Fed To Hike Into ‘Train Wreck’; How Will Stocks, Bitcoin, Gold, Bonds React? | Gareth Soloway David Lin Davi

At some point, you have a crash. Governments around the world, they are starting to realize that fiat's days are numbered. What is going to be worse for the economy and ultimately markets? If the long end continues to rise, let's say the 10-year goes to 5, 5.2%, or the short end goes up because the Fed funds rate goes up. The Fed has to be the adult in the room here and raise rates. Markets are down today on Tuesday, September 15th, in anticipation of tomorrow's FOMC meeting. Stocks are down, gold's down, Bitcoin's down, 10-year and 30-year yields are up. So why is the long end of the curve going up? Is it telling us that the Fed rate hike is coming tomorrow and there's no other way around it? Is that a certainty? We'll find out what the Fed is going to do. We're going to do a Fed preview today with Garrett Soloway, Chief Market Strategist and President of Verified Investing. We'll be getting his outlook on not just what the Fed's going to do tomorrow, but what they're going to do perhaps into December and how the markets will respond to Fed policy in the next three months. Right now on Caushy, there is a trade for the Fed decision in September. Traders are overwhelmingly in favor of a 25-basis point hike tomorrow. There is an 87% chance, according to Caushy Traders. If you agree with those odds, a $50 trade could yield $56 or $57 if you're correct. If you're contrarian and you think that there is not going to be a hike tomorrow, well, there's a 14% chance on Caushy and a $50 trade in that particular case could yield $362 if your contrarian take is right and the Fed holds tomorrow. This video is sponsored by Caushy. It's the largest prediction market in the United States. Unlike a sportsbook, you're trading peer-to-peer on real world events from economic data to political outcomes. And the price moves based on public opinion, not a house. Go to the link in the description down below or scan the QR code here to get started. Use my code LIN, L-I-N. New traders who use my code can get $25 when you trade $25. Caushy is CFTC approved and available at all 50 states. And we're going to get Gareth's take on whether or not he agrees with the 87% chance on Caushy. Gareth, welcome back to the show. Good to see you. Hey, thanks so much, David. It's great to be here and there's a lot to discuss. Everything from oil to why stocks are falling this week. I had a chat with my friend, not a chatbot, a real life friend. I was talking to you offline about a chatbot, but my friend said, I never quite understood how these guys get paid so much to just release a number between $25 and $75. Even I can do that job. Well, okay. The Fed has a lot of variables to look at when deciding whether or not to raise the rates. The FedWatch tool, well, take a look at what prediction markets are saying. The FedWatch tool from the CME is predicting a 93% chance. And the CME FedWatch tool has been pretty accurate leading up to the event, especially right before an actual FOMC. What is your assessment? Let's just start there. Yeah, so they will raise rates. They historically do not want to disappoint markets. When probabilities are even north of 75%, it's generally a lock that they will do what the markets are anticipating. In addition, you can't deny the fact that inflation remains stubbornly high. Oil being above $100 a barrel for this long and being elevated since the early portions of the year is only adding pressure to inflation, which they have to get under control. You have diesel above $6, which remember that's supply chain. That's trucks bringing goods. So it's going to get passed through. So they have to act here. I actually think the markets are happy. They're going to act. And I could argue here that we could see rates fall if the Fed raises rates. And I'll tell you why. And this is interesting. So one of the concerns- You mean the long end of the yield curve will fall? Correct. Correct. Right. Because the Fed sets the short end. You're right. Absolutely. But the reason the long end could fall is because you have a loss of confidence in people buying our debt or sovereign nations or pension funds, buying treasuries. The fact that we have $40 trillion in debt, the fact that the president is so involved in monetary policy. So the Fed, by acting and saying, hey, we're going to tamp down inflation, we're going to raise rates, gives more confidence to buyers of our debt. More buyers gain confidence. They're willing to accept a potential lower interest rate. Now, I don't think we're going way lower, but I could see this 5% as being a pullback level on the 10-year yield. I want to talk a lot more about the 10-year in just a minute. The 10-year has now reached a 19-year high, and stocks are falling because of this. The