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We made $43 today, about 1%, when the entire market fell. I would be surprised if there wasn't a major stock market crash within the next year or two . A big expert at this, right? I think artificial intelligence will simply outperform you at everything. If the US government suddenly decreed that gold was worth $40,000 an ounce, that's the article I was talking about, by the way.
Oh, yes. The numbers behind the bond bear market with a look at stocks. Oh, okay. Really good article to read. If you haven't read this book yet, I'm still working on it. I'm not finished yet. But it's a really, really good article, and he, as you know, talks about it coming. Whatever it is, he released this book sometime in 2020, right?
So, as for me, I agree with you . You've been saying this for years, and so have I. Do you understand what I mean? You know, this debt problem is piling up, but there was always a chance that we might get out of it, you know, raise taxes, cut spending, whatever, right? And, honestly, it does n't seem like it's going to happen again.
It seems that this option is closed at the moment. And we're starting to see the bond market come to a standstill. This has already started to happen. I don't know if you've been following rates, but long-term rates have risen sharply recently, despite the Fed not even wanting to raise rates. They raised them by 25 basis points, short-term rates, but that's become unsustainable now, and it's starting to fall apart right now.
Yes, this is no longer in the future. This is inevitable. Do you understand what I mean? This will start happening in the next few months. Do you understand? But, uh, yeah, he has some really good graphs. Look at this. For example, the level of public debt, okay? Look at the level of national debt in the United States over the last 100 years, okay?
We have the largest amount of debt since World War II. Right? Likewise, government interest spending is almost at its highest level ever , right ? Including World War II. The national debt is growing, now it is entering a new level, as if the transfer of the national debt is now growing rapidly. So what's happening now is that $2 trillion worth of debt needs to be issued.
And who the hell are you selling this to? Who buys this? $2 trillion in about a month or something. Yes, so check it out. So, some really interesting points here, for example, on Treasury bonds, you notice that right now the Federal Reserve is the second largest holder of Treasury bonds. This is a clear signal that the market is broken.
Do you understand what I mean? Why are they interfering? This is the Federal Reserve stepping in and changing the way markets work, right? The USA is the most capitalist country on Earth. This is not capitalism. This is what communist countries do. Do you understand what I mean? They federalize the debt.
Yes. So, this is a sign of a broken market, 25%. This is why the government also controls minerals in mining . I'm very aware of that, yes. Yes. And yes, Japan is the largest holder of debt, 5.8%. They own 1.2 trillion, and now it's going to be deployed, right? And then China, this graph only shows 5%, but in reality they do a lot of weird holding companies and so on, so it's hard to say exactly how much belongs to China.
It's probably much more than that, and that's starting to unfold as well . Right? And all this happens in reverse. Um, the UAE is also going to resume some activities because of this whole war and everything that's going on. This is a really, really bad situation. Um, that was, uh , yeah, the biggest risk, the big debt transfer, right?
So, they're going to have to roll over a bunch of national debt right now, like $2 trillion in debt, like I said. Um, it's going to happen very, very soon, and there just won't be any buyers for it. Right? This is a really bad situation. The more I read about this, the more I think: yes, I would be surprised if there wasn't a major stock market crash within the next year or two .
That would shock me. I would be very surprised if this didn't happen . Right? Because debt just gets out of control, interest rates keep going up , right? And then I gave this article to Gemini and basically said, "Here, read this, let me know what you think." What would you invest in based on this?
Right? And I used their latest AI model. Uh, Gemini 4 Argon set the maximum. Apparently, this is the smartest AI on planet Earth right now. So, let's listen to what he has to say. And he basically said, Uh, he said a few things that have actual text, uh, this is useful, blah blah, especially for tech stocks and international investments.
Hey, so Dalio is right? Hey, the basic maxim is that there is a huge surplus of both debt and equity assets appearing on the market at the same time. And that's another thing, all these tech companies that are building data centers, like Anthropic, um, OpenAI, um, SpaceX, those are all great examples.
Um, that's $6 trillion that will be added to the stock market over the next few months. So , I think, um, I've seen the math on this. It was like Anthropic's IPO was bigger than all the IPOs in the last 20 years combined. This is something so absurd, you know? So it just sucks so much money out of the system, you know what I mean?
