Markets, politics, and personal finance collide in this wide-ranging conversation with Jared Dillian. From the growing politicization of the Federal Reserve to investors overconfidence in stock returns, Jared pulls no punches on what investors are getting wrong.
Jared also shares his views on global politics, Argentina’s turnaround under Javier Milei, Europe’s chances for outperformance compared to the US, and the end of dollar strength.
Whether you’re a trader, long-term investor, or just trying to understand where money is headed, this episode gives you a clear — and sometimes uncomfortable — look at the future of markets.
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Transcript
Ben Nadelstein:
Welcome back to the Gold Exchange podcast. My name is Ben Nadelstein of Monetary Metals. I’m joined by Jared Dillian. Jared is a former Lehman Brothers trader, founder and editor of the Daily Dirt Nap, and the author of several books, including Street Freak, Those Bastards, and his new release, Rule 62. He is also a progressive house DJ and an outspoken advocate for mental health and finance. Jared, welcome to the Gold Exchange podcast.
Jared Dillian:
Thanks for having me.
Ben Nadelstein:
All right, Let’s start with your new release, Rule of 62. Why don’t you tell us what is it? I saw that it’s the number one new release in the work-life balance category. Is work-life balance overrated? We have Jared Dillian to tell us about the new book, Rule 62.
Jared Dillian:
Yeah. Thanks for bringing that up. This is a collection of essays that I’ve written over the last two years, specifically pertaining to success and spirituality, mostly about success. I think 20 years I was a little bit of a mess. I didn’t have a lot of direction, and I’ve worked very hard to become a very mentally healthy person over that time. This is the lessons that I’ve learned along the way. It’s a great book. Aside from One Jackass, all the reviews are super positive. So I highly recommend checking out Rule 62.
Ben Nadelstein:
What are some of the lessons that you wish you could have told young Jared And I think more importantly, would young Jared have listened to future Jared? I guess if you came out of a teleporter or a portal, that’d be pretty cool. I’d probably listen. But what would you want to tell your younger self?
Jared Dillian:
Well, in my professional life, A lot of people naively believe that if they do the best job, then they will get paid and promoted, that it’s strictly about performance. And just I was disabused of that idea when I saw people making less money than me, people that were less profitable, getting paid more and promoted ahead of me. And I started to figure out that politics matter within an organization. And I think some people say, well, it shouldn’t matter. All that should matter is the job that I do. And I’m like, ding, ding. This is the reality that we live in. So people say, well, I don’t want to play the game. And I’m like, Well, you have to play the game. That’s part of it. And bosses generally don’t give raises and promotions to people they don’t like. So what I tell people is that your job is not your job. The thing you do every day is not your job. The thing you should be doing is being friends with your boss, right? And if it makes you feel better, you can also do a good job at your job. But really, what you should be doing is making friends with your boss.
Ben Nadelstein:
All right, maybe here’s a fun segue for us. People think, yeah, there’s no politics at my job. It’s just whoever’s the best trader or whoever’s the best plumber, they get promoted, or obviously, in finance, it’s a bit different than maybe some other types of jobs. But there’s a specific job which is supposed to be completely apolitical. That’s our friends at the Federal deserve. They don’t care about politics. They’re completely independent. They make decisions just based on the science, right? They see what interest rates should be. They look at inflation, and they don’t care about politics. They don’t care about being friends with the current administration. What do you think? Would you give them the same advice, Hey, maybe it’s time to cozy up to your boss, or do you think this is one case where independence truly does matter?
Jared Dillian:
You know, Trump is wrong about wanting interest rates to be zero, but he’s right in that the Fed has become highly politicized. And I would say that I’ve talked to a couple of former Fed officials, not people on the board of governors, but lower-level people, and they’ve told me that you would be shocked at the degree that politics factors into monetary policy, really the optics around rate moves and stuff like that. So that’s one of the reasons why the Federal Reserve consistently gets it wrong because they’re being influenced by factors other than the things you mentioned, the economy and inflation and stuff like that. They’re focused on other things. Years ago, when I wrote about the Fed, I said that the Fed was… They operate from the path of least embarrassment. They’re constantly in CYA mode, and they’re always is doing the thing that they believe will help them maintain their reputation. And by definition, that is usually the wrong thing. The Fed doesn’t take risks. Just even going back to 2021, when the Fed started raising rates, they raised them late because reputationally, the risk of raising them too soon was greater than the risk of raising them too late.
If they were wrong about inflation and they raised rates too soon and they tank the economy, that would have been worse than if they were late, reputationally. So anytime you get a group of 19 people together making decisions collectively, it’s inevitably going to be worse. And I would like to get rid of the Fed and just replace it with a system where short term interest rates are determined by the markets. The markets do a very, very good job of a lot of things. If you had a Federal Reserve for eggs, we would have an egg shortage within a month. The markets do a good job of setting prices and equilibrating supply and demand, and the markets should be in charge of short term interest rates.
