Wall Street Tycoon: Trump is Deliberately Creating an Economic Recession

According to Larry McDonald, a former Lehman Brothers trader and founder of Bear Traps Report, the Trump administration is deliberately triggering an economic recession to address (alleviate) the United States' $36 trillion debt problem.

In an interview released on March 3, Larry McDonald stated that if interest rates remain at current levels, the interest on U.S. debt will reach between $1.2 trillion and $1.3 trillion next year. This is significantly more than defense spending. Therefore, Trump needs to lower interest rates; if they can reduce rates by 1%, they could save nearly $400 billion in interest next year.

No inflation cycle with a rate above 6% can end without the unemployment rate reaching 5%, 6%, or even 8%. The U.S. government cannot suppress inflation through massive fiscal spending, and the Trump team knows this. They need to trigger an economic recession; only then can they lower interest rates and extend the debt maturity.

Larry McDonald warned that the U.S. is now in a period where interest rates will remain high even if a recession occurs, which is a very typical stagflation period. This is similar to the situation from 1968 to 1981 when the market was essentially flat. However, commodities, hard assets, and companies with underground assets are what can withstand inflation.

Here are the key points from the interview:

Currently, the top 10% of consumers in the U.S. account for 60% of consumption, as the bottom 0% of consumers have been heavily impacted.

Since the top 10% of consumers account for 60% of consumption, it is nearly impossible to lower interest rates and inflation without depressing asset prices. The Trump team is actually trying to raise interest rates and depress asset prices.

Regarding U.S. debt interest, if interest rates remain at current levels, next year's debt interest will reach between $1.2 trillion and $1.3 trillion. This is significantly more than defense spending.

Therefore, Trump needs to lower interest rates, and they are very urgent, even somewhat panicked. If they can reduce rates by 1%, they could save nearly $400 billion in interest next year.

The reason the U.S. Treasury has not yet started to extend the debt maturity, that is, converting short-term bonds into 10-year or 20-year bonds, is that they want to lower interest rates first before doing so. They need to lower rates by 100 basis points so they can extend the debt maturity and then save about $400 billion in interest.

No inflation cycle with a rate above 6% can end without the unemployment rate reaching 5%, 6%, or even 8%. You cannot suppress inflation through massive fiscal spending, and the Trump team knows this. They need to trigger an economic recession; only then can they lower interest rates and extend the debt maturity.

After Trump's election, the U.S. bond market priced in a lot of growth expectations, and the yield curve (government bond yield curve) became steep. The market is currently trying to digest (recession expectations), transitioning from a steep yield curve to a sharply flattening yield curve

When Bill Ackman comes out and says that U.S. economic growth may only be 1%, it indicates that he is shorting; he is essentially betting on a recession.

The U.S. stock market is also signaling a recession. Over the past 3-4 weeks, consumer staples stocks (which are recession-resistant) have significantly outperformed non-essential consumer goods stocks.

Copper is currently experiencing a "capitulation sell-off." Whenever there is an economic slowdown, copper prices tend to drop sharply. However, the current situation is that copper is facing serious supply issues, and demand from data centers and post-war reconstruction may lead to a significant supply-demand gap. Investing in copper stocks may currently offer great value.

The post-war reconstruction in Ukraine will lead to inflation, and the global supply chain restructuring will also drive up inflation. Therefore, the U.S. is now in a period where even if it enters a recession, interest rates will remain high, which is a very typical stagflation period. This is similar to the situation from 1968 to 1981 when the market was essentially flat. However, commodities, hard assets, and companies with underground assets are what can withstand inflation.

The real reason for the strength of the U.S. economy and American exceptionalism is the 7% fiscal spending in the U.S., while other developed countries only have 3%.

In the past two weeks, the messages released by Musk and Trump have essentially been that they want to cut spending by $1 trillion. However, to avoid triggering a very severe recession, they are trying to gradually achieve this over 5 to 10 years.

Unfortunately, when U.S. fiscal spending is at such a high level, and Musk is so quickly reversing this trend, it could trigger a very vicious cyclical shift, which could be very detrimental to the market.