Both Treasury debt and stocks like Anthropic, OpenAI, and more. They need to raise so much money. Where the hell is this money going to come from, you know what I mean? There will be magic, not printing. They will print, so what else can be done? Yes, that's one trillion that the US government has to print in order to print even more money.
Yes. And then it will cause inflation. This will lead to an even greater increase in interest rates. And you are even in an even worse situation now. Yes. This only makes the situation worse. Do you understand what I mean? It seems like it's a temporary relief , but it doesn't seem to solve the problem, but rather makes it worse, you know?
Yes. But you know what's growing? Natural gold and silver. Yes. It will grow. Phenomenal. Yes. I-I-I expect that to be the main takeaway from this, that it's the right thing to buy. Buy goods, buy gold, buy silver. Right? Hmm, that's what I'm starting to think. I want to start investing more of my portfolio in this.
I own gold companies. I'm thinking about buying real physical gold and silver and commodities. Like I've been thinking about it lately, um, a little bit. And yes, you are right. If that's the case, then that's exactly what I think will happen. This is kind of the gist of his article . Right? Is it because it all comes out into the system?
It's like either letting the US fall into a recession, which no politician has done in decades, you know what I mean? Hmm, so that's very unlikely. Or you print a lot of money, causing even more inflation. Right? And this will lead to rising interest rates and so on. Right? Hmm, so yeah , so Dalio is right?
Here are a few things. First, you have a 100% right to own almost zero US debt. I have virtually no US debt. I think that's a very stupid thing to do now. Hmm, you know, with rising interest rates, it costs less. Owning this is a very stupid thing. Unless you like to own short-term Treasury bonds, that's a different story.
Yes. Hmm, but long-term , if you want to buy long-term US debt, I think you're a little crazy. You know, if you think it's a good idea...I would n't do it. debt for now. Eliminate immediately. Hmm, yeah, and then B, the tech sensation. Corporations have moved from being net buyers to net sellers. So, you mentioned that the valuation of technology companies scares you.
Dalio points to something much more dangerous than high P/E ratios . The development of artificial intelligence has changed the mathematics of supply and demand for stocks. Over the past 15 years, stocks of big tech companies have risen relentlessly because they were capital-intensive, generated huge free cash flow, and used cash to buy back their own shares, reducing the stock supply.
Look at Ray Dalio's numbers for 2026. The AI arms race has seen corporate bond issuance increase by 30%, with hyperscalers issuing $ 220 billion worth of debt in the first half of 2026 alone. More than double the 108 billion for the whole of 2025 . So, they borrow an insane amount of money. Worse, corporations have transformed from net buyers of shares to massive net sellers of issuer shares, dumping an annual stock supply of $1.8 trillion into the market in the first half of 2026 through secondary offerings like Alphabet, mega IPOs like SpaceX, and massive private equity raisings like OpenAI and Anthropic.
So they just suck all the money out of the system, right? Dalio's canary in the coal mine, skyrocketing AI capex, falling free cash flow, massive debt and equity issuance, wider credit spreads, higher required returns from AI, liquidity shortages across the market. Sounds scary. This is even worse than high P/E ratios , but they both happen at the same time, you know?
You have high P/E ratios and you have this happening, right? So where could Dalio go wrong? The only escape hatch. Um, Dalio missed the only way to avoid a bad ending–which is if the AI boom leads to such an immediate massive increase in real economic productivity and corporate profits that cash flows grow fast enough to effortlessly pay off all this new debt.
So, uh, the only way to avoid this really bad scenario is if AI not only does what everyone says, but does it immediately and very quickly. You know, like...Okay, that's what Gemini says. Okay, what would I do – a specific portfolio strategy for 2026-2028. So, over the next 2 years, Dalio clearly points out where we are on the map now.
We are in a dangerous window after interest rates rise, when credit spreads are just beginning to absorb AI, corporate bonds AI like a canary in a coal mine, and before the compression hits stock prices and the economy as a whole. So it's inevitable. As if that's likely to happen in the next few months if he's right.