Ben Nadelstein:
Do you think that there is going to be political pressure to get rid of the Fed and instead of doing what maybe you and I would like, which is just saying, Hey, we’re going to have market rates set by the market. Do you think that this is now just being a policy tool the same way that, Oh, we decide what tax rates are, or we decide what the Social Security rates are. Do you think that basically the Fed will just become a completely political institution? It’ll get some zoomed by the treasury? And although there won’t be a Fed, it won’t be exactly what you and I are looking for?
Jared Dillian:
Yeah, that’s where we’re trending. And we’ll go from a system where 19 people… In markets, you have 100,000 people setting interest rates. At the Fed, you have 19 people setting interest rates. It’ll go to a system where you have one person setting interest rates, and that’s Trump or whoever happens to be President. And then it will become completely political. So that’s where we’re going.
Ben Nadelstein:
Our friend Tyler Cowen, who writes at The Marginal Revolution, his blog, which has been around forever, and it’s a great read, he’s not exactly a fan of gold. But one of the things he said in favor of gold was that basically, as the Fed becomes more politicized, that will probably lead to worse outcomes, where in general, we’ve seen a correlation between Fed independence and better monetary policy. And so this could be an argument for gold, which is that basically you think over time, the Fed becomes more politicized, worse outcomes, therefore, maybe better to have some monetary insurance. What do you think about that argument? And that the argument for gold is basically, well, we think the Fed will do a worse job going forward than they’ve done in the past.
Jared Dillian:
Well, the argument for gold, especially in the last couple of days, has never been stronger. And he’s right about it, but I think he’s very measured in what he’s saying. And I think he’s understanding it quite a bit. Pretend this is 1998, and I told you that in the future, the President would be threatening to fire the chairman of the Fed and set interest rates himself, and he specifically said he wanted them to be zero, you would be buying gold with veins popping out of your neck. You would just be, just wave it in. And it’s funny because it’s actually happening And people are sitting there staring at the screen, and they don’t know what to do. A lot of trading, a lot of finance is doing really obvious things, right? That’s actually the genius of Stan Druckenmiller. He just does things that are totally obvious. Like, oh, bond yields are at three and a half %, and we have 36 trillion in debt, and we have a deficit to GDP of seven %, and it’s not getting any better, we should short bonds. Like, very obvious. He doesn’t overthink it. Like, oh, there’s a bunch of social media chatter about NVIDIA.
Let’s look into this. Maybe buy some NVIDIA. And then he makes it 50 % of his portfolio. He just does very obvious things. So what I try to do with my newsletter and just in my own thinking, is really like, what is the obvious trade? Because a lot of times that’s what works.
Ben Nadelstein:
What do you think people miss, though, when someone says, Oh, it was online and Tesla is the big thing. Obviously, there’s some danger for a retail crowd to think, Oh, well, whatever’s in the news I’m going to buy or whatever seems obvious. For example, you could say, Oh, we’re going to lower rates and that’s going to lead to inflation. And then sometimes it does, sometimes it doesn’t. So obviously, macroeconomics can be quite confusing. So how do you advise people, not in terms of financial advice, but in terms of their thinking of how to think, Hey, maybe I’m on the peak of Mount Steeple or whatever, or that I’m actually onto something here?
Jared Dillian:
Well, I think about that a lot, and it really depends on how close you to the information. Stan Druckenmiller is obviously very close to the information. I’m a little bit further away from the information, but I’m still pretty close to it. But some XYZ real estate appraiser in Myrtle Beach, I call that person the caboose. They’re the last to know. So when you’re thinking about these things, you have to ask yourself, Am I the caboose? Because information can get stale.
Ben Nadelstein:
I interviewed Jean Epstein, who used to work at Barons, and I asked him this question, which was like, Hey, sometimes if gold’s on the cover of Barons, that’s a selling indicator because it means that, Hey, the people at Barons are basically the caboose, and this is the top. What do you think about that idea that when people are talking about gold or really any stock or equity or commodity, that maybe it’s time to start selling because this has become too mainstream? Do you think that gold has hit that saturation point in the mainstream, or do you think we’re still far ways I think we’re a long way away.
Jared Dillian:
I mean, I think it did in 2011. 2011 was a food fight for gold and silver. It was a speculative mania. It got out of control. Gold topped out at about 1900. Silver topped out at about ’50. You had all the cash for gold stores and all that stuff. There was huge retail demand at the precious metals detailers, a lot of retail demand. We’re not really close to that yet. Now, having said that, Barons did have a gold cover about four months ago, which put in the top for about four months. And since then, we’ve been consolidating.