From a portfolio perspective, referencing the high interest rates and high inflation period from 1968 to 1981, the 60/40 stock-bond strategy may no longer be suitable, and investors need to have a higher allocation to commodities.

The Trump administration is currently implementing "financial repression," keeping interest rates below the inflation rate. He will talk to America's allies, asking them to buy more U.S. Treasury bonds at lower interest rates. They will also ask banking regulators to force U.S. banks to purchase more U.S. Treasury bonds.

This is the only way to escape the $36 trillion to $37 trillion debt predicament; there is no other way except for debt default.

The following is the full interview

Host:

Larry McDonald, founder of The Bear Traps Report, and also the author of your latest book "How to Listen to the Market's Voice: Risks and Investment Opportunities Reshaped by Volatility." Of course, you are also an old friend of our program; it has really been a long time since we last communicated.

Since your new book was published last year, we haven't invited you. But, oh my, Larry, I think now is the right time. Great to see you Considering everything that has happened in the current economy and market, I can't think of a more suitable guest than you. It's great to see you, truly wonderful.

Larry McDonald:

Thank you for inviting me. It has been an incredible year. Some of the points in the book are starting to materialize, such as persistent high inflation and the shift towards value investing and hard assets, with gold outperforming the Nasdaq index. I feel gratified to see these points validated.

Host:

Yes, the timing is just right. As I mentioned earlier, I can't think of a more suitable guest than you. It's been a while since we last invited you, and our show has grown significantly since then. Some viewers may be hearing you speak for the first time, and I'm looking forward to them getting to know you through this opportunity.

However, let's take a step back and look at the big picture, discussing the overall framework. What is our current situation? Perhaps you could elaborate on your outlook. Larry, you know, you can take your time to lay the groundwork for us, and then we can delve deeper into some of the topics and clues that have emerged.

Larry McDonald:

Okay. What we discuss in the book "How to Listen to the Market" is about the fiscal and monetary responses to the Lehman Brothers event (around $4 trillion), as well as the responses to the COVID-19 pandemic, the regional banking crisis in 2023, and the elections. A significant amount of fiscal funds were injected during the election period, and last year, a $1.9 trillion stimulus plan was launched.

Then in the first quarter of this year, the Biden administration spent another $800 billion before leaving office, which is deficit spending, not spending supported by corresponding funds.

So, if you add these up, basically in the past five quarters, there has been $1.9 trillion in deficit spending, plus another $800 billion. They did this because in an election year, they were trying to avoid a severe economic recession.

They created a lot of persistent inflationary pressures, and now it can be said that these pressures are starting to show their ugly side. Now Trump is forced to try to reduce inflation through various means we call "financial repression." We can delve into this issue.

But ultimately, the rich are doing well because interest rates have risen, and they have made a lot of money through savings. There is an incredible situation here.

This is the most important situation of the week. Now, the top 10% of consumers account for 60% of consumption. So the top 10% of consumers are now bearing 60% of consumption because the bottom 0% of consumers have been heavily impacted.

You can see this situation in many different companies, with a lot of evidence supporting this. So the rich are doing well because they can earn an additional 300 basis points on money market funds. Their asset prices have surged, and their wealth has increased significantly.

But what Greenspan mentioned in the 1990s was the "wealth effect." This is why we need to discuss the "wealth effect" this week, because what is actually happening is that the top 10% of consumers account for 60% of consumption, and it is almost impossible to lower interest rates and inflation without depressing asset prices. So ultimately, I believe what the Trump team is trying to do through interest rate hikes and other means is that they are actually trying to raise interest rates, which would depress asset prices.

Host:

Okay. This sets a good framework for our discussion. I didn't know this before, or I overlooked the fact that the top 10% of consumers account for 60% of consumption.

Wow, this shows me how distorted the economic situation is. You know, when you talk about those who really benefit from these policies and those who do not. So when we talk about the economy, some people say the economy is fine or something like that, but when you start to look closely at what constitutes the economy, maybe the situation is not as optimistic as you think.

Larry McDonald:

Yes, if you look at companies like Dollar General that cater to the bottom 60% of consumers, almost every such company is in quite a tough spot. And what about companies that cater to high-end consumers, especially looking at airlines?