Do you understand? Um, if I were you , already holding near-zero long-term U.S. debt or wanting to aggressively de- risk expensive tech stocks, here's how I would allocate them across four specific baskets over the next few years. Basket one, an anti-dilution package of shares in the real sector of the economy, from 30 to 35%.
Rule, as Dalio warns that AI and tech companies are now diluting investors by issuing 1.8 trillion shares. This is just madness. These numbers are just crazy. It's like we're not even talking about billions anymore. Now it's trillions. Um, and 220 billion in bonds to finance capital expenditures do the exact opposite.
Only own companies that are reducing their share count, have low debt refinancing needs in 2027 and 2028, and generate high free cash flow today. That makes sense. This is a typical action when you get into a recession. High cash flow, yes. Yes. So what to sell? Reduce your exposure to mega-cap AI hyperscalers, high-flying semiconductor companies, and loss-making tech growth stocks.
If you own broad S&P 500 or Nasdaq index funds, remember that they are heavily weighted towards these AI consumers. Expand capitalization-weighted indices. Good. What to own instead? High free cash flow and dividend payers, businesses in healthcare, consumer products, defense, and select industries that don't need to borrow the $3.4 trillion Ray Dalio proposed in 2027 for corporate refinancing.
Um, real assets are cash cows, energy, and pipelines, right? This is what we were talking about, right? Traditional energy producers and pipelines have disciplined capital expenditures, strong balance sheets, pay high cash yields, and act as an inflation hedge if the Fed monetizes debt. I think it's a brilliant move, you know?
Um, there's another company called, um, there's Vistra, and then there's Vista. There's another one that, um, there's another one that, um, is, like , uh, owned by Peter Thiel, right? So, it was Vistra, it was Vista. And this one is like an oil company in Argentina, which is apparently another really good one.
They do cool things there. This is Vistra Energy, V I S T. So it fits the bill perfectly. Yes. Right? Look at this, P/E ratio is nine, right? Very cheap. Right? This is exactly what I would like to earn. I would like to own. Look at this, it has also grown wildly. The P/E ratio is nine, and it is growing rapidly.
Look at this, it went from $7.8 per share to $70 per share. So it's increased 10 times since 2022, right? So it's just selling incredibly well. A very low P/E ratio , and that meets these requirements. Right? I think this sounds like a good company to buy, right? And again , Peter Thiel invested in this, so tick the box, you know?
Personally, I consider him one of the best investors on Earth. He likes the things he bought, he started PayPal, he started Palantir, he bought shares in Facebook early, you know? This guy is one of the best investors on Earth, you know? And if he has something, I pay attention to it, you know? Yes, Vistra Energy.
Okay, I think this is an interesting option. Yes, energy and pipelines, traditional energy producers, yes-yes-yes, okay. And then keep a tiny position in Fortress only–5 %. Only hold technology companies that have zero net debt and are not spending their free cash flow on speculative AI infrastructure.
Okay, and then the third segment, targeted international cash flow and non- USD assets. So the rule is to avoid the OECD sovereign debt trap, the public debt of Europe and Japan, and focus on international value . Creditor economies and currency diversification . Yes. International stocks with high dividends and low cost of debt.
Foreign multinationals trade at a price of 10 to 12 for the actual free cash flow that benefits if foreign retail capital is repatriated from the US dollar. Yes, that makes sense. Okay, and then the fourth bucket, dry powder for mid- cycle compression and inflation protection. The rule is, wait, wait.
Are n't we saying that the US debt is terrible, right? Or, however, the bet is that a wave of net borrowing of $ 4.4 trillion-plus in the near future will suck liquidity out of the market and send stocks plummeting. If you are 100% invested in stocks and commodities, when a liquidity crisis occurs, everything volatile is temporarily sold.
By holding 15 to 20% in ultra-short, liquid Treasuries, you take on zero long-term price risk, earn a 4.5 to 5% yield while you wait, and have liquid funds ready to buy world-class stocks at a 40 to 50% discount when the AI cap recedes and the corporate debt bubble actually bursts. That makes sense.
