SPEAKER_00 0:00

Welcome to Transatlantic Takeaways, the new show that we are going to be launching where we're going to address one question a week. We're going to argue it from both sides without keeping a scoreboard and then giving you our takeaway on what we learned in the discussion. Now, before we get too far into it, I'm going to explain to you where the name comes from. Because it is a name that actually has some significant meaning to us. There's three of us doing this: myself, John Butler, and Gene Morris. We're all Americans. We all grew up in the United States, and we all have a particular point of view of where we grew up, but we all now have a relatively unique point of view based on where we live now. John is located in London. I'm located in the Caribbean. And Gene is located in the heart of America near Mount Russian. Now, as the name also implies, it's kind of a transatlantic uh exchange. And that's been going on for many, many years, uh, decades, and even centuries. The American spirit was in some ways born in England, landed in the United States, and you know, manifest destiny came later. And now we feel like we've entered another time in our history, and in some ways it's exciting, and in some ways it's scary, and in some ways it's extremely concerning. The first thing I'm going to tell you is what our show is not. Now, there's a lot of shows out there where you get a couple people, maybe two or three, um, you do a long-form interview, you hear about what they think, what they believe, and maybe there's a few questions lobbed along the way, but it's really more of a get together and a talk as opposed to a debate. Now, there's nothing wrong with those shows. We like those shows. We participate in those shows. We have friends who host those shows, and we think those shows are important, and we think you should continue to watch those shows. But this is something different. And by the end of this episode, we hope you will agree it's different, and we hope you will want to watch. Because what we're gonna have is we're gonna have two people who don't agree with each other, but we're gonna sit down once a week and we're gonna talk about what we feel is the hot button issue. And so our mission statement is to make participating in hard arguments while remaining open to changing one's mind respectable again. And the transatlantic takeaway is gonna exist to put a serious question under real pressure every week from two people who have come at it from our own angles and have done our own work and who don't agree. And we're not gonna tell you who won because that is to a certain extent a subjective decision. But what we do want to do is provide you information. We want to get you both cases argued in full with the reasoning underneath them, and then we are also gonna give you our own takeaway and perhaps some recommendations on what we would do as a result of what we talked about and what we learned. So, again, we're gonna have one question on our show. We're not gonna have five questions, we're not gonna discuss eight or nine different topics. We're gonna have one question and we're not gonna just skim it. We're gonna go deep on that topic. Now, that might be related to financial markets, it could be geopolitics, it could be some other world affair or social issue that's taking place that is having the effect of moving capital in one way or the other. Sometimes we'll have a guest on and we will be aiming our questions at them. Other times it will just be the two of us or the three of us. But we're gonna continue to address one issue a week coming at it from opposite directions. Now, you may have recognized this format by now because we didn't come up with it ourselves. There was a show about 25 years ago called Crossfire, and it ran on one idea, one question of the night being analyzed from two different sides. Crossfire reduces everything, as I said in the intro, to left, right, black, white.

SPEAKER_02 4:00

Yes.

SPEAKER_00 4:01

Well, it's because, see, we're a debate show. It's like saying that we're gonna do that.

SPEAKER_02 4:03

No, no, no, no, no. That'd be great to a storm for the thing. I would love to see a debate.

SPEAKER_00 4:07

And they would stay on it until it was resolved, or at least clearly deadlocked. But then over time, the format changed.

SPEAKER_02 4:15

Just off of their marketing and strategy. Yeah, it's someone who watches your show and cannot take it anymore. I just can't like to have dinner with you. It must be excruciating. Do you like lecture people like this?

