time and have a blessed day.