S&P is down 50 basis points. The Nasdaq's down almost 1%. Bitcoin's down 3%. Gold's down. And yeah, the treasury yield is up. The fact that the treasury yield, the 10-year and the 30-year, the fact that they've gone up, is that a precursor or a signal that the Fed is going to raise rates tomorrow? Is basically the bond market reacting to what we're expecting, Gareth? Yeah, or you could even argue that the bond market is forcing the hand of the Federal Reserve. And this is something that a lot of people don't understand, is that yes, sure, the Fed controls the short end. But in many ways, when the market and market dynamics demand that interest rates go up, they're going to make interest rates go up. And you could either have a Federal Reserve that puts their head in the sand and ignores it, or a Federal Reserve that acts on it. And again, it looks like Kevin Warsh is going to take that acting responsibility and do it. But I actually am in the camp that the yields, and you see this, right? I mean, look at the Japanese 10-year yield. Look at what the European Central Bank did. So you've had all of these central banks raising rates around the U.S. The U.S. has to raise the rate to keep pace. Otherwise, remember, other debt starts to become more attractive from a yield standpoint. And that's part of the deal here, too. Okay, my friend sent me this. This is from the Wall Street Journal. It's a compilation of what the big banks think is going to happen. This was dated last week. So four days ago, maybe their assessment has changed as well. But as of four days ago, on September 11th, most major banks and financial institutions are expecting a September rate hike. Interestingly, they're expecting possibly, some are expecting a 50 basis point hike in September. Okay, Goldman Sachs expecting 25. Look at this, Deutsche Bank, 75 basis points. Citigroup, 50. Barclays, 50. Bank of America, 75. HSBC, indefinite hold. December cut, Jefferies expecting a cut in December, not a hike. JP Morgan, 25. So a lot of these banks are expecting 50 to 75. Oh, I'm sorry, I'm sorry. This is the policy change in 2026 column. It doesn't necessarily mean policy change necessarily in September. It could just be 25 in September, and they're expecting a few more down the line before December. But in any case, most financial institutions, except for Goldman, Jefferies, JP Morgan, are expecting 50 to 75 basis points this year by the end of the year. This is Cauchy, it's a prediction market, more or less in line with the CME FedWatch tool, 87%. Now, do you see any scenario in which they hike 50 to 75 basis points by the end of December? I do. I think 50 basis points is very, very possible. I think tomorrow is just a simple 25 basis point. I mean, that alone is likely to draw the ire of the president. We know what he said just a week or so ago about the Fed not even cutting rates. And again, that wasn't even on the table to cut rates, but even staying stationary, and they're going to end up raising. So they won't do more than 25 basis points. But I do think that the longer oil stays elevated, the longer the inflation becomes inbred in the system. And there's two ways out here. One is you raise rates, which inevitably slows the economy a little bit and brings in inflation. Or if you just wait, you'll eventually get an economic collapse down the line that will bring in interest rates and bring in inflation as well. But ultimately, I think 50 basis points at this stage, early in the year before the whole oil thing happened, I was in the camp of no hikes whatsoever. But again, with oil staying elevated as long as it has, this has not been good for the economy. And especially those diesel prices are going to impact, you know, not just the consumer, but the consumer through buying goods that are going to go higher. What I'm struggling with right now, Gareth, is that the CPI above 3%. It's at 3.4% headline. It has been, according to Warsh at this last FOMC conference, it's been above the Fed's target for more than 60 months. The point is, this is not a new phenomenon, that the inflation rate is above the Fed's 2% target. Could they make a case that, well, we don't have to raise rates now. We could wait until December for this trend to establish itself following the rise in oil, which just started again late August. Remember, Kevin Warsh made the statement several times that he looks at trends, not individual data points. Trump has also been on up the Fed's butt, so to speak. He even posted on Truth Social a few weeks ago, the Fed better get smart and not raise rates this September. He also complimented Kevin Warsh for doing a good job, but he singled out the Fed as a whole organization and said, they better get smart and not do this. So could they succumb to pressure and not do this tomorrow? No, no, I think they have to. And I think, I