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The 80% Deflationary Crash: How The Next Wipeout Triggers 25% Inflation | David Hunter

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0:00 | 58:46

Is the final parabolic melt-up finally here? David Hunter, Chief Macro Strategist at Contrarian Macro Advisors, joins Jeremy Szafron to break down the mechanics of the market's "final blow-off" and the 80% deflationary bust he predicts will follow.

As the S&P 500 pushes into record territory, Hunter explains why he believes we could see the market top as early as Labor Day. In this deep dive, we examine the hidden leverage in private equity, the potential for a $20 trillion Fed bailout, and why incoming Fed Chair Kevin Warsh is facing an "inflation bind" created by the AI infrastructure boom.

Is your portfolio ready for the 80% wipeout—and the 25% inflation that Hunter expects to follow in the 2030s? Watch until the end for Hunter’s exact exit signal to watch before this 44-year bull market ends.

Recorded May 20 2026

Follow Jeremy Szafron on X: @JeremySzafron (https://twitter.com/JeremySzafron) 
Follow Kitco News on X: @KitcoNewsNOW (https://twitter.com/kitconewsnow) 
Follow David Hunter on X: @DaveHcontrarian (https://twitter.com/DaveHcontrarian)

0:00 - The Parabolic Melt-Up Timeline
3:00 - Where is the Monetary Fuel?
5:00 - $2 Trillion Deficits vs. Deflationary Bust
7:30 - Identifying Market Cracks (Private Equity/Credit)
9:30 - Gold and Silver Cycle Targets ($6,800 / $180)
15:00 - Precious Metals: Physical vs. ETFs
19:00 - Central Bank Gold Accumulation
23:30 - Industrial Silver: Substitution & Demand Destruction
25:00 - The Bond Maturity Wall & Inflation
33:00 - Where does the 80% bust start? (Offshore triggers)
43:00 - Mining Sector: The Next Dot-Com Bubble?
53:00 - The Accountability Check: What proves this wrong?
55:30 - The Exact Exit Signal to Watch

#DavidHunter #StockMarketCrash #Gold #Silver #Investing #MacroEconomics #KitcoNews #Fed #Nvidia #Inflation #MarketMeltup
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Disclaimer:  
The videos are not intended to provide trading advice, and the views expressed do not necessarily reflect those of Kitco Metals Inc. Kitco News, its anchors, producers, and reporters are not responsible in any way for the performance or actions of any sponsor, advertiser or affiliate of Kitco News. In no event will Kitco and its employees be held liable for any indirect, special, incidental, or consequential damages arising out of the use of the content in this video.

SPEAKER_02

Kitco News in Focus with Jeremy Saffron.

SPEAKER_03

Welcome back. I'm Jeremy Saffron. Spot gold this morning holding just above $4,500 as we tape this episode. Silver swinging anywhere between $75 and $76 after a really nice run last week. And we just saw U.S. crude drop about $100 a barrel or just below $100 a barrel on reports that the U.S. is in the final stages of peace talks with Iran, which has helped snap back a three-day losing streak for the SP 500 ahead of today's massive NVIDIA earnings print. Yet the tape is still fighting in flashing tighter financial conditions and renewed segflation risk. Bond yields are hovering near two decade highs, and the market is still pricing in a risk of a December rate hike. And my guest today says the consensus is wrong. He argues we're entering the final parabolic melt-up of a 44-year bull market, a surge that could drive gold to $6,800 and silver to $180 before triggering an 80% global boss. Now, joining me to explain the mechanics of this sequence is David Hunter, Chief Macro Strategist at Contrarian Macro Advisors. David, nice to see you. Welcome. Yeah, hi Jeremy. Thanks for having me on. Yeah, I appreciate the time. A lot of people were excited about this. Both of our X accounts were kind of blowing up yesterday. We were talking about you being on the show. And I want to get into, I guess, first the forecast, because you've been forecasting the sequence, the final kind of melt-up followed by an 80% deflationary bust for quite some time. And, you know, we put put our Kit Co community to test asking what they wanted to hear from you today. And YouTube viewer, I think Leia W88 Hi, asked the question on everyone's mind: are we looking at this summer story here or or is this melt-up extending into late 2026?

SPEAKER_00

I think it's probably still a summer story. I um, as I tell people, I'm I'm not a trader and I'm not trying to say I can pinpoint this thing to you know some precise time. But you know, I will make my guesstimates just like anybody else. And I think given that we're in the final parabolic stage, I think there's a pretty good chance we could see the highs by Labor Day. Um whether it happens that way or gets pushed out, uh we'll see. But I suspect, and again, we've been kind of teased with these um comments coming out of the administration that we're close to a deal, or uh we've heard that so many times before. I think the markets kind of show me this time, but but I think again, Iran holds the cards here, or I don't mean Iran the country, but I mean the story Iran holds the cards in terms of the market. Um, if if a deal is close, if we get some kind of an agreement here, uh, I think it's off to the races. So if we don't, and this thing drags on, uh it could push this thing into the fall. But I I think there's a pretty good chance, and I'm talking about obviously, you know, 30% or more in some of the indexes from here to say that that can happen by Labor Day may sound crazy, but that's what a parabolic is, is uh you know, things move pretty fast, pretty far.

