Huge News From The Fed! If You Own Gold & Silver, Watch This Now - Luke Gromen

[00:00:00]We are going to grow out of this without inflation. This is disinflation investments. And so I think that's part of going to be his role.

[00:00:07]Um it will be complete BS to be clear.

[00:00:09]It will be inflationary, but you know, he doesn't have to sell too hard. 48% of this country is going to believe whatever comes out of his boss's mouth and and Trump. And 48% of this country isn't going to believe what he says, what comes out of his boss's mouth, no matter what. You [music] know, Trump could say the sky is blue and half of this country would disagree and call him a racist. So, like that's that's um all he's got to do is swing that middle 4%.

[00:00:35]And it they can kind of hold it together. So, >> [music] >> um I again, I think next week's going to be really important because we're going to get some semblance of where we are.

[00:00:47]Because to your point, this looked like a relatively easy job when he said yes.

[00:00:53]Now, it is a flaming bag of dog poo that he's got to try to put out without getting his shoes dirty.

[00:01:00]All there's all this noise, all this food or all this word salad, all this It's a very simple choice. The dollar or the bond market.

[00:01:09]>> [music] >> They have to make that choice. They're going to have to sacrifice one. And all of this really just brings it forward. It's not it you know, it was you know, 3 months ago before this silliness was like you said, just pricing cuts.

[00:01:22]Warsh had some time to think about it.

[00:01:24]Now next week he's going to say something and it's going to become you know, what do you want? You're going to You're going to let rates rip? Are you going to let the dollar fall? What's going to happen?

[00:01:34]I think next week is is going to be a big card flop, if you will, to use poker term. Um he's going to have to show us our cards.

[00:01:44]And there's a consensus on Wall Street that he's going to be hawkish. Uh and and certainly when he was at the Fed in 10 and 11, what have you, he was very hawkish. Uh what what find is not as well known is that he co-authored an op-ed in the journal in December of 2018 essentially begging the Fed to stop hiking rates. People don't seem to remember that as much you know with the S&P down 10% off the highs and you know you know please stop hiking rates now is not the time. So I think we're going to get a big card flop in terms of getting his view. Now that big card flop might be you know he wrote another op-ed in the journal about the Fed last fall uh that I think was kind of his job interview uh so to speak for Trump.

[00:02:31]Um in which he said essentially one of the thing he he criticized the Fed but from an economic policy standpoint one of the things he said that I thought might be important as it relates to next week is essentially we can grow out of this in a disinflationary manner.

[00:02:47]And he basically said if we invest in AI and technology uh that will drive growth up and growth that will not it will be disinflationary like the 1990s and that way that's the way we can sort of square the circle between what otherwise seems to be a completely untenable need to either sacrifice the dollar inflation or the bond market higher rates.

[00:03:15]And so I think there's a possibility that he will try to ride two horses with one ass again as as Powell did in a different manner next week by rolling out this same fairy tale that we can have disinflationary growth that we can have higher growth but that the higher growth won't necessarily drive higher rates. I think it's total BS. I think it's a fairy tale.

[00:03:40]So let's see what he does. One way or another we're going to find we're going to find something out next week and so I think they're going to have to show us a bit they're going to have to show us some cards next week and I think that's that makes it an important meeting and an important set up the back half of the year.

[00:03:53]>> After experiencing a sharp correction, gold and silver have staged an impressive recovery.

[00:03:59]Precious metals often move through cycles of optimism, disappointment, and renewed momentum.

[00:04:05]Recent price action suggests that investors may be returning to the sector after oversold conditions created attractive opportunities.

[00:04:13]Silver remains particularly interesting because global demand continues to exceed available supply in many areas.

[00:04:20]Industrial usage in solar energy, electronics, artificial intelligence infrastructure, and advanced manufacturing has strengthened the metal's long-term outlook.

[00:04:31]While short-term volatility remains inevitable, many market observers believe precious metals are entering a new phase driven by structural demand and monetary uncertainty.