hope the president is getting, I know he posts on social media to kind of stir up things, but I hope he's smart enough in getting the right insights from his advisors that if the Fed does not raise interest rates, then the concern over US debt and policy and independence of the Fed would actually make buyers of our debt demand an even higher interest rate. And I know this is very counterintuitive to what most investors are thinking. Most investors say, oh, well, the Fed raises rates, interest rates go higher. But I actually think we're going to see a pullback here as it gives that independence. And the fact that you have, you know, Kevin Warsh overseeing a body that is going to get our situation under control here, that is going to actually bring in rates. And I hope the president deep down understands that you gotta have a strong Fed. Otherwise, people do not believe the US will ever pay its debts. And that's really the only reason we are still the number one player in the world in this regard. Yeah. The benchmark 10-year yield rose to at one point earlier today, 5.041%. It's now down to 4.994. I'd like to show you something here. This is the 10-year yield. I'm going to overlay this with the S&P. I'll show my screen and then I'll flip over to yours, Gareth. The point I'm trying to make is that they've been moving in lockstep for the last couple of months. Now, the fact that the 10-year yield has been climbing today and the stock market is falling, the financial press are saying, well, stocks are falling because the 10-year yield has now reached a new high since 2007. But when you look at this chart, Gareth, the stock market has been rising pretty much all throughout March to now, discounting this consolidating period between May and August, even while the 10-year yield has been rising all throughout this time. So I don't think I can make the assessment that just because the long end of the yield curve has been rising, that will put pressure on stocks to fall. But there's something about the 5% level that's really spooking the stock market. Anyway, I'll stop here. What do you think? Yeah, so I'm in agreement. I think that generally the markets are okay with slow and steady interest rates rising. Its rate of change is the most important thing here. And what we've just seen is a headline cross as of today that we made a new high on the 10-year that we have not seen in 19 years, since 2007. And just to recall, 2007 was the peak in the markets before the financial crisis. So there's something that connects with investors here that they say, oh my goodness, this is what happened just before in terms of interest rate levels before the financial collapse. Are we potentially getting close to a scenario where you see these type of things start again? And I think that's one of the reasons why this 5% level is so important. Now, again, this is a pierce of the double top. I think it's interesting that we've seen yields come back below or back to 5%. I'm watching super closely. And I want to share my chart here because I think this is really, really important to look at is that if we look at the 10-year yield right here, this was the pivot high from 2023. So you can see that since 2023, really what's happened? I mean, rates have been gyrating between essentially 3.5% and 5% relatively in a range bound movement. Now, if we break above this 5% level, this pivot high from 2023, which we peaked above earlier today, now you're in a new scenario. Now you've broken out, and that's where you start to get people to worry about a financial crisis and bigger issues out there. Basically, then, if I could sum up the position that we're discussing here, it's either the long end of the yield curve rises tomorrow or the short end, basically, right? Because if the Fed doesn't do anything, you're saying the long end is going to go. What is going to be worse for the economy and ultimately markets? If the long end continues to rise, let's say the 10-year goes to 5, 5.2%, or the short end goes up because the Fed funds rate goes up. Yeah. And you're making such a fantastic point here, how most people would assume they're going to run, they're going to move together. But my thesis here is that you're actually going to see one move in one direction and the other move in the other direction. And I think that ultimately the best thing is that the Fed gets control here. Because think about all of the debt that the U.S. has accumulated. If we didn't have all this debt that has to be refinanced, I believe it's about $7 trillion in the next 6 to 12 months that's rolling over from the U.S. balance sheet, the U.S. debt. If we see that long end moving up, it's going to cost even more money. And remember, folks, we are at a point where we're paying a trillion dollars already in interest rates. You push the U.S. tenure to 5.5 or 6 percent