SPEAKER_03

Yeah, yeah, it's interesting. And of course, uh I saw Bezos this morning, I think he was on CNBC, talking about how market sentiment is wor is kind of driving this thing. He said, Don't worry about it, best market sentiment is what's driving this thing and will continue. I'm curious. I mean, to get that massive upside, markets traditionally need to kind of expand liquidity, as you know. But looking at the tape today, I mean, the cost of capital is a little bit restrictive. The Fed's dealing with this sticky inflation and broad money supply seems a little bit tight. Where does the market find the actual monetary fuel to drive a 4,000-point rally on the SP right now?

SPEAKER_00

Yeah, I know there are people that look at M2 and say that that's been growing. Um that's not something I watch that closely. Um I I really am more driven by the sentiment. Um, and whereas Bezos may have meant sentiment, meaning people are bullish and buying, my my view of sentiment as a contrarian is that it's it's pretty subdued, particularly since March because of the war, um, and that that is a wall of worry that that fuels the advance. So there's money, um, you know, whether it be people switching from more defensive uh assets to more aggressive assets, uh, you know, risk-on assets, or whether it's people that did have cash and are going to redeploy it. Um I I'm not one that feels like, I mean, we've kind of gotten into that. I've been around 50 plus years in this business. We, you know, we didn't used to think we had to have the Fed printing to see the market go up. And that seems to be a lot of mindset now, is that there has to be that. I think rates will come down. That's certainly a form of liquidity. Um, I think you know, money coming in as as institutional investors in particular move to a more uh bullish stance. All of that, I think, is part of the fuel to what I think is going to be the biggest, steepest rally in this bull market.

SPEAKER_03

Yeah, I mean, you know, after this melt up, you you forecasted that 80% global kind of deflationary bust. Well, when we reached out to the community, one of the Matt G did the map and government spending. It was interesting because according to the Congressional Budget Office, the U.S. is running $2 trillion annual deficits. And then, of course, on top of that, the four biggest tech companies are planning more than $700 billion in capital expenditures this year alone, just for the AI build out. How does a deflationary bust take hold when you know fiscal dominance and kind of big tech are still trying to push that much demand through the system?

SPEAKER_00

Yeah, it it may get pushed out. We'll see. But my my whole basis is that in 2008-9, we we saw what was close to a bust. I think we pulled it back from the cliff before it went over. So what I describe is this being 2008-9 on steroids. I uh get there more or less uh based on the leverage in the system. We are so much more leveraged today than we were going into 2008-9. So I think we're moving towards a recession, and I think this leverage turns an ordinary recession into something far worse. Um, I think the banks, although you know, they had to get some religion back in 2008-09, particularly in the US, um, you know, and you've had some cleanup in Europe, uh, you know, a lot of banks around the world, particularly in Asia, Canada, et cetera, uh, are in much worse shape today than they were back in 2008. So I I think if we move into a recession, and and don't forget, we've had a balance sheet, uh, you know, the Fed balance sheet moved from 9 trillion down to six and a half. Uh so and yet we have everybody talking about the Fed's too easy. Um, you know, rates rates need to go up, not down. Um I I think those are the kind of policy errors, and it's mimicked somewhat over in Europe and elsewhere. So um, you know, certainly Australia has has raised rates, uh, Canada's kind of in between. Um, but those are the kind of policy errors that I think can can trigger something that's not expected.

SPEAKER_03

Yeah, it's interesting. I mean, in 2008, as you know, David, I mean, the leverage was easier to see because it sat in banks and mortgages. Today a lot of it is in private markets that don't, you know, they don't do they don't mark daily. How do investors kind of identify the crack before it becomes obvious?

SPEAKER_00

Well, I I put it in two ways. One, you know, um people mistake my word bust for meaning the market's going bust.

SPEAKER_03

Right.

SPEAKER_00

And I say it's a it's a bear market accompanied by a bust, the bust is the economy and the financial system, um, and the bear obviously is the market. So you can identify the top in the market, I think, when when you see, as I say, when you when I see everybody's in, when when uh you know people are talking about this bull bull run having two or three years to run, this bull market having two or three years to run, when people are are kind of all over themselves um wanting to buy, uh, that will be my signal that we're getting very close to a top. We have not seen that. That's really what's fueled this this long advance from 2022, is that the particular institutions have been skeptical all the way up. They started when it moved over 7,000, they started to get bullish the first time it moved over seven. Um, they started finally saying, yeah, this is real, and they were raising targets, etc. And then the you know, Iran hit in the first of March, and we had that correction, and they, you know, the people were tripping over themselves, coming up with lower estimates of how far down we were going to go, and the thing reversed, and we're now 74, 7,500. Um, and and you know, you still have that initial beginnings of bullishness move back to the skeptic side. And right now you've got institutions pretty skeptical here um that this thing has much more upside. You know, some will say 7700 or 800 or 7600, uh, but you don't see much above that. And there are others that have kind of said we've already topped. So I think there's there's plenty um plenty built up in that wall of worry that can switch over to bullishness as this thing gets going again.