SPEAKER_00 4:25

Or do you more topics were added, more people were added. They added a live audience, they added a bell. And that actually caused the show to fail. And it ended up being taken off the air because what happened was it no issue was discussed deeply, no issue was argued deeply, and instead it just became a show of competing sound bites. We're gonna try not to do that. We're gonna try to argue fairly, and we're gonna are try to argue uh uh difficultly, or or if not strenuously, um, to put the issue on on point and try to come to some resolution one way or the other. Now, at the the the other thing that's gonna make this a little unique is that we are also, after the show is over, a day or two later, each gonna come back and record maybe a five, maybe a 10-minute response based on what we learned and perhaps even what we changed our mind about and what we may be doing about it either in our portfolios or in our own life or or or or in the world as we see it uh more broadly. So, again, I think the takeaway is going to be a rather unique thing because, again, a lot of times what you see is you even not very often do we have these episodes where an argument is being made. But when you do have an episode where arguments are made, you never know if anybody changed their mind. You never know what they acknowledge to having learned. So, what we're hoping by doing this is to provide you the tools to see the issues from two different sides, from two people who like each other, from two people who respect each other, but from two people who do not necessarily always agree with each other. And again, we're not gonna keep a score per se, we're not gonna keep a running clock of who got this right and who got that wrong. Markets are hard, and every now and then everybody has a hot streak and everybody has a cold streak, and that usually happens right before the turn comes. And we feel like a tally would just crown whoever got lucky most recently. Now, that's not to say that we're not gonna give you ideas, it's not to not to say that we're not gonna have some specific takeaways that you could potentially implement, but that is not part of this show. That may be part of the takeaway, and it may be found in our own Substacks, our own research service, and our own interviews that we give elsewhere. But this is not a scoreboard-driven um show that we will be having. The other thing um uh that I want to talk about is why I specifically chose John. Um, John has been a friend for a long time. He is somebody I respect deeply, and he is somebody who is not only a very smart analyst, but he's a very good person. And when I was thinking about doing this, he's the first person I thought of. I've been thinking about this for a very long time, probably more than two years. Um, but when I finally got down to doing it, John was the first person I thought of. And when I called him, he's the first person who immediately said yes, because I think he feels the same way. And with that, I'm gonna kick it over to John and let you uh talk about a little bit about you who you are, why you're here, and why you want to do this.

SPEAKER_01 7:43

Well, thank you very much for the kind introduction, Brent. Uh, as you say, I jumped at the opportunity to try to get and get this launched and participate in this format. Look, um I have a long career in the international financial markets. I started on Wall Street, moved to Germany where I lived for about five years, ended up settling in London after that. Uh, still traveled extensively for business across the Atlantic on a regular basis. So I've kind of seen it from all sides. Uh, initially, very much in the heart of mainstream investment strategy and finance. Uh, my first role was a multi-asset role in New York, which gave me broad exposure. Uh, then when I moved to Germany, I focused more on interest rates and foreign exchange. And that continued when I first moved to London, but then my remit began to expand again. And in particular, I added commodities to my to my remit. And so in the end, uh I rose to be a managing director at Lehman Brothers and a managing director at Deutsche Bank, and I ran teams at both of those institutions. Along the way, however, I encountered one financial crisis after another, sitting on a trading floor, seeing it actually unfold in real time all around me, three-dimensional. And I learned a lot, but I also became quite confused. Why all this boom bust? Why do these investment manias suddenly reverse? And so I decided I had to start doing a bit of self-re-education about how the financial and investment world really worked. And sure enough, I came across the Austrian School of Economics, and I was absolutely enthralled by it and spent a couple of years reading the primary canon of the Austrian school, going all the way back, even before Karl Menger, who many people regard as the founder. I went all the way back to the Salamanca School of Spain, which uh economic historians uh generally believe is kind of where the Austrian economy, uh, Austrian economic school has its roots. In any event, I began to use the tools that I was able to glean from the Austrian school to inform my investment strategy. And as I began to work independently and advise family offices, institutional investors, but in an uh in a more independent way, I use this framework. And I have found this to be a very powerful framework. And it's a framework, however, incidentally, which does lead me to disagree sometimes quite strongly, in fact, with Brent. But I have to say that's where the learning comes in, and that's what I really most enjoy. As a general rule, if you're going to be good at investing, you have to observe the world, you have to form a theory about how the world works, and you have to make predictions based on that theory. And then, of course, your predictions might become right, they might become wrong. Win some money in the former instance, lose some money in the latter. But ideally, of course, we want to win more than we lose. And that's why there is an additional stage to this process, and that is the debate, the honest, vigorous, open debate with someone who disagrees with you, if not about everything, at least about some important things. Brent has been that person for me for many years. I've learned a great deal through our debates, and I'm hoping that the debates we're going to be having here with you, our audience, I'm hoping I'm going to learn from those too. Indeed, I hope we all learn from those. So that's why I'm here. That's what I bring to the table, and that's what I'm looking to get out of it.