and that number starts to steamroll exponentially even higher. So really what you need here, and this is so important, the Fed has to come out strong. Kevin Warsh needs to be pretty hawkish. I don't think he, I don't think you want him to say, hey, we're going to raise, you know, interest rates every meeting for the next 5 or 6 meetings. But he has to say that our main goal is price control, getting prices down to that 2 percent mandate. That is important because we've also heard that maybe they're open to, oh, let's have 3 percent be the new normal. No, the market and investors that are buying U.S. debt need to know someone is in control because they don't trust the president. The president's willing to do whatever he'll, whatever gets the stock market going up, he'll do. But the Fed has to be the adult in the room here and raise rates. The way I see it, the Fed could surprise in both directions. They could not raise rates, which would be bad, right? And they could raise beyond 25 basis points or at least signal further tightening beyond market expectations, which may also have a market impact. So what's the sweet spot here? What's the Goldilocks moment? I would say the Goldilocks moment is, is guiding towards a very structured position. So raising rates, 25 basis points, saying that they are data dependent in that they're going to watch inflation, every number, CPI, PPI, PCE, economic data. And if inflation doesn't start to come in here, which is going to have a lot to do with oil, they will raise again before year end. And that'll give the market confidence that it's data dependent. So they're not locking in that they're going to raise rates no matter what, but they're also going to make sure that they get prices to stabilize here. And part of that, honestly, they've got it. We've got to get this whole situation with Iran figured out. I mean, this is, again, putting so much pressure on inflation, undoing pressure, in my opinion. And that, again, you get oil back to $70 a barrel. Inflation will come in substantially. How would you be positioned as a trader right before, the day before the FOMC? Like we talked about, stocks are down, and Gold and Bitcoin are also down today. Do you think the markets have already adequately priced in the expectation you're looking at? Or do you think there's probably some room to arbitrage, whatever the case may be? Yeah, so at least for me, I think the retail crowd is, and this is by the puts and call ratio. So put call ratio basically tells you how many people are betting that the markets are going to go down versus how many are going to go up. And the put call ratio is heavily skewed towards the bearish side. I would take the opposite angle of that. I think, again, people are assuming because the Fed raises rates that it's going to be more bad news for the market. I think the confidence that that will give the market will actually rally the stock market. Generally, what we know is that wherever there's more puts or calls, the opposite occurs because the institutional money doesn't want to pay out all the put buyers that have overpowered the call buyers. They lose money if they have to pay those players out. What we can see here on the S&P 500 is that we are right into a major trend line here around 7,575 on the S&P. As long as we stay above this, I remain bullish on the markets. What we have here is a move up near term and then consolidation, which is actually a bull flag. As long as we maintain this level, which, again, we are testing today, then I will remain bullish on the market. And I think the markets are going to rally tomorrow if Jerome Powell stays the course, raises and stays relatively hawkish. I think that's a Freudian slip. Either you miss Powell or you're expecting Powell to make some sort of... He's in the position for so long, it just gets ingrained in your brain. But you're right, Kevin Walsh. Yeah, it's muscle memory. By the way, just to comment, Kevin Walsh is not the dictator of the Fed. Even if he wants the rates to stay put, if there's enough votes from the other governors that they have to raise, they're going to raise. It's Kevin Walsh and the Fed that we have to distinguish here. OK, key levels for the S&P. Even after this FOMC meeting, what are you looking for? So what I'm looking for, and just like I mentioned, we're going to remain or at least I'm remaining bullish on the S&P in the near term. Now, that doesn't mean that down the line, I don't think the U.S. is in a whole heap of trouble like the rest of the world. You guys know that I'm looking at that 2030 potential, you know, massive market corrective decline, potentially a Great Depression. But at least in the near term, if you look at the stats, right, we have oil at $104 to $105 a barrel. You have yields at 5% on the 10 year. You have the president trying to meddle and