SPEAKER_03

Yeah, and of course, I guess that brings us to metals too. I mean, a lot of people I I first I should ask your metals outlook. I know that you were talking $6,800 gold, $180 for silver, but you know, we saw that slight correction take place. I've been talking to a lot of people, a lot of them just describe it as froth coming out of the system. It went a little bit too high, too fast. Uh, what was your thoughts on that correction?

SPEAKER_00

Yeah, well, if you're talking about the whole correction, it really went a lot more than the little high. It went from 50 to 120 in a matter of weeks.

SPEAKER_02

Yeah.

SPEAKER_00

Um, so um, you know, that obviously needed to get corrected. It was a parabolic run. Um, normally parabolic runs are end-of-cycle runs or things that you kind of say, hey, maybe that was it. I, in this case, uh didn't have, I didn't wait very long. Uh it didn't cause me a lot of uh consternation in terms of, hey, is this the top? I just said, yeah, we need to correct. Um, I thought we were gonna get like a 35% correction in in silver. It went down 50% in that initial sell-off, and we've been kind of back and forth in a consolidation ever since for the last couple months. I think we're pretty well done with that. I think we did consolidate that huge run, and I think we're poised for the next leg up, which will be again parabolic, probably even steeper than that one, or certainly similar. Um, and you know, that's how I get to 180. Right. And I'm not so sure that I'm not too conservative still.

SPEAKER_03

Yeah, interesting. I mean, uh uh, you know, silver especially has a history of violent blow-offs, but if it runs 280 quickly, why shouldn't investors treat that as an end-of-cycle warning rather than kind of a new secular beginning?

SPEAKER_00

Well, I have I have a long-term forecast of $1,000, but that's out early 2030s. And because of the bust, I um you know, I do believe this thing, wherever it goes, whether it's 180 or whether it's you know um Michael Oliver's number of three to five hundred, um, I think it will be it'll have a blow-off run here this year. Like I said, it could happen by Labor Day, it might take into the fall, but I'm not so worried about the number. You know, my 180 is where I could get to on my work, but I don't just you know, I don't discount the fact that it could blow right through that in a blow-off and take you up to you know 250 or higher. So I would not use uh that number per se as much as to realize we're we're in a I think a late stage for this cyclical cycle, you know, for this cycle, where we're um, you know, I don't think we go beyond this year. Um, and then because of the bust, all assets, pretty much all assets other than treasuries will go down. Right. Um, you know, silver is very volatile, so that could go down, you know, 50, 60, 70 percent. Gold probably less so, maybe 30 or 40 percent, but it could go 50 and this goes 75. Um, you know, so there is a downside, I think, because of a global bust. If I'm wrong about the bust, um, you know, maybe it lasts longer. But I think you've got some kind of a cycle end here this year, and obviously I think it's gonna be a violent one. So that's why I I am thinking this is very late in terms of that move. You know, we've come a long way from you know silver down at $20, you know, up to $120, and and in this case, probably up to $180, $200. Um, so it's um, you know, to me, it's we're we're months away from a point where you have to make that decision, uh, not years.

SPEAKER_03

So you still got a little bit of time. I mean, obviously you're talking about that cycle kind of targeting $6,800 for gold as well. In this one, on our community poll, one of our viewers, Damod77, asked about the exact reaction of these metals when the recession kind of actually hits. I mean, do these targets happen before the 80% market wipe or are they kind of a product of the recovery on the other side?

SPEAKER_00

Yeah, no, these are definitely targets prior to the bust and prior to the you know the bear market. Um so well, like I said, it could happen before Labor Day for both gold and silver and for the stock market, uh, but it doesn't have to. It could carry. We we might even say see it carries far as the election or come close. Um, so I'm not so worried about pinpointing that, but it's definitely pre-bust. Um and and then you know you get that correction in the bust, and that should present a generational uh opportunity because if let's say gold does up, I'll round the number off because I think I'm probably gonna be proven um conservative anyway. So let's say we get 7,000, you get a 50% correction, takes you back down to you know 3,500. From there, um you could see 20,000 in gold by the early 2030s. So you know, and and the miners obviously have leverage to that. So there's there's a another opportunity after this one, but this one still is far from over. There's a big run here.

SPEAKER_03

Yeah, it's been wild to watch. I mean, at least on this side of the camera covering it. And I mean, historically, uh specifically, I guess in 2008 and 2020, precious metals crash initially because institutions had to liquidate winning positions to cover margin calls, but physical holders don't face that same forced liquidation risk. Separate the vehicles for us here, if you would. You know, physical metal, ETFs, futures, and miners. I mean, which ones survive that initial leverage unwind? And and does the system kind of break down to the point where, you know, only I guess physical metal protects capital?