Ben Nadelstein:
What do you think about the story between silver and gold? So again, for most people, gold’s in the headlines. They think about gold. Maybe they know a little bit about gold. Maybe they even own some. But silver is obviously monetary as metal as well, but a lot less, if you want to say, famous in financial circles, where maybe people will know gold, maybe they’ll have some in their portfolio. But Silver is just a completely different story. Do you think that Silver is also going to have a time to shine, or do you think Silver is becoming more of an industrial metal, where basically the people who trade Silver, the people who trade cop?
Jared Dillian:
I think it’s a hybrid of industrial and precious. I think it’s become more industrial over the years. But even if you look at it from a purely industrial story, you should be bullish on that basis, too. I have a friend, Alex Campbell. He has a sub stack called the Campbell Ramble. And if you get a chance, you should look at his post on Silver. I mean, he did a deep dive into Silver talking about solar demand. It’s going to happen. Silver is going to go much, much higher, just even based on the industrial demand, let alone the investment demand.
Ben Nadelstein:
And do you ever think about the gold to silver ratio? Does that ever play into your mind? Like, oh, wow, you can get this much gold for this amount of silver or vice versa. Do you think that matters, or do you think that’s just a historical anomaly that, oh, you used to trade at 90 or 12, or this ratio used to be different numbers? Does that come into your calculations at all or not really?
Jared Dillian:
I think it matters at the extremes, and we recently hit an extreme before silver started rallying a little bit, where gold was over 3,000, silver was around 25. I forget what the ratio was, but it reached an extreme level. I think what’s more interesting is the ratio of gold to platinum. Platinum got to a point where it was very, very cheap relative to gold. And when platinum gets that cheap to gold, then interesting things start to happen. Even on a micro on a metal level. Like, jewelers will say, Gosh, gold is 3,300 an ounce, and platinum is 1,000 an ounce, I can make rings and jewelry out of platinum. It just makes a lot more sense. So I think at the extremes, those ratios actually do work.
Ben Nadelstein:
What are some market indicators or sentiment indicators that you use specifically for the precious metals like gold, silver, even platinum as well? Because I think there’s some pretty solid sentiment indicators, the fear or greed index for things like equities. But do you use a different index or a different thought process when it comes to the precious metals?
Jared Dillian:
Honestly, I just look at the chatter on Twitter. I look to see what people are talking about. And the sentiment for gold did get a little hot about four months ago, and I want to emphasize a little relative to 2011. But yeah, I just see what people are talking about online.
Ben Nadelstein:
And what do you think about that democratization of financial news? Obviously, in the past, it was either a single or newsletter from a smart guy that you might have subscribed to, or you are basically getting information from the top dogs like a Morgan Stanley or something like that. Do you think the fact that we have more information now is good because, hey, anyone can hear from anyone. You can talk to the best traders in the world on your on your phone? Or do you think it’s almost just polluted the information space where there’s so much information, it’s hard to know it’s true anymore?
Jared Dillian:
Well, I think more information is good, but I can tell you that it’s definitely hurt my newsletter business. When I started in 2008, there weren’t many people with newsletters. It was me and James Grant, Dennis Gartman, and a few other people, and that was it. I had first mover advantage, but there is so much competition now. I saw the other day that Satrini has 50,000 subscribers. I mean, that’s just that’s absolutely enormous. So it’s gotten very competitive. But yes, the more voices, the better. I mean, really, what you have to do is you have to become more skilled at filtering. And what I do is when I’m on Twitter or wherever, I separate people into buckets as to whether they’re smart or whether they’re dumb. And It’s not that I necessarily ignore the dumb people. They can also be useful in certain situations, but you have to separate people into, does this person have alpha or does this person have negative alpha? And they’re both useful.
Ben Nadelstein:
That’s a funny way to think about it. So maybe people are following me for negative alpha. I’ll make sure people can follow my Twitter, I guess. Okay, I want to do a rapid fire round. So I want to just ask you questions from all different areas of life, whether it’s investing or personal finance, or macro, and you can answer for as long as you want or as short as you want. So let’s start with our first rapid fire. What are your thoughts on the private equity space? There’s been a lot of rumblings on, Oh, we’ll now allow private equity into 401(k)s, and just your regular guys can invest in private equity, and they’ve had so much better returns. What are people missing when it comes to private equity? What do you think about the space in general?
Jared Dillian:
Yeah, putting private equity in 401(k)s is a pre-baleout of private equity. Besson and Trump know that private equity is a bubble. They know it’s going to burst. It’s not a coincidence that Yale was the first endowment to sell private equity. Besson went to Yale. I’m sure he gave them the call to tell them, Look, you should unload some of this stuff before it gets to be ugly. So I think the White House is very concerned about it. And the White House is throwing individual investors under the bus in order to get private equity firms more liquidity. So I’m pretty sure that’s what’s happening. I would call it a pre-baleout of private equity.