So, short-term rates. They actually pay very well , from 4 1/2 to 5% . This is actually very good. Do you understand? Right? I mean, the stock market is clearly showing better results. I think NASDAQ is growing at about 20% per year. But I mean, it actually makes a lot of sense. Keep part of your portfolio in this.
And then, when that drop happens, you'll be ready to buy things very cheaply. Good. By the way, by the way, here's, um, here's the answer from Gemini . Do you want to go through this? Yes. Good. So, okay. So, a reality check about your Amazon purchase is important first. Before we get to the tickers, we need to take a close look at Amazon because this is exactly the trap that Ray Dalio warns about in the article you shared.
Interesting, okay. It's easy to think that Amazon thinks they're pulling in a ton of money from retail and AWS, so they're a company with high free cash flow. Here's the catch. Operating cash flow is not free cash flow. Free cash flow is operating cash flow minus expenses, right? Good. So, when Ray Dalio wrote his article, we are now seeing that higher capital expenditures due to increased borrowing and share issuance led to the recession.
This market should be considered as a canary in the coal mine. Amazon is one of the major AI hyperscalers he talks about , along with Microsoft, Alphabet, Meta, and Oracle. While Amazon generates huge operating cash flow, it is now investing tens of billions back into AI data centers, Nvidia chips, and power infrastructure, and is issuing corporate bonds alongside other hyperscalers to help fund the buildout.
What to do with your Amazon shares? You don't have to panic and sell every stock tomorrow, but don't consider Amazon a safe bet with high free cash flow. Consider Amazon strictly within your maximum 5% tax bracket. Real high cash flow. Okay , interesting. Home cheat sheet. Each ticker symbol is behind the basket.
Good. So, portfolio bucket, anti- dilution, high US cash flow in the real economy, best ETFs with one click, cows SCHD, SYLD. Yes, I don't know any of them. I know I know it's SYLD. And then individual stocks, Berkshire Hathaway. This is a good option. Oh, broker, yes. Exxon Mobil, Chevron. Yes, ExxonMobil.
And then CVX and Alibaba. Actually, I just do EFT for gas. Okay, then gold and silver, physical, GLDM or SLV. And copper X GDX. Yes, copper. Then the best individual stocks, AEM. I don't know any of them. I think CCJ and balance. Yes, and then the mid-cycle dry powder, SQV. Yeah, USFR, all the things that we...
Oh, by the way, actually, I have something to show you. So, I use this Ray Dalio strategy. I'm actually making a video about it. So, look at this. I use Schwab, this is in my Schwab account, this Ray Dalio strategy. No. Today we are actually beating the market. Oh, yes. So I actually looked into it, yeah.
Yeah, so I asked, you know, how does my strategy feel today? And today it has actually grown. Okay, wait. Let me...Yes, it's so late. Yes, the latest figures for today, we grew by almost 1%. The whole market fell, and the market and we actually rose today. Right? Because Ray Dalio...It's kind of like an AI strategy.
Right? Remember when we created Ray Dalio's AI strategy ? I invested real money in it. So, that's 5,000. It's not like a huge bill, but it's, you know, real money, right? And we are officially outperforming the S&P 500 as of now. Perfectly. Yes. We made $43 today, which is about 1%, when the entire market was falling .
Oh, that's good. Yes. And in particular, we made money on this ERX. Oh, where did we get all our money today. ERX soared 7.3% in one day. This is madness. It's something like an energy ETF. So, Ray Dalio's AI decided to diversify into these four things: UPRO, ERX, TBT, and TQQQQ. And then of course the Nasdaq disappeared today, and over the last few days the Nasdaq has also disappeared.
Um, the S&P went up a little bit, didn't it? But ERX just took off like crazy. A. So, this is where we made all our money today. And that's good, but why did they choose this one ? Can we talk to him ? Ha? Yes, we can talk to him . I mean, you could literally ask why he makes these decisions, right?
Yeah, that's what I'd like to know, just so that, I mean, it's interesting, but it's like knowing where this information comes from, why they're creating it, so that I have more confidence in it. Yes. Yeah, because I think today it was kind of like him doing that. It was like we were lagging the S&P a little bit, and then today it seems like it just took off and we turned around.