SPEAKER_00

Yeah, well, physical certainly will be the more stable. Um, and obviously supply-demand, particularly with sovereigns being so interested in it, um, helps hold that up. Um, I'm sure it will, you know, trade down with the paper at some point. It's not gonna, it's not gonna deviate that much that it goes opposite. Um, but it will be more stable and and will probably come down slower. Um the you know, the ETFs, we saw this you know back in 2020. We saw this in 2008, 9, I think. Um, but certainly I remember 2020. Um, you know, you have two things going on then. You have the underlying securities in that ETF under pressure, and then you have all those, and particularly we found out how much institutions use the ETFs. Um, you have the liquidity problem of of some you know big whales wanting to get out and get out in a hurry. And so the ETFs actually went down farther and faster than did the underlying miners that were in the portfolio. So so that is a risk that I think you see anytime you have a big downturn. Um and then and the miners themselves obviously have plenty of volatility and plenty of risk if if the metals roll over. So it's um, you know, pick your poison, they're all going down, I think. Uh obviously physical less so or less less fast. Um, but I think they're all gonna get hit pretty hard. Not nearly except maybe silver, not nearly as hard as as um you know equities themselves. Right.

SPEAKER_03

Yeah. I mean, to that point, I mean you're talking that 50% correction in gold, possibly to kind of pick up that haircut and and and lever get kind of get back in. And miners obviously uh that kind of correction would be brutal, brutal, and miners would be hit first. If miners have leverage to the upside, obviously they have leverage to the downside. How do investors avoid getting wiped out before the real 2030s opportunity arrives?

SPEAKER_00

Um, well, two things. One, if you're investing without leverage, yeah, um, your own leverage, you know, if you're you're buying just buying stocks, um, you can hold on. You know, you may not like the volatility in the portfolio valuation, but you can hold on. If you're leveraged, you could get wiped out. So, you know, I would I would say be cautious as you get closer to the at least my idea of what the top is. Um, and because once it goes over the other side of the mountain, it can unwind pretty fast. And you know, if you have leverage, you're gonna get wiped out.

unknown

Yeah.

SPEAKER_03

Speaking of moving fast, I mean, the gold market structural changes have been quite stunning. I mean, last year, going into this year, and this morning I saw Goldman Sachs just projected central banks will step up gold buying to an average of 60 tons a month through 2026 in one report. And then at the same time, just this morning, Hong Kong's launching a new gold clearing system in July to offer an alternative to London. Uh, David, are sovereign institutions accumulating physical gold right now to front-run the deflationary bus that you're forecasting? Or are they strictly preparing for that monetary reset that comes after it?

SPEAKER_00

Yeah, I th I think it's more um frankly, I don't think a lot of a lot of central bankers or or policymakers realize that there is a bus coming. Uh, I don't think if you talk to them, they have any idea that that's what's coming. They think 2008-9 was kind of the big one, and uh you know, nothing like that's coming again. So they may worry about a downturn, et cetera. But I think they're buying um gold um primarily because of all the debt and money that has been put out there over you know, since 2008, and particularly since 2020. Um, I I think people realize that fiat currencies uh are not are not the um sound money story today. And obviously we have things like the BRICS, you know, looking to try to create a a gold-backed currency. And you know, China, China I think understands maybe pretty well what's coming in the future, uh, and they want gold. Um so I I I don't think it's because they're worried about a bus, they're more worried about fiat currency.

SPEAKER_03

Yeah. And you say, I mean, central banks are building infrastructure, I guess alternative infrastructure to London, you know, as I just mentioned, they're in an accumulating physical supply that could establish a stronger structural floor and limit the severity of a gold drawdown. Does sovereign wealth acting, does it kind of act as a buyer of last resort? Does that change the crash narrative for gold at all?

SPEAKER_00

Um it may. I don't think it will. I mean, just look look at near term what we've seen in in both gold and silver in just the last few months. So uh if if it can do that, and when we're in you know a reasonably healthy economy, what happens in a in a bad economy, uh, and what could be more than a bad economy, um, I just think sovereign may step away to some extent during that time. Um so I I don't think so. Um I may be surprised by that, but I think you can, as I tell people, I think you can look at somewhere between, you know, four 35 and 50 percent downside in gold from a top, and probably 50 to 75 percent in silver. So um, you know, may not be as bad as that, but I think that's what should be anticipated.

SPEAKER_03

Yeah. You brought up that silver run-up where you, you know, it happens so fast. I mean, the 50 to 120 dollar. I mean, it feels like silver's already acting like a stress asset and a momentum asset at the same time. Uh, is there a specific kind of signal that tells you that this move is institutional accumulation, not just funny, uh funny. Well, I guess funny funny money, some would call it, but not just fast money speculation.

SPEAKER_00

Yeah, I don't I don't have any that can tell you that. I mean, I think it's both. You know, frankly, I don't think institutions have yet really warmed up to it.

SPEAKER_02

Yeah.