attack the Federal Reserve. You have the AI question. I mean, just this last weekend, we had Dario Amadei coming out and basically saying this is an existential threat. We need to slow down, which throws at risk the idea that there's going to be unlimited growth here in AI if things slow down. And yet the S&P is down about 3% off all time highs. And with the Fed, again, raising, I actually think that we should see a move up. But now I will say this, as any trader, you have to have your levels. Where does your thesis get invalidated? You have a neutral zone here between 75, 75 on the S&P and 7,400 right here. This would be a little bit more question marks. If we start trading in here, this is where you have to start to say, wait a minute, this is still potentially bullish, but it's a little murkier now. And if we break below 7,400, that's when I would get very, very concerned. That's a major trend line that goes all the way back to the peak of the bull market in 2021. And if we break below that, we likely head all the way down to 7,000, quite a drop on the S&P. Okay. I want to flip over to Bitcoin now. Bitcoin moved on the 19th of August. I don't think we've had a chance to speak about that yet. No, I think you were on right before then. But it moved right at the announcement of Treasury Secretary Scott Best and saying he's going to intervene in the bond market. Basically, he's going to double bond buybacks from $4 to $6 billion. He's since moved that to even higher. But the point is, all of crypto basically woke up at the exact same time and it's been trading pretty much range bound ever since. What is Bitcoin waiting for at this point? Is it another rate story? So I think part of what Bitcoin is doing is it's waiting for the Clarity Act, which I know there's a vote on today. It's not the specific act itself, but it's to advance the legislation. And it's really waiting to get clarity on the Clarity Act. Is it going to push through? Will the regulations be more transparent of what can and can't be done in crypto? And so I think that's part of it. I think what you brought up, the initial move on Bitcoin, number one, it was choreographed beautifully by a technical breakout. This was your all time high here on Bitcoin, descending trend line. You can see it broke out, it consolidated, gained traction and then ripped up right there beautifully. Now to talk about this, this pattern is actually bullish on Bitcoin. Now it's bullish as long as we hold this $76,000 to $75,500 zone. Notice how every move up has come back in and it's been defended against this same level, inclusive of today's price action. So if we were to give and basically trade below $75,500, I would start to get concerned. But aside from that, this pattern in technical analysis is what we call a bull flag, and it's potentially setting up for another leg higher in the near term on Bitcoin. So again, I remain bullish here on Bitcoin per the chart as long as we hold above $75,500. Your bullishness on Bitcoin, is it more or less the same reason as why you're bullish on the S&P? To some extent. I mean, I think the S&P, it's a risk asset, risk on, which helps Bitcoin. But we clearly saw that when you had a government like the US government and Scott Bissett coming out and saying, hey, we're going to start basically trying to control the yield curve, to control the long end. That freaked a lot of people out. To me, it tells me that the government and this is not just the US. I mean, this is governments around the world. They are starting to realize that fiat's days are numbered. Now, it still might be 10, 20 years, but at some point they are having to meddle in the markets more and more to maintain control and not allow a collapse. And I think that gives a great case for gold and it gives a great case for Bitcoin if you're a believer that Bitcoin could be potentially a long-term digital gold. Well, let's flip over to gold now. Good segue. Long-term digital gold. Well, before we get there, we have real gold to contend with. And real gold is telling us, what is it telling us, Gareth? Yeah, so real gold is telling us that it has broken out. So that's stage one. Now, I want to be clear on this and I want to show you some technical analysis. When you have a descending trend line and price is hammered on it multiple times, when it breaks out, it doesn't usually just go to the moon. Oftentimes, there's a little bit of a check back to that level before it makes its next move up. So in other words, it was resistance, resistance, resistance, breaks out. Now it becomes support. And so what we've seen is here's your descending trend line. Gold's broken out, hits resistance right here. It's pulling back. It honestly could pull back more if yields keep going up. But inevitably, it's doing its check back moment. Eventually, it's going to go higher. At least