SPEAKER_00 11:34

Well, great, John. And that's, you know, that, like I said, that's exactly why I uh chose you uh to begin with. Um, but now I'm gonna tell everybody why I'm here. Uh, because, you know, to a certain extent, I have had some success in uh the social media world. I have a following, I'm fairly well uh known on the podcast circuit. But I had I I I wanted to be part of this for all the reasons John said. But I think to really understand why I wanted to be here, you need to kind of understand who I am and where I come from. So I grew up in the American Heartland. I had the quintessential, you know, small town, Norman Rockwell, American uh childhood. Grew up in the heartland. We had a Fourth of July parade, we had a rodeo in our hometown. But I always kind of dreamed of bigger things going on in the greater world. And through some hard work and a lot of luck, I was able to eventually find myself working on Wall Street. And I worked there for a little over 10 years, both at Donald Suddenlufkin and Jinrette and at Credit Suisse. I then joined an independent firm in traditional finance uh in San Francisco called Baker Avenue. And along the way, I set up Santiago Capital. And so now I have my own independent wealth management firm where I manage capital for real people. So when I am on these shows, when I'm on social media, when I'm making my arguments uh regarding capital markets, I'm typically coming at it from a money-making point of view. Not necessarily what I would like to see happen, not what I think is the most just or correct thing to happen, but what is going to happen to markets and why they're gonna happen that way. And I trained in the traditional finance world, but I chose based on some knowledge that I gained along the way to not remain there fully. And I joined some of the non-traditional finance world, more specifically, like what John was talking about when he found moved to commodities and then found the Austrian school. Along the way, I set up a gold fund, bet on those, uh, based on those beliefs. That gold fund ultimately failed. And when it did, it was one of the worst days of my life. And so I know firsthand that markets are hard, they're not always easy. And having a specific set of knowledge does not necessarily mean you're going to win. And part of that, I think, and the lessons I learned going through that, if I can impart some of those lessons to some of you and some of the audience, then I think that that will be worthwhile. And I hope that that is something that you are able to glean from this. Along the way, I had a very fortuitous meeting just prior to the global financial crisis, which in many ways set me on the same path that John just described. And that is probably why John and I agree on so many things. It's probably partly why we respect each other. And it's also probably why we're not so willing to just change our minds when we have a disagreement. And it is actually through that pursuit of knowledge and understanding, when I had that fortunate meeting, that ultimately led me to John. And when I reached out to John and met John, he was one of the nicest and most generous people I've ever met. And that started a very long friendship that was not just about friendship, it was based on respect, but also the fact that we don't always agree. And so I think this I we're I know we are all kind of being repetitive here, uh, but we think it's important. In today's age of tribalism and gotcha uh tactics, this is supposed to be a show where we argue and we're gonna argue hard sometimes, and we are probably going to leave a few of the shows upset with each other, but we are going to remain friends, and we think that is important for people to see because we think ultimately that's what this is all about. Now I'm gonna hand it back to John, and John can go through kind of is his case a little bit of what is leading him to his points of view right now, and what his kind of foundational uh mindset is that leads him to some of his views. Thank you.