We swapped places. Score? Hmm, it was October 8th. Oh, oh, that was recently. Wow . Very, very recently. Yes, it's only a few days. Yes. Good. So, you are right. Search all of this . Okay, yes, yes, including reading. Good. Clear reading after comparison, still close, like very close, like a score plus a point.
Okay, so we're a little behind the S&P right now. Yes, that makes sense. Our common change. Yes, we have grown a lot today . Well, actually even more. Now that this is updated, we are actually up more than 1% today. There is a lot of movement on this account today. Mostly just through ERX. But we're still a little behind the S& P 500.
That's still not bad. Yes. Absolutely not. Yes, given all this crazy stuff going on, this is a triple leveraged ETF account. Yes. Keep this in mind. Like, these are all ETFs with triple leverage. And we are still very stable. So I'm very happy with the strategy so far. I think she's doing a great job .
I think Ray Dalio's AI bot... I'm a big fan of it. I think, you know, well, I'm making this video about it, and you know, I can actually show you the video. It actually looks really cool. This...Let me show you this, Sam. I give a team of AI traders $5,000 of my own real money to trade on my behalf.
Not just one artificial intelligence engine, we will have five of them. They will argue with each other and actually automatically trade through me. Okay, here are the rules. So, rule number one: he trades completely on his own. I am not allowed to interfere in any way, no matter what happens. These are artificial intelligence agents that trade completely independently.
Rule number two: It has to be the S&P 500. If the S&P 500 is up 10%, it has to outperform. If it fell by 10%, it should still perform better. Even if the strategy loses money, it should lose less than the S&P 500. And even if the S&P 500 makes money, we need to make more money than it does. Rule number three: this is a real money account.
He will not use paper trading of any kind. We use real money with real consequences . But I can't stop him for any reason. He has to keep trading, even if he does something crazy. And rule number five: I show you every deal. The good, the bad, the ugly. If it was a deal that brought in a bunch of money, we'll talk about it.
But if it was a deal that brought in a bunch of money, we'll talk about that too. Complete transparency. You will understand exactly what happened here. We do n't hide anything, whether it's good or bad. That's it. In any case, it's still a couple of minutes longer. But what do you think? Yes, that's not bad.
Yes, do you like it? Yes, I like it . Because it explains what the bot will do, and you do it live with everyone. I like it. I plan to make a video like this about all the strategies we have . Right? Basically, run them, see how they work, and it's something like this, you know, you can watch what happened, what happened in the last 7 days, right?
Did he make money? Did you lose money? It's like, you know, it was good. This is interesting. I was very interested because he explained how this process would happen . That's pretty good, but yeah, and then, and then the rest of this I actually need to change a little bit, because we got rid of the API key requirement, and there are a few other fixes that we made.
But then, as you can observe, how it actually...So, day one, right? So, here's the first day. Hey guys, it's the first day of the challenge. My Ray Dalio AI bot has been running for 24 hours. Let's see what he actually did. I'm going to step into the bot's shoes. I'm going to see what the hell actually happened here.
And as you can see here, our account value is a little lower than it was yesterday. Right? So, here are the warrants. So , he placed ERX, TBT, TQQQQ and UPRO. So, he bought them today. And then TBT lost me about 92 cents, and then ERX, uh, made me about 81 cents. We lost a total of about 23 cents on our total assets.
So, actually, not that bad, considering how the stock market has been doing. And this is very interesting. He bought, uh. So, these agents actually automatically bought UPRO for me, which is the triple leveraged S&P 500 index. They bought TQQQQ, which is a triple- leveraged Nasdaq. And then TBT, what I learned today.
These are double- leveraged Treasury bonds. I was actually looking for this today. This is not something I have never heard of. So these AIs are trading things I've never even heard of. It seemed that the AI didn't conclude that these four would outperform SPY. He used consulting agents to assess growth, inflation rates, and debt liquidity.
The Dispute Resolution Agent challenged these views. The trading agent then selected a basket that combines equity exposure with positions in rates and energy. Okay, so we got the result. So basically, Ray Dalio bought. We got pretty close to 0% today. So, 0% overall return. This is much better than the stock market.