Airlines have been quite profitable this year, and any company catering to high-end customers like American Express has been doing well. I think the situation now is that in terms of debt interest, if interest rates remain at current levels, next year's debt interest will reach $1.2 trillion to $1.3 trillion. This is much more than defense spending.

So they need to lower interest rates, and they are very urgent, even somewhat panicked. And to do this, if they can lower interest rates by 1%, they could save nearly $400 billion in interest next year.

Larry McDonald:

Janet Yellen, when she was Treasury Secretary last year during the election year, did not want to see significant volatility in the bond market. So she issued Treasury bonds in quantities that were two standard deviations above short-term bonds. When you issue Treasury bonds, their prices do not fluctuate much.

Imagine if you and I had to borrow $5 trillion. If you issued $5 trillion in Treasury bonds, they would hardly fluctuate, right? Because they mature within a year. But if you issued $5 trillion in long-term bonds, their prices would fluctuate like this, right? This goes back to the interest rate issue.

The Trump administration and some people closely associated with him criticized Yellen for issuing so many Treasury bonds during the economic downturn. The amount of Treasury bonds issued in the past few years has actually been two standard deviations above normal.

So now we have a lot of short-term debt. This is something emerging market countries would do, right? So they have been criticizing Yellen.

But guess what, so far they haven't started to extend the debt maturities, that is, converting short-term bonds into 10-year or 20-year bonds But guess what? They want to lower interest rates before doing this.

They want to lower interest rates. That's why they are trying to suppress the market with these tariff measures. Every time the market rises, Trump intervenes.

It's as if he has more means to take more severe measures, right? That's what's happening. They need to lower interest rates by 100 basis points so they can extend the debt maturity and save about $400 billion in interest.

Host:

That's interesting. Okay, let's talk about tariffs as a means to achieve this goal. I want to hear more about this aspect. Yes, let's start discussing tariffs as a means to lower interest rates.

Larry McDonald:

Yes, tariffs do have their inflationary factors, but in the short term, they will also lead to a massive economic contraction because they bring about various uncertainties.

And it's not just about tariffs. The enforcement actions by Immigration and Customs Enforcement (ICE) are also making the labor market very uneasy. Imagine if you are a company and you hire immigrant workers, and now ICE's enforcement actions are intensified.

So ICE's enforcement actions will drive away immigrants to some extent, which causes labor to flow out of the economic system, which is inflationary, but from another perspective, it will also lead to economic contraction because companies cannot operate as efficiently as before. Then regarding tariffs, when you impose tariffs on other countries, it slows down economic growth because Chief Financial Officers (CFOs) cannot make decisions.

You know, in the presence of tariff uncertainties, no CFO can really make decisions. So they have to start cutting labor and reducing hiring. That's why you see the initial jobless claims increased by 20,000 this week, one of the largest increases in years.

Host:

So do you think we are on a path that might lead to some unexpected negative growth? Do you think we could be heading towards a recession? What are your further thoughts on the economic outlook?

Larry McDonald:

Yes. If they can slow down economic growth, remember, Stan Druckenmiller, one of my favorite investors, has the view that no inflation cycle with an inflation rate above 6% can end without the unemployment rate reaching 5%, 6%, or even 8%.

You cannot suppress inflation through massive fiscal spending, you just can't, and that's exactly what the Biden team is trying to do. This will only hurt ordinary people because the lower-tier consumers are being suffocated by inflation.

So the Trump team knows this. They need to trigger a recession, only then can they lower interest rates and extend the debt maturity.

And this would actually make the competitive environment fairer, because if inflation decreases, it would actually be better for the bottom 60% of consumers, right? So they want to lower inflation, and that's what they're trying to do.**

They're basically trying to slowly walk towards a recession. That's why the market has behaved so strangely this week, as everyone is digesting this situation.

Host:

You're right, the market has indeed behaved strangely this week. What do you think the market is trying to convey? I mean, you can even consider the significant drop in Bitcoin. What is the market trying to express?

