What keeps John Rubino up at night?

Well, AI might change the world for better or for worse in the next few years.

So obviously that's a huge deal.

But, you know, even leaving AI out of it, this is an incredibly complicated world right now.

We've got stuff going on and any one of which would be consequential on a level with the world wars or the industrial revolution and stuff like that.

So this is a very complicated time.

And there's no way to know which of these big consequential issues are going to dominate the next few years.

Are you someone who thinks, hey, it's better to start a bit early rather than be a bit late?

What is going on here?

Hey, Kerry.

Well, yeah, we pick a good day for this because a whole bunch of things are happening out there.

The 10-year Treasury just broke 5% in the U.S., Which translates into 7.5-ish percent for mortgages, which is brutal for the housing market.

Because just staying with just the housing market for a second, housing is frozen because prices are really high everywhere.

And mortgage rates are rising.

So that means fewer and fewer people can afford to buy houses at today's prices.

You know, basically the European industry is dead because they're allowing, you know, Canada is doing it now, and the U.S. is the only one that won't allow Chinese vehicles to be exported here.

How do you assist everything that's going on at the moment?

Well, it's a crazy world at the moment, you know, and I think that's the broadest way of putting it.

When you look around the world, you see basically suicides, financial and cultural, everywhere you look.

You know, Japan has borrowed more money at the governmental level than any other country in human history on a per capita basis.

And they don't know what they're going to do with all that debt.

Different countries in Europe are just doing inexplicable things.

I mean, Germany, my God.

Just go, if you can, John, just go into the mechanics of that and why that would make a lot of sense for mining companies to do.

But of course, that takes moisture away from other parts of the world.

Yeah, natural cycles are, well, they're things we can't fix or change.

And they just happen.

And sometimes they're really disruptive, too.

But it would be an issue if this El Nino turned out to be disruptive in any kind of a major way, because it comes on top of all the other stuff that's going on.

You know, massive rainfall happens.

in the Southwest doesn't actually fix anything because so much of that just runs off into the ocean.

What are the three main, let's say, portions of the housing market that are watching this with growing anxiety?

What do you make of copper? What is it telling us? Why is it shrugging all this off? And maybe tie this all together into the economic outlook we're seeing from copper.

Yeah, copper just doesn't care anymore.

You know, it doesn't care where interest rates are going.

It doesn't care what deficits are, what the geopolitics are doing.

And it just keeps going up.

And again, no guarantee that that continues.

But right now, I mean, gold and silver have had pretty dramatic corrections.

Anything you want to say about the precious metals? Kind of in a similar boat.

Uh, hey, is now a good time to visit Japan? I'll bet you the, uh, yen's gonna be going down against the dollar, isn't it?

Hey, Cary.

Well, yeah.

You know, the, uh, the US bailout of Japan is potentially a really big story.

Um, partially because, um, Japan has been, uh, taking on government debt at a dramatic rate for decades now and seems to have gotten away with it.

And that provided a lot of ammunition for, um, economists and politicians to say, "You know, it doesn't matter how much the US borrows.

Look at Japan.

They never make that connection like Milton Friedman said, that inflation first and foremost is always a monetary phenomena.

And I'm curious, what, what are your thoughts about that? 'Cause we talked about private credit in our last conversation here in early March, and w- you, you mentioned that that might be the first domino that will just, uh, you know, th- set us off here and maybe set off the next financial crisis.

Oh, the, the AI bubble and the, uh, the role that private credit plays within it, tho- those things are massively, um, much, much bigger than the, uh, subprime mortgage crisis of the, of a decade ago.

Um, and, um, you know, because of that, I think the risks are a lot more dramatic and I, you know, I, I, again, I wouldn't, um, I wouldn't wanna presume to say how all of this stuff turns out, but the numbers are just much, much bigger.

And, uh, and, and basically nobody's immune to it right now because I just posted a thing on Substack a couple of days ago about how the, the big US banks that I think most people believe are immune to the whole private credit thing because those are separate industries, um, uh, that's not really the case.

Um, big banks are lending a lot of money to, um, entities that operate in the private credit space, and those guys in turn are, are lending, uh, insane amounts of money, uh, by historical standards to software companies, to AI companies, and, and to, uh, the chip companies that are related to this space.

Uh, and that means that any, um, any hint of the bubble bursting in AI, uh, would blow up, um, a lot of private credity, credit firms, and that in turn would hit a lot of the big banks.

So we've got a, a real possibility of, uh, problems in one space metastasizing to other spaces here.

Um, is a, is a rate hike maybe the end of, uh, you know, the line here?

Why are we not seeing more M&A? Do you think we'll see more M&A? Because at one point, if they want to grow, they're going to have to acquire.

Yeah, you would think Newmont, who are seeing declining production, wouldn't want to go before their shareholders in the annual meeting and talk about that because, you know, people are going to complain and it's going to make the CEO look stupid.

So you would think that they would be aggressively acquiring new assets so they can go to their annual meeting and say, we had another good year of good growth.

That's within their power.

You would think they'd be doing it.

And they haven't been so far.

And I think part of that is that the mining industry has a long history of overenthusiasm at peaks of cycles where they go out and they do empire building acquisitions instead of accretive acquisitions.

But if there isn't another financing window for a year and a half, they're not going to have that much money left.

So do you think there's still a disconnect in the market between the wild rollercoaster ride from the huge highs in January and February, the big dive down in March and April? And now, even though there's these record Q1 earnings, why aren't investors pricing these things at higher levels, all things considered?

Well, there has been a correction.

And part of that is that the reason why everything got so high so fast is that silver did an inverted V spike.

It went up to $120 an ounce.

And when it corrected, then you definitely get a correction in the miners.

But yeah, you know, I was going through my watch list now and thinking about buying maybe some cheap shares since they corrected.

But, you know, I looked at them and they're still way up from, say, 2023 levels.

So with a lot of calls out there for the potential of economic contraction, why are the base metals doing so well right now?

... my bigger question for you is, um, what does your gut tell you here? I know we don't know what the future's gonna be, but what, what's more likely here? We, we end up, in, in America at least, we end up with a golden age where, you know, the, the, the wealth gap starts, um, narrowing because we're, we're raising the bottom leg of the, the K, um, or-We're gonna go more the Bernie Sanders, Mumdami route where the wealth gap, um, narrows because we're pulling down the, the top part of the K by extracting them with confiscatory taxes or whatever.

Well, yeah, the, uh, uh, the idea that we're bringing back manufacturing is really good because that was one of our big problems.

You know, we basically hollowed out our society by sending a whole broad category of jobs overseas.

You know, if you were, um, a 40-year-old high school-educated guy who worked with his hands, there was a time when you could make middle-class money.

You know, I had two uncles who worked in GM assembly lines.

They had houses and cars and, uh, families that didn't go hungry and everything, and we took all that away from a whole generation of people with globalization.

And if we bring those factories back and the, the factories are run by humans, which is...

Right