[00:04:40]>> Yeah, I think that's a one of the $64,000 questions is, you know, uh you know, there's a there's a scene in a Kevin Hart comedy video where he and his his his crew are sort of getting ready, kind of hyped up before his show, and you know, he screams, "Everybody want to be famous." And they all shout back, "Nobody want to do the work."

[00:05:01]"Everybody want to be famous." "Nobody want to do the work."

[00:05:05]Everybody want to have an independent Fed.

[00:05:08]Nobody want to cut deficits. Nobody want rates to go up. Nobody want the dollar, right? So, look, the Fed certainly, I would agree with Warsh's and Bessant's [music] point that the Fed ran pretty far afield in some certain areas. Some of them around DEI and climate, 100%. Get rid of that.

[00:05:27]Now, is Kevin Warsh going to stand aside and let the Treasury market dysfunction?

[00:05:34]Cuz if the answer's no, then he's not going to be that different. And I think the answer's absolutely no. And why is the Treasury market repeatedly dysfunction since 2020? Amongst all the noise and all of the word salads from all these academics and economists, it's a very simple thing.

[00:05:49]The debt is too high and there isn't enough balance sheet to finance it without the Fed's help.

[00:05:56]That's it. That's it.

[00:05:58]The end of the day, that's what it boils down to. And so, the debt is still going to be too high, right? We can start there. Uh the deficits are going to be what they are, right? There's not neither Bessent, you know, if anything, Bessent has been part of administration this year that is that is by virtue of this ill-advised adventure into Iran going to increase the deficit pretty notably. You notice his three arrows has just gotten wadded up and thrown in the trash.

[00:06:22]Um so, that's where I would start with that answering that question is is what you know, we know the deficit is primarily three things. It's interest where rates are going up because of this this adventure in Iran.

[00:06:35]Um we know it's entitlements. There's 65 million boomers, whatever. Those they're the politically untouchable. And there's defense which the budget just went from a trillion to a trillion five.

[00:06:45]Is what Trump would like to do.

[00:06:47]So, we're not cutting any of them.

[00:06:49]So, that then leads you to one of two things. Either rates are going to go up a lot and the problem with rates going up a lot in an economy with 122% debt to GDP and 6% deficits, um means that you're going to create bond market dysfunction very quickly. Again.

[00:07:06]And when that happens, what is Warsh going to do?

[00:07:09]Is he going to stand aside and watch the 10-year go from 4.6 to 4.8 to five to five and a half to six to seven and just let stuff break and say, "You know what? Cut defense. Cut the boomers. Oh, we're going to pay interest and that's it. Our entire If I have to, I'm going to let rates go so that interest will be 100% of tax receipts.

[00:07:30]Everything else can get cut." And you and I both know the the odds of that are zero. That's never going to happen.

[00:07:36]So, then what we're really talking about, in my opinion, is where's where's the worst put on the bond market, right? Where's the you know, where where is he stepping start buying bonds?

[00:07:50]And do everything he said he would.

[00:07:54]And [music] Bessant I would throw in the same thing. Listen, Bessant was extremely vocal in 24 about Yellen and how stupid she was throwing out the debt.

[00:08:03]And what did he do when he got in office and got to actually behind the scenes and saw go, "Holy crap, it's way worse than I thought."

[00:08:10]>> It's different when you're sitting in the chair and you're like, "Oh shit."

[00:08:13]>> and you're like, "Oh my god, what does he do?" He doubles the rate of treasury buybacks that she was doing. Doubles.

[00:08:18]Okay. So, that like that is all, you know, sort of the issue alongside you know, my view is ultimately the Fed won't be independent. They'll be a set effectively more married with the treasury. Um maybe it'll be smoother because Warsh and and and Bessant worked together under I don't know who whether neither Druckenmiller or Soros, I can't remember. Um you know, maybe there's going to be more coordination particularly given where we are geopolitically. I could certainly see that. Um but that's inflationary. Like 100% that's inflationary. And and so I think part of what Warsh's mandate will be will be to sort of the, you know, the good-looking face with the good hair to get on TV and tell people this isn't inflationary.