Larry McDonald:

Well, think about the past four years, right? The market has gone through three different trends. If you look at a month ago's Bank of America survey, the probability of a hard landing was less than 3%, while in 2022, that probability was nearly 40%, and at the beginning of 2023, it dropped to less than 5%, around 4% to 5%.

So we're talking about the probability of a hard landing in the minds of investors in the Bank of America survey. Over the past three to four years, this probability has fluctuated back and forth like a tennis ball. So what happened three weeks ago, four weeks ago? Because a market-friendly presidential candidate won the election, the market's expectations for growth and profits were really high.

The market was pricing in a lot of growth expectations at that time, and the yield curve (the government bond yield curve) became steep. So when you look at the yields on two-year and ten-year government bonds, after Trump's election, the yield curve really steepened, indicating that the market was looking for high growth.

But ultimately, the Trump team knew behind the scenes that there were these structural issues in the bond market.

We need to extend the debt maturity, and there are serious inequality issues, with inflation hurting the bottom 60% of consumers. So now the market is trying to digest this shift from massive growth expectations and a steep yield curve to now a sharply flattening yield curve.

In the silver market and interest rate futures market, the risk of recession has already been priced in. We are shifting from massive expectations of GDP growth of 5% or 6% to a possible economic contraction.

Bill Ackman said last week that last Friday he indicated that we originally expected GDP growth of 4% or 5%, and now he expects only 1% growth. He is the Chief Investment Officer of Pershing Square Capital Management, a renowned fund manager, and one of the most respected investors of all time. I really like Bill Ackman; he's your friend, and he performed well on this show.

But, you know, for Bill Ackman to come out and say these things, first of all, it indicates that he doesn't think the situation is optimistic. He is one of the greatest investors of the past 30 years, and this indicates that he is shorting; he is basically betting on a recession.

Host:

Yes. Steve Cohen also doesn't often speak publicly. If he could come on our show, I would convey that wish to the outside world, but he doesn't often come out and say these things, and he is one of the greatest traders of all time Okay, you mentioned the yield curve, can you talk about the actual situation? What is the relationship between changes in the yield curve and signals of economic recession? Is this also one of the signals of economic recession?

Larry McDonald:

Yes. We have a model, we have a market sentiment model, and we also have a model to measure the rate of change of the yield curve and oil prices. We also pay attention to transportation stocks.

If you look at the situation over the past three to four weeks, whenever you see transportation stocks significantly lagging, at the same time, consumer staples stocks (which are recession-resistant stocks) are performing significantly better than non-essential consumer goods stocks. Meanwhile, the bond market is experiencing severe volatility, and the yield curve is flattening.

At the same time, oil prices are falling. When these four factors occur simultaneously, if you use our model to measure their rates of change, you will get a very strong signal because the last time we saw this type of signal was in February 2020. We also discussed this issue in our book; the market has a very keen sense.

At the end of February 2020, the stock market was still rising, but transportation stocks were significantly down, and the bond prices of economically sensitive companies were also significantly down.

Oil prices fell, while consumer staples stocks, such as companies like Procter & Gamble (P&G), as well as cosmetics, alcohol, and other necessities of life, performed significantly better than the S&P 500 Consumer Discretionary Select Sector Index (XLY).

So when these four factors occur simultaneously and change rapidly in the same direction, it tells us about the market trend; the market communicates something to us every day, and these signals indicate that the likelihood of an economic recession is significantly increasing.

Host:

Okay. You mentioned "capitulation," and I would like to hear more about this. Are we preparing for more "capitulation"? Are we starting to see this situation?

Larry McDonald:

Are we preparing for more situations? Well, in some respects, there has already been quite a severe "capitulation," such as the significant drop in copper-related stock prices.

If you think about it, let me give you an interesting trading example. Copper prices have been suppressed because of cognitive dissonance, right? This means having two opposing beliefs. The market is like a person; over the past 40 years, whenever we experience an economic slowdown, copper prices have significantly dropped, just like when Lehman Brothers collapsed.

So investors watching our program have had this experience; investing in copper during an economic slowdown leads to a bad experience.