SPEAKER_00

It's it's been um for the longest time. You know, gold was uh not even looked at as a uh an important piece of portfolios until recently. And so then they say, oh, maybe you should have five to ten percent, and some people twenty percent in gold. Silver, I think, is is far less. Um looked at as something that institutions need to have in their portfolios, or wealth managers have to put in portfolios. What happens, I think, is momentum starts, you know, attracting attention, and institutions start moving away from kind of stubbornness of saying, yeah, we don't need silver, it doesn't, you know, doesn't fit our our parameters, and they start realizing that you know it's it's uh runaway freight train in terms of momentum and that they should be on board. So as always, I think psychology plays a role both for retail and for institutions. And but but frankly, I don't think they've really uh obviously there are institutions out there that are buying, but I don't think in in uh main part there are all that many institutions that are uh really paying much attention to silver at this point. I think as we move into this next leg up and get over $100 again, I think that run from $100 to say $200, uh, because I do think by $180 is going to prove low. I think in there you will see a lot more institutional buying, and that's part of that run-up.

SPEAKER_03

I mean, on the we should talk about the retail investment demand as well as the industrial. I mean, at $180 an ounce, obviously the physic, physical market changes drastically. Solar, EV, the electronics manufacturers operate under severe margin pressure already. I was looking at this report. When silver recently touched $90, it made up about 29% of the cost of a solar panel. We know it's not just solar panels made out of silver, but at double that price, physical demand could slow a little sharply. We could substitute, you know, redesign, maybe copper. Um, if industrial buyers pull back to save margins, does retail investment demand have enough volume to kind of sustain that 180 price tag on its own?

SPEAKER_00

Yeah, that's what I say. I don't think it's just gonna be retail. I think it's also gonna be institutional. I think I think the run from 100 to $200 is gonna be dominated by speculation by chasing momentum far more than physical. So uh yeah, they will more than make up, I think, for any physical drop-off. Yeah, it we gotta be. And of course, we know that on the physical side, you know, a lot of that has already been purchased. And so it's it's really next year's um contract that they are worried about, you know. So at least between now and the end of this year, uh I'm sure the physical's pretty well already been priced, you know, they've already priced their their purchases.

SPEAKER_03

Yeah, it's an interesting macro environment. And of course, we should talk about bonds too, because if you've been watching the market this week, you know, 30 or past 5%. I want to pull up a post you made on X this morning regarding the bond market. Uh, I was talking to somebody, I put out a thing, and somebody was asking you about discussing yields. They said that you mentioned they're kind of bottoming, sees a correlation here with oil. Um, you wrote rates are topping, bonds are bottoming, the Iran conflict in the closing of the strait has driven up oil prices. That can and will reverse when we get a resolution. Uh, just this morning we saw a crew drop below $100 on reports that the U.S. is nearing a deal with Iran. David, I mean, assuming you're right and the geopolitical premium washes out, what happens to the bond thesis if inflation remains sticky anyway?

SPEAKER_00

Yeah, I think well, I think inflation is still in a downtrend. Uh, you know, it's very contrary right now, but yeah. Um other than oil prices spiking from you know 65 to 120 or and or you know, and now over 100 or soon recently over 100, um, it it obviously changed the expectations for inflation. It it there were some other things that got influenced, fertilizer prices, et cetera. So and we saw PPI print not too long ago. Um, you know, certainly it drove up prices in the short run. You're gonna see the same reaction in this in the opposite direction. Uh, I think if if the uh street gets opened and then we have a real deal in terms of Iran that people trust and believe it's it's actually happening. Um, you know, Iran's been basically the whole story between March 1st and now. Um, and I think people underestimate how fast we can go back down. Um what I see a lot, because I get a pushback a lot about recently, about the fact that you know it's gonna take a while to get that oil flowing again, that there's because inventories have been drawn down, there's gonna be a period here where we're not flush with oil because it's not in the marketplace. You know, it's not in those markets yet, it's it's in transit. And I just come back with markets are discounting uh our discounting function. They look at the future, they're not focused on the supply at any given time versus the demand. They're they're looking at what is what is what's going on with the opening of the strait lit, for example, what is that gonna have in terms of implications down the road? So so I think the the fact that the straits closed and that the you know that there's there's gonna be a period of time where oil's not gonna be in the markets where it's needed yet, um, that's all discounted.

SPEAKER_02

Yeah.

SPEAKER_00

It can be it can be pushed up higher if if again we have a false alarm here and there's no agreement, or if it looks like you know there's gonna be more military intervention and it's gonna get messy. I'm not saying that this has to be you know down from here, but I'm saying if it is, uh I think you'll see it back into the 70s pretty quickly. And and I've had a lot of pushback on that because people think you know that's way too optimistic given that that oil has to get from the strait into markets. Yeah, that takes you know, that takes time.

SPEAKER_03

And I mean to your point, though, uh uh you know, oil is lower today, but but that's I mean, Blueberg's reporting just this morning, U.S. crude inventories, including the strategic reserves, just had the biggest draw on record as exports surge. I mean, if if oil is really rolling over, is it kind of rolling over? Or are we just draining the cushion to keep prices contained?

SPEAKER_00

Um we already did that. I mean, that's that that may have been part of the story the last month, but um it's it will be rolling over if this is truly an agreement. It will be rolling over. We're not going back up. Those that are sitting here thinking, well, reality will hit, we'll find out that you know it's it's gonna be a couple few months before we get this thing back in order and oil's going to 150. I think they're they're gonna be very disappointed or surprised. Um, I you know, I think we will see oil back down into the 70s based on oil flowing through the strait.