The SPY, which we are trying to beat, is down about -0.42% today . So we defeated him. We actually closed trading flat while the entire stock market was falling. There is some cash. I wish there wasn't so much money left. We'll see if that fixes it tomorrow. Hey, guys. So, it's day two now . Let's see how my strategy works.
Do you think I made any money today? Do you think I lost money today? What do you think this AI was doing ? I'm really curious to see what the hell he was trading ? Did he buy anything? Did he sell anything? Why did he do that? I'm very interested to see. Good. So let's ask Bot Spot how it actually worked .
Let's see how our strategy worked. Yes, I think I want to cut out some of the initial parts. For example, cut API keys and some other things. And then it will be more about how to grow each day, how to fall, what happened each day. Yes. Right? This ERX position seems pretty crazy. The fact that ERX rose 7% in one day is just crazy.
This amazed me. I thought, "What did they do to decide this way ?" It was a good choice. Yes, a very smart move. It was basically like we're going to ask about it, right? So we'll say, "So please tell me why the AI decided to invest in each of these symbols." Okay, let's see. I don't even know what ERX is.
Energy? Yes, it's an energy thing. So when I read about it, the idea was that, um, the war in Iran is causing a lot of these energy problems , and also it's kind of a hedge against inflation. Right? So they say it's a hedge against inflation because of what's happening with oil in general around the world right now.
And it's like a nice contrast to the rest of the portfolio, right? Which actually worked well. Look, the Nasdaq was falling wildly, but the ERX was up. Yes. Great idea, isn't it ? This is a really good idea . Yes. AI, dude. It's like this is what I'm fully invested in right now. I am 100% invested in creating better AI strategies.
Because I just see these AIs just making better decisions, unless you're a big expert on this, right? I think AI will simply surpass you in every way. Yes. I think so too. Yes. Okay, the team bought four ETFs on October 8th after weighing growth, energy, and risk. Specialized agents offered their suggestions.
The final sales agent combined these thoughts into a roughly balanced basket. All four buy orders have been executed. Okay, UPRO. Okay, this is a 3x leveraged ETF for the Nasdaq. Essentially a triple QQQ. Uh , the growth analyst, uh, viewed this as a broader core stock. Recent returns have been positive with lower volatility than TQQQQ in comparison, right?
Actually, sorry. This is UPRO, SPY with triple leverage. And then TQQQ. The growth agent preferred its stronger recent momentum. The team also pointed to its higher volatility, concentration in technology, and sensitivity to rising rates. So it was included as a selective risk position. Then ERX. This is, uh, 2x leveraged energy exposure .
The inflation- energy price analysis saw this as a way to participate if oil prices supported energy stocks. That, uh, was right. And this thing was right. Uh, that's what really impressed me. It's like, yes. That's right. 7% in one day, that's crazy. Do you understand? Yes, pretty good. Yes. The evidence was mixed, and agents noted that Eurex could still fall with stocks or an economic slowdown.
And then TBT is an inverse exposure to Treasury bonds. So the view on rates was that rising yields could put pressure on Treasury bond prices. The trader chose TBT over the more leveraged TTT as a more balanced way of expressing this point of view. So this, from Ray Dalio's perspective, could work really well, you know?
Yes. Interest rates are rising, you make money on rising interest rates, you. Yes, the team rejected the reverse equity bet and the SHV cash position, as well as the addition of TTT or UCO, deeming the evidence ineffective for these more concentrated positions. These are recorded reasons from the live broadcast on October 8, not proof that the choice was optimal.
Leverage can amplify both losses and profits. And that's pretty cool, you know? This is really cool. Me. Yes. I actually like that this summary description etc. is provided. Yes, I tried to make our bot more visual in general. Right? So now when you ask him about a briefcase or something , he'll show you the briefcase.
This is a typical thing. It will show you your latest orders, an overview of your account, and your assets. And he has these columns and other things that show where he went, right? So he's trying to make everything more visual, you know? Yes, that's really good. Yes. Yes, the weight here is about 25-24%, you understand?
Yes, you should see what he can do with options. Let me show you, uh . This is actually pretty cool. We added it. So, uh. Let's say if we say so, if we go, uh, I'm thinking about buying a credit spread on Nvidia. Can you help me figure out what to buy {slash} sell from an options perspective? This is actually really cool.