Ben Nadelstein:
Okay, next one for you, in a similar vein, which is that Trump and the White House have been pushing their own crypto coins, Trump coin, Melania coin. Do you think this is basically the end of the meme coin era, where people just see right through this stuff and say, listen, maybe you want Bitcoin, maybe you want Ethereum. But if we’re talking about meme coins, that’s truly a joke. Do you think the meme coin era is over and maybe cryptocurrencies will consolidate over the top few, whether it’s Bitcoin or Ethereum? Or do you think that this is just the beginning of the proliferation of more meme coins?
Jared Dillian:
The meme coin thing will end. I don’t know when it will end, but it will. If you remember about five or six years ago, we had ICOs, initial coin offerings, and that came and went. So it’s a fad in crypto, just like NFTs. Nfts can be… I guess it 2021 when Beeple sold his NFT of his art for 69 million in Ethereum or something like that. And nobody’s talking about NFTs anymore. So this is just one of these things that comes and goes in crypto.
Ben Nadelstein:
Next one for you. So I’m a bit on the younger side. People of my age are very interested in crypto and Bitcoin, and, Oh, we’re going to change the world with blockchain. And then on the older end of the spectrum, you have some people who maybe they don’t understand Bitcoin or crypto. Maybe they like gold, maybe they like silver, maybe they’re just in a real estate or stocks or bonds, who do you think is going to give up first? Do you think that the crypto people are going to realize, Hey, there’s more assets in the world that we should probably be taking an advantage of, whether you’re tokenizing them or not? Or do you think that the older generation will go, Yeah, sure. You can tokenize my real estate. I don’t care.
Jared Dillian:
Well, first of all, let me just say that if I had a choice to own Bitcoin or gold for 100 years, I would definitely own gold. A hundred years is a long time. I’m not sure Bitcoin is going to be around in a hundred years. Maybe it’s going to be around for 10, 20, 30. I would be surprised if it’s around for 100. So I like to think really, really long term. I’m not answering your question right now because I lost my train of thought. I was going somewhere, The older generation versus the younger, who do you think is going to acquiesce first? I think the younger generation, for sure. Yeah, I’m not really old. I guess I’m old. I’m 51. And I started buying gold 20 years ago when I was 31. And all the gold that I bought back then, I still own. I did own Bitcoin for about a year and a half from 2019 to 2021. I made a ton of money on it, and I sold it, and I bought a Corvette. For me, it was just a trade. It was just a trade. I don’t really believe in crypto as being a store of value I believe in physical, tangible things being a store of value.
Ben Nadelstein:
Do you think there’s going to be a merger between the crypto verse and the blockchain and all these supposed benefits that are going to come from, whether it’s tokenomics or just something crypto-related in this digital age, and hard assets, real assets like gold or real estate or silver? Do you think that there’s going to be a merger of the two, or do you think that they really should be and will be separate asset classes?
Jared Dillian:
Well, I do think security tokens are super interesting. I I actually think that’s one application of the blockchain that is really cool. You take a building on Third Avenue in New York, and you tokenize it, and you can buy $50,000 worth of it. That is a very, very, very good application for crypto. I think that will start to happen in dribs and drabs, and I think those are good applications.
Ben Nadelstein:
I want to ask you about gold versus equities. So you wrote that people think nothing about having 80 % of their networth in stocks, but freak out if they have 5 % of their networth in gold, even though roughly, they’re usually the same volatility. So do you think that in general, people are going to add more gold to their portfolio as stock volatility changes over time? Or do you think that people basically are stuck in this mental model of having around 5 % of their portfolio in gold?
Jared Dillian:
I think the higher it goes, the more comfortable people will be with owning more of it, which is paradoxical. But that’s usually the way it works. I mean, it’s working that way with stocks. There’s a lot of different opinions on diversification. I want to go back to Stan Druck Miller for a second. Stan Drucker Miller is not a believer in diversification. He calls it diversification. The more assets you own, the lower your returns go. So if you are good, if you can identify asset that is going to go up 100 % a year, then you should have 100 % allocation to it if you’re super confident. I have a pretty high degree of confidence that gold is going much higher, but even still, it’s only about 25 or 30% of my portfolio. It’s not 100% of my portfolio. I tend to be more conservative. Actually, I don’t know if you know about the awesome portfolio, which is something I have been in, but that’s 20% 20 %, stocks, gold, cash, bonds, and real estate. It’s funny. When I came out with the awesome portfolio six years ago, people freaked out. They’re like, 20 % in gold?
Gold is so risky. And I’m like, I think 20 % in stocks is risky. Seriously. Look, gold has had some pretty big drawdowns in the past. It had a 20 % drawdown in 2022. It had a a 45 % drawdown from 2011 to 2013. But like you mentioned, it’s approximately the same volatility as stocks since 2000. I mean, you can play the time horizon game, but since 2000, gold has outperformed stocks. Since 2005 or ’06, it’s been about a push. So I don’t understand people’s aversion to holding 20 % of it.