SPEAKER_03

Yeah.

SPEAKER_00

You know, maybe that's overly optimistic. Um, we'll see.

SPEAKER_03

Well, a lot of people hoping for it. Uh the margins getting a little bit tapped. Um, you know, if uh obviously we we live with this Wall Street versus Main Street kind of narrative as we saw yesterday on X. I mean, if oil and insurance and food and power and financing costs kind of remain elevated, households may not experience that downtrend. Is is the Fed looking at the same inflation trend consumers are living with?

SPEAKER_00

Um some of the Fed are certainly there, you know, you're you're hearing talk from Kashkari and and a few of the others that rates might be hiked. Um, I think, and then there are others I think are in neutral ground. There are too many that are looking to cut, I think, at this point. Um, I don't know whether uh Kevin Walsh is or not. We'll find out soon enough. Um, but again, I believe inflation was in a downtrend that got interrupted by Iran. If we get Iran straightened out, it may take a few months to have it show up in the numbers, but I think the market will look ahead and start um moving back towards um inflation's heading lower, not higher. Um, I think our economy is is soft and getting softer. Obviously, we've got uh uh what I call a have and a half-not economy, a K-shaped economy, whatever you want to call it, but half where half the consumers are barely getting by. They're you know, they're having to borrow from Peter to pay for pay for Paul. You know, they um they don't have enough, you know, they're living paycheck to paycheck, and and the big run-up in gasoline caused them to have to pull back on other things. So so I think that's gonna continue to be a story that as we move through this year, the economy is gonna be slowing. It may be disguised a bit because the manufacturing sector is so strong, given the you know, the build-out for AI and power. Um, but underneath the surface, you know, consumers are still a big part of our economy. Obviously, uh underneath the surface, things are slowing, and that's why I I think we move into recession late this year, early next, and into a bust uh for much of next year, probably.

SPEAKER_03

Yeah. You know, you just brought up a little bit about AI, and there's new reporting that the shows that the bond market sees AI making the Fed's inflation bind worse, not better, at least for now. Uh tech companies have already issued hundreds of billions of dollars in debt to fund AI infrastructure, while demand for chips and power and data center capacity is obviously pushing up that capital needs. It seems like it's going higher and higher. Hey, I mean, the CMU Fed Wedge Tool is still pricing in a 40% chance of a rate hike by December. What is the rationale for investors buying long-duration bonds right now and stepping in front of a potential AI-driven inflation shock?

SPEAKER_00

Um, well, from my standpoint, it's because I think that I don't buy into that rhetoric, that uh narrative at all. Um, I understand it. I understand why people might might be there. I think I think that's what's in the market right now. This last run up uh from the low fours to 465 or wherever we went to on the 10-year, I think discounted all of that narrative. And I think again, it's an if, but if we are close to an agreement in Iran, I think that narrative tops out here. And you know, we're down at, I don't know where we are now, but we were down at um 458 last I looked um earlier today. So, you know, if you're if you're coming down from high 460s to you know 458 just based on the possibility, if you actually get a um uh an agreement and oil you know starts heading south in a hurry, I think you'll see we'll we'll be back at 4% pretty quick on the quickly on the 10-year, and I'm I'm saying we could be at 3% or below by the end of the year.

SPEAKER_03

Wow, wow. That would be a quite uh I mean a great event. And of course, the things that we cover here wouldn't surprise me, David, and this is why we wanted you on. And we we got to kind of talk a little bit about what what breaks first. I mean, you've warned that the leverage in the system will cause a crisis worse than 2008, specifically talking about that private credit and private equity and pensions. Uh, where do you see the first structural fracture kind of occurring that actually shifts the market from the melt up into the bust?

SPEAKER_00

Yeah, it's hard to say, but I what I have said is that I think it could come from outside this country. You know, it could be Japan, it could be Asia, it could be Europe, uh, could be, you know, Canada's not in great shape right now. Um, so I I as you know, in 2008, everything kind of centered here. We really were the trigger, and everything kind of flowed from that. This one could be more outside our shores, and with us being part of it, but not the lead in it. Um we'll see. I mean, it's it's hard to say. Um, you know, there's so many areas that I think are showing cracks, but not in people, you know, wasn't that long ago. Private equity was center stage, and people were were certainly messaging me and saying, is this it? As you know, I think you're your um your bus is coming sooner. And I said, no, it's these are the kind of early signals that we're moving in that direction, but they're nowhere near at the point where it's gonna really break. And I think that will those those kind of cracks will accumulate over the balance of this year and early next, and it's when they kind of reach a critical mass that that this can happen. But it's it's hard to say which which trigger it's gonna be or what the catalyst will be. Uh, as I say, my bigger picture is that it's I kind of put it in a formula of um leverage, massive leverage, like far beyond anything this world's ever seen before, going into a downturn. Um add it, add to that. Um the fragility that was caused, even though it's six years removed now by the pandemic and what we did, you know, in terms of shutting down the world economy. And there's still a lot of fragility around the world in Europe and Asia that I think stems from that. And and even here, statistically, things look pretty good under the surface. Not everybody came right back from that. And so there's fragility in the system, and then third policymaker error. And I, you know, typically central banks are the big ones that make that error, but it it can be a multiple, a multitude of things there. Um, you add all those three together, and I think it can turn into a bust.