that's what the technical suggests. So again, shorter term, it's a little fuzzier if you're someone that's looking for an entry. Like, I'm not a buyer of gold this second. I think you can get it a little bit cheaper in the coming weeks or months. But if you have a long-term horizon, you know, whether you get it $100, $200 cheaper, it doesn't really matter if you're thinking the upside is $10K or $15K in the next cycle. Do you think the risk-reward trade-off for gold is still there this year at current levels versus, let's say, stocks or even Bitcoin? Yeah, I think, again, if you're just limiting yourself to the last quarter of the year as the third quarter is coming to an end, I don't know if the gains are going to be significant in gold. And I honestly don't know about the, you know, in the stock market either. We'll have to see. I still think there's upside in the stock market. But again, you know, how much upside is up for debate? Bitcoin, honestly, the chart setup is the best on Bitcoin right now heading into year end. I do think we have to see if this level holds that we discussed on Bitcoin at $75,500. Because if that were to break, then it totally throws the bullish flag pattern on its head. But right now, again, I just don't see massive upside into year end. I think the game on gold is understanding the bigger picture of what fiat currencies are slowly doing, which is degrading the monetary or de-dollarization of the dollar as well. And that's, you know, you have to have this kind of foresight of five years out for the gold to really pay out significantly. I want to switch now to oil. Everything kind of hinges on oil right now. The Fed's making the decision because oil has spiked up and pushed the CPI index up. Oil above $100. And if you overlay oil with the 10-year yield, you'll understand how important this is, because whether or not oil actually caused the 10-year to spike directly is debatable. But there is a very, very strong correlation. What do the charts tell you about oil? Yeah, and you're right about that. I mean, the and for people to understand that a lot of people may not fully understand it. So think about it simply like this, is that the higher oil goes or the longer it stays elevated, the more inflation gets pushed through all the way to the consumer. The more inflation to the consumer, the higher interest rates have to go to essentially fight that inflation, right? That's what the Fed does, raises rates to fight inflation. So that's why they are so tied together. Now, in terms of oil, I actually think and I'm short oil right now in one of my services, the commodity service. I'm into a major, oil's into a major resistance here around $105. Now, it's not to say it can't go higher, but at least on a technical basis, we're into a major resistance trend line. Notice this orange trend line going through pivot high, high, high breaks out. Then it becomes support, breaks back below and becomes resistance again. So I'm in the case that oil is probably closer to a top here than not. And there's two angles to this. Number one is that as the midterms approach, there's more and more chance that Trump gives into a demand that they've been opposed to with Iran to get oil prices down before the midterms, which is a huge deal to the Republicans. Or it could also be that higher oil slows the economy. And at some point you have demand destruction. I mean, you have diesel north of six bucks here. That is a huge headwind to these trucks that are burning as they drive across country, taking goods all over the US. So, you know, one way or the other, oil's coming down. Could it go a little bit higher? Of course it could. But I am short oil here and I think it's coming down here in the near term. Would you then make a contrarian play given that oil, like we discussed, is correlated with the Tangier yield? Would you make a contrarian play and be long bonds if you're expecting oil to come down? Perhaps we've seen a short term cap on the long end of the curve. Yeah, I absolutely agree. And that goes right in the same vine as what we were just discussing about the Fed is that if the Fed shows a backbone, then yields come in and yields honestly wouldn't really come in if oil keeps going up three or five dollars a day. So for that call to play out, we would also need oil to come back in here over the next week or so. So absolutely, I think the play here is to be long bonds, expecting rates to come in and oil to come in. Are you surprised oil hasn't gone higher this year? I think early on, initially, it was hard to kind of gauge how much of a disruption the Strait of Hormuz was going to be. And then the Red Sea came in play and all like, oh, well, we can just get it through the Red Sea or then, oh, we have a pipeline from Saudi Arabia. But the Houthis have really started to clamp down on the Red