But this time is completely different for two reasons. First, compared to the past thirty years, the new mining output of major global copper mines may have decreased by 70%, meaning that the number of new copper mines coming online has significantly reduced. So we are facing a serious supply problem because we have severely underinvested in this area. But this is just part of the reason. Think about it, take the reconstruction of Ukraine as an example. You can search on ChatGPT to see how many buildings and infrastructures Ukraine needs to rebuild, and then consider the situations in places like Los Angeles and Gaza.

You will find that there will be large-scale reconstruction in the next five years, which will require a lot of copper and other metals. Then look at the spending of the seven tech giants (MAG Seven, namely Microsoft, Apple, Google, Amazon, NVIDIA, Meta, and Tesla) on data centers; it's like a fierce competition.

They are all competing against each other, trying to outdo one another. Microsoft plans to spend $80 billion this year, up from $40 billion last year. Zuckerberg from Meta (formerly Facebook) is also showcasing strength, and I think they plan to spend $55 billion this year.

If you calculate it, their spending scale in the coming years will reach about $2 trillion. Think about it, what are the main commodities used in data center construction? It's copper. So now everyone is frantically investing in AI-related projects, and you should also invest in copper-related stocks.

These copper-related stocks, such as Teck Resources, Freeport-McMoRan, and the U.S. Copper ETF (COPX), have already dropped 30% to 40% in price. You are in a very favorable position right now because global investment in copper has been severely insufficient for years, leading to constrained copper supply.

If we look at the capital expenditure in the copper, oil, and gas industries from 2010 to 2014, and compare that period with now, we have an investment gap of about $2 trillion to $3 trillion in this area, meaning we are severely underinvested. This is because all capital expenditures have flowed into the AI sector. Some parts of our U.S. power grid are already 50 years old, and some are 30 years old. So we need to apply all this technology investment to an aging power grid.

The power grid is in a state of disrepair and needs to be rebuilt, which is a $2 trillion project involving hard assets like copper and aluminum. This is the investment direction for the next five to ten years.

Host:

So this is what you are currently optimistic about regarding hard assets. This is also a theme in your book. From our conversation, it feels like a large part of resource allocation in the Western world is irrational right now, perhaps as you mentioned in your book, the world has changed. Many viewers of this program may not be familiar with this concept, but it can be said that it is somewhat like the "Fourth Turning" in the financial realm. Can you elaborate on this viewpoint?

Larry McDonald:

Yes, well, we have transferred 100,000 of the 5 million jobs in the U.S. to around the world. So we have greatly improved the global standard of living, but at the same time, it has led to the decline of the American Rust Belt. So the situation now is that in the Rust Belt, fathers come home to face their children, and they used to have a job with an annual salary of $150,000, but now they can only work in restaurants Annual salaries of only $30,000, $40,000, or $50,000.

With such significant structural changes occurring in the United States, we have made life difficult for many working-class individuals through inflation and job outsourcing.

Today's world is more diverse; over the past 20 years, we have been in a unique global landscape where the United States was the most powerful country and there was almost no war. But now we have two wars ongoing, which has led to supply chains not functioning effectively. Wars bring about significant inflation. I have discussed this with Neil Ferguson, David Tepper, and David Einhorn in my book.

They all told me that wars will continue to trigger inflation for many years due to the reconstruction efforts after the war, such as rebuilding infrastructure in Ukraine. This will cause inflation to remain high in the coming years.

Moreover, because we have politically neglected the Rust Belt, we need to restore all these jobs and bring them back to the United States. So we are bringing semiconductor jobs back to the U.S. When you rearrange the supply chain, it will lead to more inflation.

So we are now in a period where even if we enter a recession, interest rates will remain high, which is a very typical stagflation period. This is similar to the situation from 1968 to 1981, when the market was essentially flat. But commodities, hard assets, and companies with underground assets are what can help you withstand inflation.

If you look at the discounted cash flow model (DCF model), we refer to it as cash flow discounting. In an environment with stable deflation expectations and low inflation rates, software companies or tech growth stocks perform well. From 2010 to 2020, that was a typical deflationary period, and it was not just deflation.