SPEAKER_03

Okay. I mean, the if the if the bus starts offshore, which is uh fascinating. I mean, US investors may not see it coming through the SP first, like you said. I mean, all the things in the news, the yen, the JGB yields, European bank spreads. I mean, we could talk about Canadian housing, dollar funding stress. Um what is the overseas equivalent of a subprime today?

SPEAKER_00

I think probably one of them is is uh you know Japan. Um, you know, basically they they ran a very aggressive policy to keep themselves going uh at zero rate policy for a lot longer than we did, and we did it for way too long. Um and I think you run it run the risk, because you're seeing it now. If inflation breaks out there and rates break out there, talk about leverage. They are leveraged to that zero rate policy, and it won't, you know, it'll tip over pretty pretty hard if if things get out of control there. So I think that's certainly one that could be like subprime was back in 2008.

SPEAKER_03

Yeah, yeah.

SPEAKER_00

And of course the other one I think is it's more adding up all of them, it's all part of that leverage, but you know, people don't realize private equity, you know, private, private credit is obviously a big off balance sheet story now, and one that's not tracked like banks, you know, you don't have you don't have bank regulators watching it. So so that can be something, but people kind of forget about um private equity. But private equity, um, you know, basically it's what what in my old in the old days back in the mid eighties, it was leverage buyouts. You know, it has a a uh prettier name now, private equity, but you know, there's so much leverage there. And that don't don't forget, we have a lot of pension funds that are looking at private equity and private credit as things that are not as volatile. They can put them in their portfolios and and not have to worry about the market volatility. Uh, and so they were taking on in you know, alternative investment in general, they were taking on more and more um percentage of uh pension portfolios. And I we have not yet really had a cycle where we tested that. And I I think that's another piece of this puzzle, not to mention, I mean, we we have spent an awful lot of money um putting um uh uh illegal immigrants on on our you know, our welfare program, on our our system. Um, and everybody just acts like that money just comes, you know, gets created out of air and we're fine. And when we go the other way, we're gonna find out how the limitations of how much we've piled onto our system. You know, we we see it through the obviously the the debt and the government debt, but it's you know, municipalities, states, um, you know, and the federal government are all way over-leveraged compared to any other cycle we've had.

SPEAKER_03

Yeah, and I mean it's a good point. I mean, in public markets, panic shows up immediately. In private equity and private credit, the losses can be hidden under what you refinancing, redemptions.

SPEAKER_00

And it is cumulative. I mean, if if if all of a sudden housing rolls over, yeah, and you get a 30% hit housing next year, um, and and people don't have the money to pay these inflated taxes that are coming because of the the massive money spent in in on school budgets, for example, uh, you know, all that it just works until it doesn't work, and then it kind of everything comes on at once and and uh it it becomes cumulative.

SPEAKER_03

What does that mean for people's pension? I mean, obviously the Fed has the printing press to kind of backstop that FDIC insured bank deposits, but these pension plants and private vehicles, I mean, that they don't receive the same protection in that specific environment. I mean, do it do investors have any safe harbor for cash outside of short-term treasuries?

SPEAKER_00

Yeah, I I don't even think of short-term treasuries. I I have said for a long time that um the two things that I think will hold up in the bust will be treasuries across the entire curve. Uh, because frankly, if I I expect the the 10-year to drop to zero, the third year to drop to a quarter to a half percent, you know, in in 2000 in 2020, I think we got down to 0.4% on the 10-year and maybe 0.8 on the the 30-year. So I think we have one higher high in the bond market, and it'll be a secular market top, uh, the likes of which we won't see for the next decade for sure. Um, but but I think you get that. So treasuries, I think that cross the curve makes sense. Um, and yes, you're right. The FDIC will be, I feel very confident saying that the FDIC will be funded to whatever is necessary to meet the liabilities that are out there. Um, beyond 250,000, you know, 250,000 per institution, it's hard to say. But what I can say is that you can use, probably use 2008-9 as some sort of a guide. Um, you know, we had the don't break a buck in the money market funds, you know, so that they held together. Um they bailed out the banks, obviously, uh, that were basically zeroed out because of subprime. Um I think I'm I have said many times in the last several years that I expect the Fed balance sheet to grow by at least 20 trillion, meaning we grew it by 5 trillion in in response to the pandemic. We grew it by 3.7 trillion post 2008. Um, and so we got up to 9 trillion after being 875 billion going into 2000, you know, going into October 2008. Um, we went from 875 billion to 9 trillion over the next 15 years. Um, I think we can go from 9 trillion to probably 30 trillion or more in response to the bust, if I'm right about uh what this is going to be. A free-falling banking system around the world will, even though the central bankers will all swear to you today they learned their lesson and they're not going back to QE infinity and they're not going back to you know zero interest rate policy, when you're faced with a free-falling financial system, there's only one thing they can do, and that is print. And I think it's gonna take a lot of printing because of the leverage in the system to stem the tide. Um, so if we're if we're gonna print, just looking at the Fed, if we're gonna print 20, 20 trillion, just as seat of the pants guess, um, that money is gonna go in all kinds of places, including probably bailing out pension funds, bailing out municipalities, and bailing out states and um bailing out, you know, um funds, etc. So you know, we won't I would be surprised if if the US has bail-ins in their banks. You know, I can't speak for Europe because they have a precedent there, but at least here I think you'll see that money will will be, you know, they'll figure out a way to make that happen where they're they're bailing out bigger monies. Um, I would not be complacent with that because none of that is guaranteed. The FDIC has a guarantee, you know, Treasury has a uh government guarantee behind it. So those things we know. What we don't know is what they'll do in terms of, you know, because they're gonna they're gonna be trying to save the system.