Ben Nadelstein:
Do you think that this idea of a permanent portfolio or an awesome portfolio, do you think that’s something that most investors can just wrap their head around, and that’s going to be the new 60/40. Or do you think that 60/40 is going to continue on? Yeah, it’s had a little bit of a rough patch, but 60/40 is here to stay.
Jared Dillian:
Well, I mean, this is my mission. I’m trying to change the world. I’m trying to get people to think about it differently. I have a book coming out next fall called The Awesome Portfolio, which is all about that. Like I said, I’m trying to change the world. I’m trying to get people to think about risk differently. The funny thing is that you have so many people that have 100 % of their portfolio in stocks. And the book is done. It’s written. It hasn’t been edited yet. But one of the things I talk about in the book is if you won the power barbell, if you won $300 million, would you put all that money into stocks? Of course not. You put 90 % of it in T-bills, and maybe you would screw around with 10 % That’s what most people would do. But if you have a middle class family, a middle class household that has $400,000, what do they do? They put their entire life savings in the stock market. The stock market has had four 50 % drawdowns in history. The Great Depression was an 89 % drawdown, 89 %. And a lot of people say, that’ll never happen again.
I don’t know. I I can’t say that. So over the course of a 40-year investing career, you are probably going to have one or two 50 % drawdowns, right? And what a lot of people have a tough time doing is imagining how they are going to feel during those drawdowns. Because it’s easy to say, Oh, I’m just going to dollar cost average, and I’ll buy the dip. And markets always go up, and it’ll work out. That’s not usually what happens. First of all, most people puke, most people sell it. And even if you manage to hold on, that’s three years of your life where you are miserable. You are absolutely miserable. So why would you put yourself through that? The awesome portfolio has had a max drawdown of 12 % a year. In the financial crisis, it was down nine %. This is when the world was going to hell, the awesome portfolio was down nine %. So it’s It’s all about managing your volatility, managing your risk, managing your drawdowns. And if you’re not experiencing these drawdowns, then you don’t have these negative emotions associated with it, right? So if you say, All right, I have two choices.
I can have two million at retirement, or I can have a million and a half at retirement. But if I have two million, there’s going to be five years where everything is awful and I’m going to hate it. Or if I have one and a half million, I don’t have to worry about my portfolio at all. Everything’s going to be fine. What would you choose? And some people would choose a two million, but they would probably regret it.
Ben Nadelstein:
I think investor psychology is so interesting because so many people think that they would do something differently. And then When the fan is actually getting hit by the feces, they very quickly change their tune. I try not to swear on the podcast. This is a family podcast. That’s just not true. But so what do you say to those people who think that they would act differently or have that regret? Let’s talk about the psychology of investing. What are some things you think you can do to minimize that regretful feeling when you do have that two million in the bank?
Jared Dillian:
You see, the thing with modern investing, this idea that you should buy a bunch of index funds and hold it for 40 years and dollar cost average and buy the dip and ride out the volatility, it’s all based on faith, right? It’s based on this idea that the stock market has returned 9% a year for the last 100 years. Therefore, it will return 9% a year for the next 100 years, right? Think about that logic. Whenever you look at a mutual fund fact sheet, what does it say on it? Past performance is no indication of future results. So past performance is no indication of future results. Just because it returned nine % in the last 100 years doesn’t mean it’s going to happen for the next 100 years. It could return 5%, it could return zero. Something else could return nine %. We don’t have knowledge of the future, right? But it’s a cult. It’s actually a cult. It’s like an index fund cult. And look, if we become a Communist country, the stock market is not going to return nine %. It’s not. It’s going to return negative something, right?
Ben Nadelstein:
I want to ask you actually about this guy. His name is Zoran Mamdani. He’s potentially going to be the mayor of New York City. Do you think that he’s a symptom of the fact that people feel disenfranchized? And how do you square the circle between guys like that potentially getting power in one of the most important cities in the entire world, and this idea that, Oh, markets always go up into the right. There’s nothing to worry about. The people who are screaching about drawdowns or depressions, they’re just fear mongers.
Jared Dillian:
I mean, the disenfranchized US people did not vote for Mamdani. They voted for Cuomo. It was the Intelligencia that voted for Mamdani. It was the Trustafariens that voted for Mamdani. So it was these people who were educated in Ivy League or Ivy League-ish institutions and have been taught their entire lives that socialism is good, that’s who’s voting for this guy. And when I talk to people in New York, they’re like, We survived De Blasio. We He didn’t survive this. He’s not going to be able to do anything. It’s going to be fine. Yeah, maybe the city gets a little dirtier. It’s going to be okay. De Blasio was a Communist, but was not a true believer. He was more of a pragmatist. This guy is a true believer. He’s talking about seizing the means in production, right? And he’s not soft selling his message at all, which is alarming, but he’s also succeeding by not soft selling his message at all. The demographics of New York have changed dramatically over the last 40 years. New York had a Republican mayor. They had Giuliani, right? And he won in 1988. He beat David Dinkins, and it was a very close election.