[00:09:06]We are going to grow out of this without inflation. This is disinflationary investments. And so I think that's part of going to be his role.

[00:09:14]Um it will be complete BS to be clear.

[00:09:16]It will be inflationary, but you know, he doesn't have to sell too hard. 48% of this country is going to believe whatever comes out of his boss's mouth in in Trump. And 48% of this country isn't going to believe what he says, what comes out of his boss's mouth no matter what. You know, Trump could say the sky is blue and half of this country would disagree and call him a racist. So, like that's that's um all he's got to do is swing that middle 4%.

[00:09:40]>> [laughter] >> And if they can kind of hold it together. So, um I I I again, I think next week's going to be really important cuz we're going to get some semblance of where we are because to your point, this looked like a relatively easy job when he said yes. And now, it is a flaming bag of dog poo that he's got to try to put out without getting his shoes dirty.

[00:10:07]>> Physical gold and silver are only part of the story.

[00:10:10]Mining companies frequently act as leverage plays on rising metal prices.

[00:10:15]When confidence returns to the sector, mining shares often outperform the metals themselves.

[00:10:20]This relationship has appeared repeatedly throughout previous commodity cycles.

[00:10:24]Investors closely watch mining stock performance because it can provide clues about market sentiment.

[00:10:30]If producers and explorers begin attracting capital faster than bullion, it may indicate growing confidence in future price appreciation.

[00:10:38]However, mining stocks also carry greater risk and volatility.

[00:10:42]Their movements reflect not only metal prices, but operational performance, financing conditions, and investor expectations.

[00:10:50]>> Yeah, um You very You very well may be right. I'm I'm not as well versed in all the sort of the the internal politics there.

[00:11:01]To me, my read of that is I I think you're probably right. And if you're right, I would say that that means Warsh will just have to use there's no atheists in foxholes approach, right? So, you know, as we sit here today, the Dow's down, you know, Nasdaq and and S&P are down percent and a half, uh gold's down huge, uh bonds are down, and the dollar's flat.

[00:11:22]So, we've got stocks down, bonds down, dollar not up, almost down.

[00:11:30]That's that's That's the Fed's worst right there. What do you want to do?

[00:11:36]And the way you you know, you can you the the the there's no atheists in foxholes approach is just like fine, let it you know, It it was uh famously employed with the tarp vote, right? Remember they couldn't get the votes for tarp? Okay, fine. It failed. And now watch this show. And you know, the market crashed and then everyone came back after they got some religion and and um and then it passed.

[00:11:59]And so, I think it's you know, to your point, you know, if it plays out that way and I could I think you raise a valid point. To me, that just suggests near term you're going to get some pain in markets um and all markets. Stocks down, bonds down, and probably dollar not up that much. I I'm surprised the dollar's not up more today. I'm shocked actually.

[00:12:18]It's a very bad sign. Um until they until you know, Waller et al.

[00:12:25]come around, right?

[00:12:26]>> Although oil prices have eased following geopolitical developments, the broader energy picture remains complex.

[00:12:33]Supply chains disrupted by regional conflicts do not instantly recover when tensions cool.

[00:12:40]Shipping routes, refining operations, fertilizer distribution, and industrial supply networks often require months to normalize.

[00:12:48]Many analysts warn that hidden bottlenecks may emerge long after headlines disappear from the front pages.

[00:12:54]Meanwhile, years of underinvestment in conventional energy production [music] continue to raise concerns about future supply availability.

[00:13:02]Even if markets appear calm today, delayed economic effects can surface later, influencing inflation, transportation costs, agricultural production, and broader economic growth.

[00:13:13]>> I think it makes perfect sense, but it's very troubling, which is is there a lot of people saying no, it's going to be super good for the dollar. I I thought it'd be good for the dollar.

[00:13:20]But um look, you can buy dollars or you can buy oil. And you can't put all your My my truck doesn't run on dollars, it runs on oil.

[00:13:28]And last week I put $158 in it. So, you know, um the the issue is ultimately you know, you need you need energy and food. They're higher on Maslow's hierarchy of needs than you need treasuries, US dollar stocks, et cetera.