Sea and the pipeline and striking on Saudi Arabia. And so, you know, it's one of those things where, you know, historically, and I know this sounds crazy to people because at the pump, it's so hurtful to have oil and gas at these levels. But back in 08, oil hit one hundred and fifty dollars a barrel. And that was when dollars actually were more valuable. Right. So one hundred and fifty oil then was much more than one hundred and fifty oil now. And that was very, very painful at that point. So so I think, again, I am slightly surprised that we haven't gone a little bit above one hundred and twenty. But at the same time, let's be fair, the oil, the US is much more independent in terms of producing oil as well. And so and now you have Venezuela starting to be in the mix, although we got a lot of work on their infrastructure to get. So I think initially I was a little surprised. But at this point, I think oil is probably closer to a major high and going to fifty dollars. Like I would say this oil to fifty before one hundred and fifty. Wow. Oil to fifty before one hundred and fifty. OK, yeah, there's an equal chance of going up to. Yeah, it's an equal increment. One hundred to one hundred and fifty, one hundred and fifty. Interesting. One thing we have to note is that diesel has gone to new all time highs in diesel. I think I was reading a stat, I think seventy eight to eighty five percent of America's trucking runs on diesel. Commercial trucks run on diesel in the US. And so if diesel goes up, either the grocery stores or whatever, whatever warehouse needs trucked goods, they will either need to absorb the costs or they will have to, I guess, raise prices to maintain the margins. And if they raise prices, we know sticky prices are sticky upwards. Likely we're not going to see prices go back down immediately. So I'm personally concerned about that. Tell us that from a trader's perspective, how that affects your outlook. Well, so it absolutely has an impact. And you're right about that. Price increases are sticky. And I mean, think about the airlines. I mean, with with the airline jet fuel, the trucking all get passing through. I mean, even when we buy a TV, it's got to be trucked from somewhere after it's built. And a lot of the plastic is made with petroleum. Right. I mean, that's part of the production process. And so it is so inbred in everything we do that, yeah, it is sticky. And honestly, as a trader, it brings forward the potential for a recession because if prices stay sticky, it sucks more money out of individuals pockets like you and I when we have to pay up for goods. And that leaves us with less disposable income to go to Disney World or go buy McDonald's or anything else. And so it will have a chain reaction. The longer this stays up, the worse it is. And probably the quicker it draws forward that next recession that is looming at some point. OK, why are we still talking about? You told me this last time you're expecting a recession at some point, even perhaps a Great Depression. The conditions for a recession have been there for quite some time now. Why necessarily does it even have to happen even after so much time has passed and it hasn't happened already? Yeah. And so just understanding cycles, if you study cycles, there's always, you know, basically recessions are a natural, you know, just like you and I go to sleep every night. It's a it's a cycle. We get up, we go, we do things all day, then we take a break, we go. And so recessions are very much normal. They're healthy, believe it or not. It allows for a little bit of a drawdown, a little bit of a relaxation. What we've been going through is since the Great Recession in 08, 09, the Federal Reserve and the government have been pumping the system with drugs essentially to keep the high going. So imagine we haven't slept for weeks at this point. We're on these crazy drugs, not sleeping. Now, maybe it can go on a little bit longer, and I think it could last with the CapEx from AI maybe to 2030. But at some point you have a crash and we know that's a crash off drugs or the patient dies, which is the worst scenario. Either way, it will come. You can't keep the good times rolling forever. Eventually something gets tapped out and we already see it happening. It's like a slow motion train wreck where you have the government running up massive debt, which is stimulative. Right. So when the government spends money, it's stimulative. It keeps the high. It's the drugs. But at some point, look at what's happening. The 10 year yield is going up. Borrowing money is costing more. The housing market is starting to suffer because rates on the 30 year have gone up as much. There are repercussions that will eventually add up to the straw that breaks the camel's back, whether it's the dollar collapse or something else. I don't know. But there will