SPEAKER_01 16:01

Thank you, Brent, very much. Yes, I thought it would be helpful in this in this introduction to uh to the concept of transatlantic takeaway to offer up one example of what I believe is a central area of disagreement between us. And I'll approach it from my direction. Uh, but I will I will also uh try to characterize your view a little bit as I as I go through that and why I disagree with it. It won't take long, but I'll be showing you a few slides to illustrate my point. The first one shows you what I believe is the single most important economic imbalance in the entire world. This is the US uh current account deficit, which is chronic. It's been in place for two generations and uh it has resulted in the world's single largest economic imbalance, one that needs to be financed. And that financing is ultimately sourced abroad because that's what the current account balance is. It is the balance that an economy has with all the other economies in the world. I call it the one imbalance that rules them all. The ultimate source of all global dollar liquidity in credit is this imbalance. All those dollars sloshing around the world, be it in the form of what we call money, money substitutes, credit, you name it, it's all ultimately sourced here. However, as I said, this this imbalance has been growing chronically for two generations. It is now extremely large relative to the size of the US economy and relative to the size of the global economy. And the Austrian economic school is very clear that that which can't go on forever won't. This imbalance cannot continue to grow forever. It doesn't work that way for reasons I'm not going to go into detail here and now. But this is where I begin my understanding of the dollar's role in the world. Now, there is another twin deficit that needs to be financed too, and that's the one run by the federal government. Uh now, this is only the federal government, not state and local. Uh, if you add in state and local governments, the public sector deficits the U.S. is running are larger still. These have also been chronic for about two generations now. The last president to consistently run a surplus was Eisenhower. That's how far back you have to go. In any event, this shows you that the public sector is sucking resources out of the private sector, and the Austrian economic school instructs that other factors equal, that public sector agents tend to allocate economic resources less efficiently than private sector agents that need to make a profit in order to survive. They need to serve their customers in order to survive. The government, not so much. So these are the twin deficits. As a result of those deficits, of course, foreign countries have accumulated a large portion of the treasury market. It rose to a nearly one-third at one point and has kind of stayed at that level ever since. Now you might scratch your head and say, wait a minute, if the U.S. is still running these chronic deficits, why isn't the foreign share of U.S. treasuries continuing to increase? There's a simple explanation for that, which is that they've been acquiring other dollar assets instead, or merely leaving a larger portion of their accumulated dollar holdings on deposit rather than specifically through uh treasury bond purchases. And it's that purchase of other assets, other dollar assets, which has continued to support the dollar. This is where the milkshake, this is some evidence of the milkshake theory, although I'm approaching it from a different angle. Notice that you would have expected if the US is a chronic debtor to the rest of the world, that the dollar would trend lower over time. But the trade-weighted dollar, broad-based versus the US's trading partners, it's it's pretty strong in a historical comparison. And again, that's because there is still an extremely large foreign appetite for US assets generally, even if the appetite for uh treasuries specifically has not continued to increase. And if anything, has actually started to wane now, uh, due perhaps to the uh growing weaponization of the dollar in recent years, sanctions and whatnot. But finally, that still leaves the dollar vulnerable because a lot of that forward investment in US assets, it's not going into treasuries, it's going into riskier assets. And that of course requires if the returns on those risky assets are going to be a you know are going to be uh attractive going forward, well, that requires you to believe in the US private sector continuing to grow productivity and profitability in future. And that's where I have some concerns, because if you take a look at US net private investment, that means net of depreciation, uh, in recent years, it's been about zero. The US is not building its capital stock, net of depreciation, private sector capital stock, net of depreciation. It hasn't been doing so for years. Now, to be fair, the same is also true of Europe. In fact, you could argue that Europe is now beginning to consume its capital stock, permanently reducing its ability to grow in future. But where you have seen, of course, tremendous net investment is in emerging markets during this period that has continued. Now, this is not to say that emerging markets are necessarily better than the US. It's just an observation. And it's one that's going to be I'm going to uh use, I'm going to refer to from time to time in my discussions with Brent going forward. So this is a little Austrian economic thinking applied to big picture global macro. And these are some of the foundational uh factors and slides showing you those factors that I will regularly be referring to in my discussions with Brent. That's just intended to give you a little uh understanding of how I see things. And although I'm not going to rant on any longer now, uh it also will help to inform why I remain, notwithstanding a huge bull market, I remain bullish precious metals going forward. These slides all feed into that uh analysis also.