[00:13:50]And so, um market action of dollar down, bonds down, stocks down is capital flight. That's money leaving the dollar. Where is it going?

[00:14:01]Well, it's probably either, you know, buying commodities or or, you know, paying down basically paying down debt.

[00:14:09]I'm I'm really surprised. It's Or alternatively, some of it might be, you know, you look at the volumes of CIPS, China China's uh international international payment system, interbank payment system. I can't remember what the I is. Anyway, I think it's interbank payment system. Point is is the volumes in this war have exploded higher.

[00:14:28]Uh in other words, uh to get around uh US dollar sanctions, et cetera, um there's a lot more volume going through that. Now, is that enough to drive the dollar like down with with risk off as sharp as it is? Boy, I'd I'd be surprised. So, it is at the end of the day capital flight. It's it's capital flight price action. Dollar down, bonds down, stocks down. Um again, we're flat to on on the dollar. So, it's not quite there, but we saw this in liberation day. We saw capital flight, you know, dollar down, stocks down, bonds down in liberation post liberation day for a week or two.

[00:15:04]And then, you know, Trump uh Trump was elect, you know, had the come-to-Jesus from, you know, or or the hey, I'm effort call as we used to talk about on the sales desk, you know, hey, I'm effort, knock it off. And 7 days later he paused. But, um it it it it is as it relates to Warsh, it makes his job infinitely harder. Because again, all there's all this noise, all this food or all this word salad, all this it's a very simple choice. The dollar or the bond market. They have to make that choice. They're going to have to sacrifice one.

[00:15:41]And all of this really just brings it forward. It's not it you know it was you know three months ago before this silliness Warsh, like you said, pricing cuts.

[00:15:51]Warsh had some time to think about it.

[00:15:53]Now next week he's going to say something and it's going to become you know, what do you want? You going to you going to let rates rip? Are you going to let the dollar fall? What's going to happen?

[00:16:03]>> As technology companies reach extraordinary valuations, some investors are questioning whether capital is becoming concentrated in speculative growth sectors.

[00:16:12]Massive public offerings often attract enormous attention and can signal peak enthusiasm within financial markets.

[00:16:19]By contrast, commodities remain relatively under-owned despite their importance to the global economy.

[00:16:25]Resources such as gold, silver, copper, and energy products serve as the foundation of industrial activity.

[00:16:33]Supporters of the commodity sector argue that tangible assets remain attractively valued compared with many high-growth technology companies.

[00:16:41]They believe future market leadership could shift toward businesses producing essential goods rather than purely financial narratives.

[00:16:48]>> Yeah, I think some of this is partly why Warsh got the job is I think some of what is, you know, shrink the balance sheet, I think is a very cynical BS narrative.

[00:16:59]Um it's gaslighting.

[00:17:00]And the reason I say that and and look, the reason he's gaslighting isn't he's a bad guy or mean guy or anything, it's just they're cornered. They are absolutely cornered. And so they're trying to sort of not have to go black or white of the bond market or the dollar. Okay, well what sort of you know, how can you split the baby so to speak? Well, you could get a guy like Warsh in there who comes in and says, "Listen, I'm going to we have we've got disinflationary growth." Which by the way, show me a data center that's cheaper today than it was a year ago, 2 years ago to build, right? So, it's that's total BS. It will eventually be disinflationary, but that will probably be in 5 years or 10 years time. So, it again it is cynical best case, worst case it is overt and misleading, but again, they need to do that because this they can't they really don't want to have to choose the dollar or the the bonds, which they're going to have to eventually.

[00:17:54]So, if I'm a Warsh, I say, "Okay, there's going to be disinflationary growth based on AI, and so I can cut the front end."

[00:18:04]Great.

[00:18:05]And the Feds, you know, been naughty and they've been buying all these bonds and, you know, running a field of their running far afield of their mandate, which is also BS because they've been doing it to finance the US government and to prevent the bond market from collapsing.

[00:18:19]Whatever.