You'll see it's something like this thing, you can kind of slide over it and it shows you the payout for the options. Okay, so that showed put options. So, here's Nvidia. That's where we put options come in. That's where we are for call options. Here it is. Okay, so take a look at this. So, let's say if you bought a put option, you sold a put option, right?
That's all. Aha. Oh, cool. For the Iron Condor. I'll show you what the iron condor will look like, and you'll be able to move it. This is really cool. Truth? And that way you can just, you know, move it back and forth and it'll be fine. Where do I buy? Where do I sell? What are my prices for each item?
And then what is my reward? Yes. Right? It's like interactive charts that they can play with, you know? Yeah, that's pretty cool. I like it. Yes. And here's another example. It's still a little, you know, there 's still little things that I want to fix, but I think it's pretty cool, don't you think?
For example, when you are trying to trade options, it makes the process much easier . You don't have to look for these things, create them yourself. It seems like everything is in one place. Show me this, show me this. I'm also working on making this more automated. So he would just do it automatically.
Okay , and then this is the same question, by the way, that you asked about, we asked about gold up to $40,000 . Yes, I remember that. Right? Um, the article you see about the price per ounce doesn't pull that number out of thin air. The math behind it is real and directly related to the exact numbers from Ray Dalio's October 26 article.
However, there is a big difference between the mathematics of balance sheets on paper and how governments actually behave in the real world. Breaking down the origins of $40,000, where the trick is, and what it means for how much gold you should actually own helps separate the complex math from the hype.
How does the math of $40,000 gold work? Each of these articles is based on a comparison of two numbers. How much gold the US government owns versus how much debt and power the US has created. US government reserves. The U.S. Treasury officially holds 260,1.5 million troy ounces of gold, mostly at Fort Knox and around the world, as well as at the New York Federal Reserve.
The absurdity of the calculation is that now, due to a law passed in 1973, the US government still values all 261 million ounces on its official balance sheet at $42 per ounce, which means that the US government officially records its entire gold reserve at only $11 billion . This is not true. Meanwhile, as the daily note in the article noted, US Treasury debt on the market has reached 32 trillion.
Jesus Christ. With a total gross debt of 40 trillion, and foreign investors own 9.3 trillion of this debt. Even with gold trading around 4,000, the total market value of US ounces is only 1.1 trillion. If the U.S. government were to revalue its gold at today's market price to help pay down debt, $1.1 trillion wouldn't cover even half of this year's $ 2.1 trillion budget deficit .
This is madness. This is madness. For America's gold ounces to really move in sovereign debt, analysts are looking at three historical scenarios, and three of them end up around the 40,000 mark. Interesting. Okay, so the revaluation scenario, the official book value in the US, the math for statutory prices, the total cost...Interesting.
Is this at that price? It's just accounting stuff, right? Yes, but I'm just saying they're taking a value of $11 billion, which is $42.42 an ounce. Yes, it's nothing. Yes. Yes, it's nothing, which is not a real value at all. But you have to ask them why they do it. Yes, but it's not that they're not a financial company.
They are not like a bank that has a revaluation at market price. It's like no one is telling them to do it. Like but there's no reason to move it, you know, like...Yeah, I mean, I'm just saying, how much money do you have? Oh, we only have 11 billion. But in reality, their cost is much higher. Yes, exactly.
Yes, I don't know. I just understand why they still do it? This is madness. Oh, I understand where that math came from. So, here's the math. Right? So, 33% of 33 32 trillion dollars of market debt. So , 10 trillion dollars divided by that amount of gold, that's what it comes out to, 40,000. Okay. So, if they had to pay off the debt, I understand.
Okay , that makes sense. Okay, 40,000, that's growth. Yes. 100% payout. That is, if you had to use this to pay off debt, how much would it cost? Right? And so, this mathematics works in this direction. Okay , so if this 19,100% of the total growth, 100%, 40 trillion growth, 40 trillion, that's about 152,000 per ounce.