It was ’51, ’49. And Giuliani won because of blue collar votes in Brooklyn and Queens. While the demographics of New York have changed dramatically, There’s no more blue-collar people in Brooklyn and Queens. It’s become totally gentrified. It’s all these trustafarians, as I said. So New York, from a political standpoint, it’ll never get a Republican mayor again, and it’s probably doomed.
Ben Nadelstein:
What do you think about other states getting an influx of refugees from New York? Are you bullish on different states, whether it’s Florida or Texas, and maybe bearish on places like California? Or do you think that the United States is actually going to lose some people to other cities, places like Dubai or other countries? What do you think? Do you think there’s going to be a migration, at least out of maybe blue cities into red states? Or do you think that there’s actually going to be an emigration from the United States in general?
Jared Dillian:
Well, three states lost population in the last census, New York, California, and Illinois. Not a coincidence. And I actually wrote a piece about this for Bloomberg in 2017. When the tax reform, the TCJA was passed in 2017, and it had the cap on the salt tax deduction. That’s when I said, That’s it. There’s going to be massive, massive migration out of the Northeast, out of California, and into the South. I live in South Carolina. I moved from New York City 15 years ago. I actually went back and read that piece. I wrote it eight years ago. Everything I And what I wrote in that piece actually happened. If you’ve been to Nashville lately, there’s cranes everywhere. It’s booming. Atlanta, Austin, Miami, like Raleigh, Durham. It is booming. So the migration is not done. New York has about eight million people, New York City, that is, and the outmigration is going to be large. I would not want to own property in New York City.
Ben Nadelstein:
I want to ask you about some different countries you’re bullish on. Argentina has had this incredible miracle turnaround with Javier Mele. Do you think there’s other countries that are going to maybe copy his success, copy his playbook, or do you think that he was a shining star in a dark, dark galaxy?
Jared Dillian:
I was very involved in Argentina in that trade. Latin America is looking really, really good because most Latin American countries look at Mele and they say, We We want that. We want to become like Argentina. So Chile, Colombia, and Brazil, I would say the three biggest candidates. Brazil, the politics are a little funky. The election isn’t for another year. And it’s not a done deal that somebody right wing is going to get elected there. But Chile, the election is coming up soon, and that, I believe, the right wing candidate has a 60 % chance of winning. But the thing to point out about these Latin American countries is that the right wing is not the populace right. They’re the free market right. Populism as an economic strategy does not work. The funny thing about all these countries is that they trade at six times with massive dividend yields, like dividend yields of 6-8%. Brazil has a dividend yield of 8%. Why would I buy the S&P 500 at 24 times with a 1% dividend yield when I can get a country that’s on the verge of liberalizing that trades at six times with an eight % dividend yield and could get explosive growth.
In terms of my equity holdings, only about 10 % of my holdings are in the US. Everything else is international. I own Latin America and I own Europe. I don’t think I have any Asia. Plus, if you’re bearish on the dollar, which most people are, then this should absolutely work.
Ben Nadelstein:
So Do you think that period that we’ve had of US relative outperformance compared to EU, or Latin America, or Asia, do you think that that is basically over, that we’re in a new world, global order? And why do you think that?
Jared Dillian:
I don’t really have a reason, but Europe is up about 10 % this year, and the S&P is up about 4 %. So it’s working. Like, it’s working. So I think if you really wanted to talk about the big macro reason why it could be happening. It’s probably the end of dollar strength. I mean, actually, I should disclose that I’m long the dollar at the moment, just for a correction. But on a long term basis, I’m very bearish on the dollar. Us assets, US currency, it all comes down to the debt situation. With 2 trillion in deficits, 7% of GDP, no end in sight during peace time. Look, I was about to say it’s the end game, but the end game could take 20 plus years to play out. A lot of people look at the debt and they say, Oh, my God, there’s going to be a crisis and everything’s going to crash. No, it could take many, many years to play out.
Ben Nadelstein:
What do you think of this dollar milkshake thesis by our friend, Brent Johnson? Basically that there’s other currencies in the world, other countries in the world, they all lack relative to the US, the markets, the rule of law. And so when a crisis happens, whether it’s because of dollar weaponization or inflation or currency crisis, the capital flows from these countries into US assets like the dollar, the S&P 500. Do you think that that thesis is overblown? Where do you agree and where do you disagree?
Jared Dillian:
I never understood the thesis. I know Brent. I met him before. He’s a nice guy. He gained a pretty big following with that thesis. There were actually Twitter accounts running around called Dollar Bullish, like his fans. I never really got it, but I can tell you that it’s probably over. It’s probably over. So he’s going to come up with maybe a dollar hamburger theory or a dollar or something else.