[00:18:21]Um only uncouth guys from Cleveland say that, even though lots of people know it to be true.

[00:18:26]Um so, I'm going to shrink the balance sheet.

[00:18:29]Okay. Well, that all else equal puts upward pressure at the long end. Okay, so now I'm steepening the curve.

[00:18:36]Great.

[00:18:37]Now I'm going to go to the banks and say, "Hey, I'm going to deregulate you banks under the auspices of hey, Main Street, not Wall Street." And there was an element of that that that's true.

[00:18:45]That's 100% an element of that's true, that deregulation.

[00:18:50]What does that deregulation mean in >> [music] >> in again, uncouth Cleveland guy terms?

[00:18:55]It means the banks can now basically load up on close to infinite leverage on Treasuries, which they will absolutely do because the yield curve is so so they can borrow if the yield curve steepens and then you take all the regulations off, now they banks don't care about real returns, they just care about a spread. So, now the banks are going to step in and buy the Treasuries that the Fed's sell.

[00:19:16]Now, the banks are just the regulatory perve purview of of the Fed. So, it's just QE done by the banks. We saw this in the second quarter of 2020 during COVID when they temporarily suspended SLR for a year.

[00:19:30]So, that the banks would buy more Treasury. It's just QE through the banks. That's it. Which is again, it's fine. I get it.

[00:19:36]Um but don't pee on my back and tell me that it's it's raining. That's, you know, just be honest with me.

[00:19:41]Um Now, the nice thing about the deregulation in theory is not only does do you see you steepen the curve for them and then you take the regulations off so that they can buy a lot more of the Treasuries that you're selling if you're Kevin Warsh, but those regulations also remove the leverage requirements. Now, the banks are no longer constrained to some amount by I can lend money to the US government by Treasuries or I can lend money to Main Street. Now, they can do both.

[00:20:06]So, I think that's what his whole plan is or at least was before this silly war started, which is I'm going to cut rates, I'm going to sell the long end, I'm going to have the banks backfill with regulatory removal, and then they can still lend to Main Street, and I'm going to get on the horn and tell them, "If you don't lend more to Main Street, I'm going to have a regulator up your rear end looking for stuff until you do start lending to Main Street." And in that world with AI overlaid, that is pretty close to a sellable package of like disinflationary growth.

[00:20:39]Look at that nice isolation. It's ultimately still going to drive higher rates because of the context in which it's occurring, which is to say that the GDP, US net international investment position, foreign borrowing of dollars, rates are going higher no matter what he chooses. But at least this is sort of good.

[00:20:56]Um So, I could see all that. Now, they started this war.

[00:21:03]>> [laughter] >> Yeah.

[00:21:05]>> Look, pro tip. If you're in the administration, you're listening, this pro tip.

[00:21:09]If you're going to spend 3 years, 2 and 1/2 years shifting issuance to the front end because the back end is blowing out, you can't be stupid and start an inflationary war that sends a front end up.

[00:21:22]>> Yeah.

[00:21:22]>> That's like giving yourself a root canal with a shotgun.

[00:21:27]Very effective, but fatal. Like, duh. Who is Who is Anyway, I'm I'm I'm getting all worked up now cuz it's just It's so galactically stupid. And now we're, you know, it makes it It makes everything that sort of nice package that we're sort of had, it just like beats it over the head like a baby seal. Like, it like Now, what do you do?

[00:21:48]>> Beyond daily market movements lies a larger discussion about economic stability and geopolitical change.

[00:21:55]Many observers believe the global system is transitioning toward a more multipolar structure, where economic influence is shared among several major powers.

[00:22:04]Rising debt levels, geopolitical competition, and shifting trade relationships are creating new uncertainties.

[00:22:11]In this environment, some investors prioritize wealth preservation over aggressive speculation.

[00:22:17]Rather than chasing every trend, they focus on assets with tangible value and long-term resilience.

[00:22:23]Whether through precious metals, commodity producers, or productive businesses, the goal becomes protecting purchasing power and maintaining financial flexibility during an increasingly unpredictable era.