be a reckoning day. And I think we all know that deep down. I think it's all like hot potato. We just like the politicians. They just want to keep it good enough so they get reelected. But inevitably, someone's going to be left holding the bag. Okay. You're a swing trader, Gareth, and like a swing, markets would eventually reverse course once the swing gets up high enough. It loses momentum. It goes the other way. I think that's the analogy here, if I'm not wrong. What, if anything, has reached the point where it's gotten high enough and it's about to reverse? I would argue that the AI trade, what we saw over the summer with Micron and those stocks, not to say that AI is not going to change our world and potentially for the worse, the way some of the heads have been talking recently. But at the same time, you pull forward all this demand. You pull forward these expectations. You get people to chase and run into these stocks. And inevitably, these things are cyclical. Just like the economy will eventually have a downshift, there will be a downshift. More and more factories are coming online to produce memory and all of these things. And that's going to bring the margins down. So AI margins are not going to be at 80% for the next 30, 40 years. There's going to be a drawdown. And margins, honestly, probably go back to 20%. That means a huge revaluation for a lot of these stocks that have been parabolic. Now, it doesn't mean they can't run in the near term on hopes and dreams, but there is always that reckoning day, just like with the economy. My final question, and this has been keeping me preoccupied at night, just thinking about this. The last time we had a major hiking cycle was 2022. And back then, everything fell, right? If you remember, the S&P went down that year. Bitcoin went down. It was a major crash, and businesses just weren't having it across America, and the world for that matter. My point is, okay, this is not a good chart, but I think you get what I'm trying to say. My point is, what is going to be different this time? I think we have to consider why the Fed is hiking and how many hikes are likely going to make. Because if you're expecting the rate to go from zero to 5%, which is what happened in 2022, that's a major bear market. If you're expecting the Fed to just react to oil and hike a few times this year and next, perhaps not. So are we talking the day before another 2022 bear market, Garrett? Is that what's happening right now? Yes or no? I don't think that's what we're seeing right now. And again, as bearish as I am over the next multiple years, I still think that the CapEx spending is going to keep the economy on life support, which will keep things rolling. Profits are amazing right now. Those will stall out eventually. But I think overall, the Fed is very aware that the retail consumer is suffering immensely under the inflation, you know, essentially rock. And they have to be very careful here. You know, they push too hard. You will see a depression a lot sooner. And arguably many people are already feeling that we're in a recession, probably not depression yet. But again, these are the things that I would be very concerned about. I think Kevin Warsh is very acutely aware that there are things that are breaking already in the system. And again, you look at the data. You have auto defaults already rising substantially. You have even mortgages. Mortgage delinquencies are starting to tick up. Credit card 90 days late, starting to surge. And this is telling us that there's haves and have nots, right? You have the upper echelon that are heavily invested in the market. They're making money hand over fist along with the president, right? But then you have everyone else that's just getting by. And every time prices go up at the pump, they wonder if they can pay their credit card this month. And I think that's what the Fed has to be acutely aware of, is they can't raise rates significantly because it will cause something bigger than just a minor recession. Gareth, excellent. Let's wrap it up here for today. Where can we follow you? Just verified investing. All charts, no BS guys there. It's all about probabilities, analyzing the data. And again, we always just try to be there for the retail investor to try and even the playing field out there. We'll put the link down below, so make sure to follow verified investing there. And Gareth on social media. Thank you so much, Gareth. We always appreciate having you back, and especially at such an important time as the day before FOMC. So thanks for that. Thank you so much, David. Take care. And thanks for watching. Please do like and subscribe. Follow Gareth in the links down below. And please use my code LIN when you sign up to Kaoshi. Remember, new users get $25 when you sign up and trade $25. Link down below or scan the QR code here.