Ben Nadelstein:
Okay, a couple more in the rapid fire, which is, do you think the US will ever have a sovereign wealth fund, where they basically say, Hey, we’ll use this sovereign wealth fund like other countries and we’ll use this to help with things like redistribution. So everyone feels like they’re a part of the US story. And when the stock market goes up, well, that makes everyone happy. Instead of right now, people say, I don’t care that the stock market goes up. My eggs are twice as expensive. Do you think a sovereign wealth fund in the United States would be a solution, and do you think we’re heading towards that?
Jared Dillian:
I don’t know. I mean, I’ve heard some chatter about it. I hope it doesn’t happen. If you want to talk about making decisions based on politics, I mean, that’s essentially what a sovereign wealth fund is. You’d be picking and choosing investments based on political whims. So I hope it doesn’t happen. I mean, if it does happen, I hope it owns a lot of stuff outside the United States.
Ben Nadelstein:
Okay, and what are some DJing lessons that you can apply to your real life or investing? Because not a lot of people know DJs. I’ve got one on the horn with me.
Jared Dillian:
I don’t know about lessons. So anyway, I I have a gig. I actually just played last weekend in Nashville at a club, and I have a gig at the MGM Grand in Vegas, the Palm tree Beach Club. So I’m playing there this weekend. I’m opening for Zed, if you know Zed. So the DJ career is doing pretty well right now. It’s funny. When I started DJing, I was very focused on the mechanics, just the mechanics of mixing. And And I used to practice four hours a day, and I drove my wife nuts. I was just blasting music four hours a day, and just practicing mixing and getting really good at it. And I thought that’s what being a DJ was all about. And then as the years went by, I learned that DJ is really a curator of good music. I like to tell people I am basically DJing all the time, right? Because if I download some tracks from Beatport and I’m driving in a car, and I listen to them in the car, I’m thinking about, Oh, I like this track. I could use this in a mix, or I like this track, or this track sucks, or whatever.
So I’m constantly thinking about it. And all the What you see in a performance is really the sum total of hundreds of hours of work just listening to music and creating a signature sound that you have, right? So I have a very signature sound that if you listen to one of my sets, even if you didn’t know I was DJing, you would probably know it was me.
Ben Nadelstein:
So cool. Okay, I have to ask a couple more DJ questions. What’s your dream venue to play?
Jared Dillian:
Well, I used to say one of my favorite clubs was Pasha in New York, but that closed down. But that was an incredible club. I would have liked to play there. I did play at Cielo in New York. Cielo was my favorite club of all time, and I couldn’t get a gig there, but I rented it out and threw a party. So I got to play in that booth. So that was really cool. I don’t really have a favorite venue because it’s It would be cool to play in Omni or a Haccazan or something like that on a humongous sound system. But I actually, I really like small, intimate clubs the best. Actually, now that I think about it, my Probably the one place I would want to play is do not sit on the furniture in Miami.
Ben Nadelstein:
Okay. Well, when you book it, you got to let us know. I want to ask you some questions now about personal finance, some psychology questions as well. What’s one of the worst money habits that you see most often? You wish you could tell people, Hey, let’s cut that out, guys.
Jared Dillian:
There’s a lot. I have my book, No Worries Here. This was published last year. The paperback just came out. It’s a It’s a personal finance book. There’s a whole bunch of lessons in there. I’m very much against debt. I’m against debt at the government level. I’m against debt at the household level. And a lot of people think in terms of… When they talk about their mortgage, they think in terms of their interest rate. So they say, Oh, my interest rate is 4 %. So that’s not that bad. So I can not pay down my mortgage and instead I can make the money, invest in the stock market, and I can make 9%. So I can have this giant balance sheet where I have all these liabilities and all these assets. And I like to keep the balance sheet small. I like to pay down the debt, less assets, less liabilities. There’s a lot less risk. The way I put it to people is, don’t think about it in terms of the interest rate. Think about it in terms of the dollars you pay in interest. So for my I’m paying down as fast. I built a house last year.
I’m paying down as fast as I can. In the last year, I have paid about $100,000 in interest. And did I get any in employment out of that $100,000? Was that beneficial to me somehow? All that is is profits for the bank. I’m just helping bank profits. And I think the The worst thing in the world is to be a good customer of the bank. You don’t want to be a good customer of the bank. You want to be a bad customer of the bank. So how do you be a bad customer of the bank? Well, one is you pay stuff off as quickly as possible so they don’t get the interest, or two, you just default. You say, Screw you, I’m not paying you back. That’s how you become a bad customer of the bank. A good customer of the bank takes out as much debt as humanly possible, never prepays it, pays all the interest. My brother Arthur, at one point, had hundreds of thousands of dollars in credit card debt at a 30% interest rate. He made his payments on time every month, paid all the interest. He was paying about $100,000 in interest a year.