Wow, this is crazy. Yes , this is madness. Madness. So let's see how this... I'm curious how this would actually work in practice, right? That is, it is about how the 1934 reset mechanism would work theoretically. In 1934, during the debt crisis of the Great Depression, President Roosevelt revalued U.S.
gold overnight from $20 to $35 per ounce, a 69% increase overnight. This is madness. The Treasury took the paper profits from marking its gold and deposited them with the Federal Reserve to create new spending money, without issuing a penny of new debt. Oh, I understand. OK. The article "You'll Move to Gold at $40K" claims that if the bond market completely freezes in 2027-2028 , the US Treasury could repeat 1934, revaluing its 261 million ounces to $40,000.
OK. Hand over $10 trillion in gold certificates to the Fed and instantly get $10 trillion in fresh money to back maturing Treasury bonds . So they just...What the hell? Wow, okay. Back it up with this. The value of gold is increasing. Oho. What the hell? I didn't know if that was possible. Ha? I didn't know if that was possible.
I don't...Okay, reality check . Why the $40,000 gold price has three big catch. While the math of division is 100% accurate, here's what these articles usually leave out about what it would look like in real life. Pitfall number one: it would be a huge victory for China and Russia. Think about geopolitics, as Ray Dalio pointed out, China and other foreign powers have been dumping these Treasuries for years and aggressively accumulating physical gold.
If the US government suddenly announced that the price of gold was $40,000 per ounce, the US would instantly multiply the wealth and geopolitical power of China and Russia 10-fold. Oho. While simultaneously announcing to the world that the US dollar is broken. Washington will do almost nothing to avoid such a windfall for Beijing overnight.
This is a very good remark. Yes. This is a very good remark. That's a good point. I see they want to do it, yes. Pitfall number two: politicians prefer a slow simmer rather than an overnight explosion. Check out Ray Dalio's article: How are the Treasury and the Fed really handling the current bond bear market?
They are doing a dramatic reboot overnight. They don't do a dramatic reboot overnight. Instead, the Treasury Department shifted 50% of its borrowings into short-term Treasury bonds, and the Fed quietly began buying Treasury bonds again to manage reserves . Historically, governments have abhorred sudden dramatic declarations of bankruptcy.
Instead, they prefer 10-15 years of financial repression, quietly printing money to cap bond yields at 4-5% , while allowing real inflation to run at 6-8% per year, slowly melting away debt at the expense of bondholders. I think there is a very high probability that this will happen. Yes, that's exactly what I was going to tell you.
They are going to print more money. Yes. Because what they can do is limit bond yields. This is how Ray Dalio actually talks about it in some of his articles. For example, it's possible that the US government could come in and say, "No, we're not paying you more than 4% on short-term debt." They can't control long-term debt in the same way, but they could definitely do it with short-term debt , right?
And they say, “We pay 4%. I don't care. " Do you understand what I mean? Go to hell. It's our money and we do whatever we want, right? And we pay 4%, and that's what we promise to do, right? And then when you do that, you let inflation run wild, right? 6 or 7% - from 6 to 8% per year . We already saw something similar recently, in 2022.
I think it's quite possible that it will come back soon, right? And this is the 1970s. This happened for about 10-15 years in a row. Do you understand what I mean? So I think it's quite possible, you know? It says: "Assuming a slow simmering monetary devaluation, gold will still rise rapidly from 4,000 to 6, 8, or 10,000 over the next few years, without any official announcement by the U.S.
government of a gold standard at 40,000." So in any case, this suggests that gold will go up. Steeply. Interesting, friend. I have a feeling we experienced something pretty cool today. Yes, we survived. Yes. Perfectly. I understand because I just reviewed some of the things I've already discussed myself.
Yes, yes, exactly. Do you understand? Yes, I've thought about that a lot . I just want to use the latest artificial intelligence, right? As you know, Argon just came out. I wanted to see, you know, how smart this thing is ? She's actually very...I'm also very impressed with how fast she is. Yes, she is fast.
She is very fast. Yes. Impressive. Cool, buddy. Yes. Well, I think I'm going to make some adjustments to my portfolios. Yes, me too. Yes. Mhm. Steeply. Okay, dude. Well, see you then. Okay, cool. Good night. See you next week, dude. Goodbye. OK. Goodbye.
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