SPEAKER_00 22:40

Okay, so that's uh that's uh that's a great foundation from John. I'm gonna give you my foundation uh and why I think this is important and why I think uh you know I wanted to do this with John now. And I'm gonna come at it a little bit different way than John did, although I certainly understand John's point of view. The reason I think this is important now, and I think that the reason that all of this stuff is uh leading to, you know, um some discussions that we didn't really have to have 10 or 20 years ago, is because I don't think the map is fixed anymore. And what I mean by that is I feel like we're at a time in history where when I started 25, 26 years ago, the world was globalizing, the world was becoming smaller. It was the golden age of travel. You could kind of go anywhere you wanted to. For the most part, the world was cooperating with each other. And so the map was fixed. The prices weren't, but the map was fixed. But I think that's changing now. I think the world is no longer globalizing. I think the world is no longer cooperating. We have people in positions of power who are actively trying to change the lines on the map, and I think that changes a lot of things. Whereas we used to just be able to argue about the cycle without arguing about the map, we now have to argue about the map in addition to arguing about the cycle. And I think that changes some things. And I think there's a lot of people who agree that that changes some things. What gets interesting is when they disagree on what the knock-on effects of those things that they agree on happening. And so we think that uh I think that some of the assumptions that many people have been able to build a very successful career on are perhaps no longer going to be the case going forward. The other thing is kind of what I just talked about, is I think a lot of people know um that these big changes are happening. And people know there are going to be big consequences to these things happening. So it's not that the it's not that the events are happening is is is the is is the is the advantage. Um the the question is whether or not it's priced, right? Is it priced in? Is it not priced in? Again, John and I are ultimately markets guys. We like the social aspect, we like the geopolitical aspect, we like the you know, the the broader social implications of what's going on. But at the end of the day, we both have finance careers where allocating capital was the primary objective. And so we I feel like you know, a lot of people are looking at the right issues, but in my opinion, coming into vastly different conclusions. And that's where it gets really, really interesting. And that's where I hope John and I are able to kind of dig into these things and explore ideas a little more. The thing that I think is perhaps the most missed by many market participants that I interact with. And I'm not saying that this is John, um, but for many people that I interact with is that when they look at the markets, or perhaps even when they look at the charts that uh that John showed earlier, or other similar charts, whether they be of the United States, whether they be of China, whether they be of Russia, Brazil, or anybody else, is that they again look at them in a sense where the map is fixed. And I think one of the things that is often missed is the influence of real politics or power. Power dynamics have the ability to make things last longer than they otherwise would in a free market. They have the ability to change outcomes, they have the ability to make things that we would maybe prefer didn't happen happen anyway. And I have spent uh several years arguing that these factors need to be brought into bear in analysis, whether we like it or not. Power has many influences, it has the ability to change the definition of money, it has the ability to change the map, it has the ability to overrule the way economic laws should work. And I also think there's a recency bias that's involved here. For all of my life, or at least most of my life, there was always the hint of some issues, geopolitical issues, but for the most part, they didn't really bubble up. And, you know, I think uh Marco Rubio gave a great speech um maybe six months ago in Munich, where he said, you know, we had we thought we entered, we we had uh reached the end of history where no where no great differences existed, globalization was the norm, and cooperation was something that would be with us forever. And as a result, I think that kind of thinking or that that kind of experience, because we all grew up with that, that has largely been the case, not all, not fully, but largely the case for the last 70, 80 years. And I think that is certain, to a certain extent, there has been a recency bias that has uh that has seeped into analysis. And I think that I think that recency bias is going to be tested very hard. And I think John agrees with me on this, which again uh is gonna make this very, very interesting. Um, the other thing I would say that I think is important to understand is part of the reason we wanted to do this is because tribalism is a real thing. Having enemies, having adversaries, having the others is a real thing because it allows you to point at them, say they're wrong, say if everybody was just like you, the world would be a better place. And we dismiss that other side without actually engaging in it. And we recognize the tribalism, we recognize the loyalties, we perhaps even belong to some of those groups. But what we are trying to do is interact with that group and those other sides rather than just saying, look at those silly people over there. Because when you interact with them, you actually get to learn. And it we don't want it to be, we don't think investing should be like going to a football game and cheering for your favorite team, where you cheer for the team just because they are your team and not necessarily because they have the better team or they have the people who are most likely to succeed. We think that doing that brings about a case where you miss some things where you might otherwise see more clearly. You get comfortable, and in markets, when you get comfortable, it often ends up being expensive. I think John and I agree on that. And so I think that's another reason why we're looking forward to doing this. So, and to recap, what we're planning to give you on this show, we're gonna give you one question a week, and we're gonna argue that one question, and we're gonna argue it hard. We're gonna give each of us equal billing. You know, it's not gonna be the Brent show, it's not gonna be the John show. Gene is even gonna show up from time to time when he has something to add, especially because he is kind of, to a certain extent, the neutral observer. He sees it from a different perspective than John and I do. Gene is not a financial professional per se, but he's an investor. He's somebody who's deeply interested in social issues, world issues, geopolitical issues. So we need him to keep us honest in doing this. We're also going to talk about what we learned and how it potentially changed our mind. That is why we're not necessarily going to give a scoreboard, but we are going to give the takeaway. We think the takeaway is perhaps one of the best things that we'll be doing. Again, we're not going to be necessarily coming here saying, making this call, buy this stock, short that currency, or make this bet. What we're trying to give you is a framework to understand the issue from two different sides. At the end of the day, you have to be big boys and girls yourself and make your own decisions. But hopefully, we are going to provide you something that lets you do that in a little bit better manner. So, again, here's what you're going to get. You're going to get two friends, two friends arguing hard. We're going to disagree seriously on camera about things that really matter. And then when we get off the call, we're still going to be friends because that's what we think is the most important. We're not going to pretend to agree with each other and play nice just to make it a nice, comfortable show. We are not going to argue just to argue either. There will be times where we agree on things. Um, but we're not going to make an argument by taking on the man as opposed to taking on the argument. And so we hope that you uh tune in. We hope that you find it useful, and we hope that you find that you can employ the same things that we hope to bring to you in your own life, and you can have discussions with your own friends and your own families where you don't necessarily agree. John, did you want to say anything as before we wrap it up?