Credit card companies loved him, right? He was a good customer of the bank. So you want to be a bad customer of the bank.
Ben Nadelstein:
So what do you think is the best argument against owning gold right now? Because obviously, we have a lot of people on the podcast. They’re very bullish on gold, and so are we. But it’s also smart to think about what are some of the threats that could potentially happen to the gold price?
Jared Dillian:
I mean, it’s not so much that I’m worried about the gold price. The gold price is going to go higher. I can say that with 100 % conviction. I think people get a little too jammed up about owning physical. And I think there are some hard core gold bugs that say, look, if you want exposure to gold, you have to own physical. You have to own it in your house. I don’t think that’s true. I think you can own it in ETFs. I think you can own it in futures. I think you can own it in gold mining stocks. I think to be prudent, you should own all of these things. The gold ETFs are super liquid, low transactions cost. Physical is a big pain in the butt. And honestly, I think the one negative about the ETFs is that they’ve been around for 20 And there was this controversy 10 years ago about, was the gold in the vault real? And there was this video of the vault. They were trying to reassure people that the gold was there. The gold is there. I’m not worried about that. But we don’t know how the ETFs are going to behave in a crisis of some sorts if they’re going to decouple from the price of gold, which could happen.
So I think the gold ETFs are good. 99 9. 99 % of the time. And then when the crap hits the fan, they might not be. So that’s one situation in which you might want to think ahead. But I get… Yeah, it’s a long discussion question, but it’s physical versus ETFs. But I just want to say, I don’t think people should get too jammed up about owning 100 % of their gold in physical. I think you should have it in a lot of different forms.
Ben Nadelstein:
So One that might be interesting for you to answer for us, I think that the ability to tokenize gold or put gold on a blockchain where you can just use it like Apple Pay, you can pay for Starbucks, you can buy a house with it, but it’s all digital. You don’t have to actually physically bring a gold bar with you or a coin with you. I think that actually makes the argument for silver as a monetary metal much weaker because silver was used for smaller transactions, like a coffee or whatever. But if you can just pay for it with digital gold, that takes away the argument for silver as a monetary metal. So what do you think of that argument? Do you think that basically gold is now going to have a monopoly in terms of the monetary metal status, or do you think that there’s actually going to be still a reason to own silver as money?
Jared Dillian:
Well, all this is far off in the future. I mean, if you had a gold-back crypto, I don’t think that exists. But if it did exist, that would be a pretty cool innovation. I actually might buy it. And I think you’re right. I think it would take away some of the demand of silver I mean, because to be realistic, gold is impractical as a medium of exchange because it’s just so expensive. I mean, you could walk into a car dealership with 10 coins and buy a car, but you can’t buy a sandwich. So silver, you can actually do that. I actually have a lot of silver coins just for that purpose because I’m paranoid and I think about doomsday prepping and stuff like that. And I wanted a lot of silver coins in case a hurricane blows through, or there’s civil unrest or something, and I can just pay for stuff in silver.
Ben Nadelstein:
And then last question on the gold and silver front. Do you think that silver is going to outperform gold in at least the short term? Because gold has had this nice run up, silver has had a nice little run as well. But is there more room to grow for silver and a little consolidation for gold? Or do you think that gold is going to outperform this year?
Jared Dillian:
I think silver is going to outperform. I mean, if you look at the long term chart, going back to the 1950s. There you had the first run up to 50 bucks in the Bunker Hunt days in 1980. Then you had the second run up to 50 bucks in 2011. We’re making a run for the roses here, another run up to 50 bucks. There’s no such thing as triple tops. Once it breaks through 50, it’s going to 100 for sure, and possibly beyond that. So I think that gold-silver The price ratio is going to catch up quite a bit. The price action is pretty good. Just in the short term, trading at 39, waiting to break through at 40. I think once it breaks through 40, it’s going to run to 50. Then you’re going to have some resistance there. It’s going to pull back to about 40, and that’s when you want to buy it.
Ben Nadelstein:
All right, Jared, it’s been so fun interviewing you. What’s a question I should be asking all future guests of the Gold Exchange podcast?
Jared Dillian:
You should be asking them what percentage of they’re comfortable with in their portfolio.
Ben Nadelstein:
That is a very fun one. Some people are pretty private about their gold, but I will have to ask those who are a little bit more loose-lipped. Jared, where can people find more you, more Daily Dirt Nap, and all things Jared Dillian?
Jared Dillian:
You can follow me on Twitter @dailydirtnap. If you want to subscribe to the newsletter, just mention… So go to my website, dailydirtnap. Com. Click on the subscribe button, an email pops up. Send me an email, mention the Monetary Metals podcast, and I’ll give you half price.
Ben Nadelstein:
Can’t be a better way to end the podcast, Jared. Thanks so much for coming on. We’ll have to have you back on soon.
Jared Dillian:
All right. Thank you.