During that time, the certainty of deflation was very high. But starting in 2020, we are facing higher inflation expectations and a more certain inflation trend.

If you use the discounted cash flow model and consider inflation factors, the main focus is on interest rates. If both interest rates and inflation rates are high, global portfolio managers will want to hold stocks of companies like BHP and Rio Tinto; they want to hold gold and want to hold assets.

They want to hold stocks of companies that have resources like oil and copper. In the high inflation, diversified economic environment from 1968 to 1981, these different types of stocks performed excellently, while the investment portfolio model from 2010 to 2020 will undergo a transformation.

Host:

Okay, it sounds like our inflation may persist, and in a stagflation environment, this is the most challenging time for all asset classes. But do you think if we might face a recession, we should allocate to hard assets, and what else? Larry McDonald:

Yes, in the first phase, we mainly have inflation issues and inequality issues. They need to lower the inflation rate.

They need to lower the inflation rate. So they need to trigger an economic slowdown, or they are trying to achieve this through measures like tariffs and immigration enforcement.

They want to spread the pain as much as possible, and we have a close relationship with the team in Washington. When you talk to those close to Trump or Yellen, they want pain, but they want that pain to be as far away from the middle class as possible, right?

They need to reduce inflation through pain. But this means that, because inflation is like a problem hidden under the carpet, it won't disappear easily. So this means that in the context of an economic slowdown, inflation will persist, just like the world from 1968 to 1981, where stagflation really began to show.

You can see this by looking at the performance of growth stocks versus value stocks. There has been a significant change in the past three weeks, with value stocks significantly outperforming growth stocks. Gold mining companies have outperformed the Nasdaq index. Look at the comparison between Enbridge and Microsoft; last year, Enbridge outperformed Microsoft by 40%, a situation that hasn't happened since the 1980s.

Enbridge outperformed Microsoft by 38% last year, which is unprecedented since the 1980s. That's why we are returning to an era that requires a completely different approach to portfolio construction.

Host:

Okay. By the way, this may sound like to address some long-term challenges, we need to endure some pain in the short term.

Larry McDonald:

Absolutely right. That's what Musk and Trump are trying to achieve. I mean, think about what they said this week.

What they said was so crazy that I'm not even sure they really mean it. They basically firmly told us they want to cut spending by $1 trillion. So now our annual spending is $7 trillion, and Musk says we want to bring that down to $6 trillion.

You can't do that in one year. The fiscal deficit we are talking about now is about 7% of GDP, while the average for developed countries is about 3%.

So the core argument of American exceptionalism has basically turned into, oh, we can spend at a 7% fiscal deficit rate while other developed countries only have 3%. That's what makes the U.S. economy strong and the reason for American exceptionalism.

But if you try to cut total annual spending from $7 trillion to $6 trillion in one year, you will trigger a very severe economic recession. So what they are trying to do should be gradually completed over 5 to 10 years, because unfortunately, when your fiscal spending is at such a high level and you reverse this trend so quickly, it will trigger a very vicious cyclical shift, which could be very detrimental to the market Host:

Yes, you did mention that we need a different portfolio structure. Can you remind everyone what that structure would look like? It's no longer a 60% stock and 40% bond mix. From your perspective, what does the new portfolio structure look like?

Larry McDonald:

Well, yes, it might be 40% stocks, 40% bonds, and 20% commodities, or maybe a ratio like 35% and 35%, where we have a higher proportion of commodities in the model. Just remember, from 1968 to 1981, when we experienced that high-interest, high-inflation multi-polar world, and during the Vietnam War.

At the end of that period, 49% of the components of the S&P 500 were industrial, oil, gas, and materials stocks. And in recent years, that proportion has dropped to 12%. So we don't think it will return to 49%, but if you look at the charts of industrial stocks compared to the Nasdaq index, industrial stocks have been performing well over the past three to four years, and that performance is accelerating.

So industrial ETFs (like ETFs representing industrial stocks) are something you should pay attention to, as well as oil and gas ETFs (XLO) and materials ETFs (XMI).

So oil and gas, materials, and industrial stocks have made up about 12% of the components of the S&P 500 in recent years, while all the money has flowed into tech stocks, right?