SPEAKER_01 32:10

Only I think that's a great, great summary of our of our mission statement and what we're setting out to do here. Uh, we we learn a lot from each other, and we're very I'm very hopeful that others will learn from our honest, open, and vigorous discussions and debate. And the takeaway will also be something that we do believe uh honestly and genuinely will be of practical, potentially actionable significance to our audience. We really do not want to leave people hanging, like, well, that was fun to listen to, but but but now what do I do? We we we want to try and provide what we can as a takeaway with that practical and actionable significance. Uh, and we're also gonna have fun. I I'm I'm really looking forward to this. It's going to be fun. We're going to fight a bit, we're going to laugh a bit, and we're going to learn a lot.

SPEAKER_00 33:04

And I can't wait to get going. Absolutely agree. So, again, so the offering is this go to YouTube, sign up, click subscribe, click the click, click the like button, and tell your friends about us. We're going to be on YouTube. We will probably at some point be on the different podcast uh uh platforms. We're also gonna have a Substack where each episode is going to be written up in report form so that you know if if if if listening is not your thing and reading is your thing, you're going to be able to do that. And you're going to be able to use those to refer back to something that we said perhaps in the weeks prior. So, as part of that, if you want to send us your questions or hot button topics that you would like us to debate, we're open to doing that. And then at the end, we're not doing it today. This is the only time there won't be, but for every episode going forward, after we have debated, after we've gone our separate ways, we're each going to come back on our own. We're going to record a five minute takeaway of what we learned and what we've what made us think of that prior discussion. So, with that, we'll be back next week and we'll pick up with a question and we'll pick up with the fight.