If that situation changes, the proportion of oil and gas, industrial, and materials stocks in the S&P 500 components could rise from 12% to 14% over the next five years. We believe that this proportion will eventually approach 25% to 30% of the S&P 500 components. That is the new portfolio structure you need.

Host:

Yes, sorry. I've always loved having you on the show. It's really been too long since I invited you, and as I said, it's great to have you this week. I know the audience will really enjoy this weekend special. Before we wrap up.

There are a few things. Everyone go buy Larry's book. I saw you doing a book tour on social media. If you haven't read it yet, if you haven't read "How to Listen to the Market," please go buy it and read it.

I tell you, I listened to the audiobook, and it was really great because I particularly loved the conversations you captured in the book. Let everyone know, obviously, to promote this book. Tell me more about the "Bear Market Trap Report." I know you have a great community. Then share some final thoughts. What do you want the audience to think about? Now it's your turn to speak.

Larry McDonald:

Thank you very much. You know, I'm proud that I started from the retail finance business. We wrote a book about Lehman Brothers that made it to the New York Times bestseller list and has now been translated into 12 languages I realized that doing book tours earns about 10 times more than writing books because publishers make a lot of money. But the best part is meeting many people. Over the past decade, we have been to London six times, Toronto and Vancouver six times as well, and also to Boston, New York, and Miami.

We just returned from Geneva. We created a Bloomberg chat group, which is somewhat like gathering information from very smart investors. These investors come from hedge funds, mutual funds, and pension funds. What we do is collect information to provide investors with a perspective on market conversations.

This means we focus on what billionaires, professionals, and industry insiders are talking about and paying attention to this week. So every week, we have Bloomberg chats with the best people among institutional investors and summarize these contents in the "Bear Market Trap Report." This is not an ordinary newsletter.

This is not something written by someone sitting by Lake Michigan. This is information collected from the best investors in the world. We aim to democratize information and share it with small investors. I want to summarize that I just returned from an event hosted by Whales and Position, which was a great group with many interesting people.

Saul Tannenbaum, Post, Chim, and Bionico were all there. The great thing is that there were many excellent strategists as speakers, along with many renowned fund managers. So it was a mixed gathering of strategists and fundamental analysts, with everyone speaking for 40 minutes. I gathered a lot of information from that meeting and from the various idea dinners we hosted. I have held many such dinners around the world, like in Miami and New York. What we do is talk to investors and understand their real views on the current market.

At first, like in September and October, we knew the Treasury was meeting with various hedge funds. But the situation was still unclear at that time. Now it is clear what path they are taking, which is called "financial repression."

They want to manipulate interest rates to be below the inflation rate. By manipulating interest rates, such as talking to our trading partners, like Canada, Mexico, or more with Japan and Germany, saying you must buy more U.S. Treasury bonds at lower interest rates if you want to be our allies. By the way, they will also ask bank regulators to force U.S. banks to buy more U.S. Treasury bonds.

This is "financial repression," trying to push interest rates below the inflation rate. This is the only way to get out of the $36 trillion to $37 trillion debt dilemma, with no other way except for default (what we call debt default). We have discussed many such stories, but this can be traced back to...

Host:

Back to what the Bible says... or through "financial repression," over time pushing interest rates below the inflation rate to solve the problem through inflation. I think this is the agenda of the Trump administration's Treasury, and I believe the Federal Reserve has the same idea Wow.

Host:

Thank you very much. Honestly, I feel like I've learned a lot from you in this half hour, and I know the audience must feel the same way.

Host:

You are always welcome to our channel, and we are very pleased to invite you, Larry McDonald, founder of the "Bear Trap Report," author of several books, including "How to Listen to the Market" and "The Collapse of Common Sense: The Story of Lehman Brothers" (which is a fantastic book that made it to the New York Times bestseller list, and I've learned a lot about you from it). Larry, thank you so much for taking the time; it's always a pleasure to talk with you, and I really appreciate it. Hope you have a great weekend, see you next time, take care.

Larry McDonald:

Wishing you a great weekend as well.

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