SPEAKER_03

Yeah, absolutely. And and you know, before I let you go, we got so many people asking of us about miners. You know what a volatile market it's been. I mean, it can move with gold, move with silver, have a drawback. I mean, where are we in the mining cycle right now? Are miners still in the early accumulation phase? Are they closer in this re-rating phase, or are we closer to a blow-off more than investors want to admit?

SPEAKER_00

I I think we're very close to the end of the consolidation that uh kind of tracked the metals themselves, not surprisingly. Um, you know, the miners were more volatile even than the metals, obviously. But um, people have to remember we we have basically, even at these corrected levels. You know, these stocks are up probably three and four fold from where they were, you know, 18 months ago. Um, and uh I think they have in many cases three three plus fold to go. So you know, just as an example, my silver miner junior, the SILJ, I have a target on that of 90. Um, so um, you know, it's currently what 28 and change. Um, so you're more than a triple there. You know, SIL, I have a target of um 220. Um, you know, GDX, I have a target of I think um 180, if I remember right. And GDXJ, I have a target of 250. So if you do the the numbers, the silver miners I think have triples ahead or more, um, and and junior miners probably more than that. Um, and and the um the gold at least you know doubles or more. Um so you know, I think this big upside, and again, that's not two years out. I think we see that this year. Um so it's it's really a case where yes, you have to take some volatility, and if you have leverage, you may get you know the get taken away from you. But if you are investing in these, I think you'd be a happy camper between now and the end of this year. Yeah, and if you know I think it could happen by Labor Day, but I you know, with those kind of moves, you just you know have to give yourself a little more time.

SPEAKER_03

Yeah, interesting. I mean, uh if we're in ending kind of that consolidation phase, does that set up an MA wave? Obviously, I know Equinox. There's been some interesting deals in in the sector lately, but are are the seniors about to buy ounces because it's cheaper to acquire reserves than to build them?

SPEAKER_00

You would think so. It's been it's been remarkable, really, comparing this cycle to past cycles where MA came in very early on. You know, the the uh the CEOs got very excited about buying uh stuff cheap, well, um because they saw us, you know, they saw these things taken off. And in a lot of cases, um, then things rolled over and they didn't, you know, their operations didn't look great because they had leveraged themselves up. This time around, they seemed to be more focused on maintaining, cleaning up their operations, maintaining the efficiencies, and and not doing that because they they got burnt in previous cycles and they got criticized from what they did back then. So it's been remarkable to see a little bit more discipline in that industry. It's not known for any discipline. Um, and we have seen more of it this time around. And there's been, as you say, there's been some MA work, but but uh not nearly as much as you might have thought, given the move in the metals. Um, I do think probably this, you know, this move between May and Fall uh we'll probably see a lot more MA. Because it is getting harder to find you know the the um to extract the metals to find places where you can do it at a reasonable price. And so they're gonna be looking saying, hey, I can I can buy it better than I can develop it.

SPEAKER_03

And I mean, you know, miners are not just a gold proxy. I mean, they're they're operating businesses. They got cost inflation, just like us, you know, permitting risks, financing risks. In your framework, what changes that finally make generalist capital treat miners as a serious asset class again?

SPEAKER_00

Probably the price of the metal. You know, more than anything. And and we're finding obviously there are more uses for silver now. Um, it's not hard to see that it's become uh a metal that's in, you know, in uh at center stage now in terms of um some you know people need to acquire it. So I think that brings it more mainstream, maybe not quite to the extent of a copper, but you know, it is recognized as a crucial metal in in various operations now. Um so that and again the sovereign interest in gold. Uh, and even here, obviously, we have we have um people maybe somewhat connected to this administration. Uh Judy Sheldon probably comes to mind. Uh, people who do believe that we should go back to some sort of a gold um back dollar. I I have said pretty consistently for the last several years, because of what I think is coming in the bust, that um you're not gonna see it before the bust, um, and that even if they wanted to, it'd be suicide. If they if they tied the dollar to gold before the bust or on the on the eve of a bust, um they'd be tying their hands in terms of what's gonna be necessary to bail us out. Um, because there really is no other tool if we're having a free falling financial system. Um I'm I'm not endorsing it. I'm not saying that it's long term a good thing to be printing money like that. It's gonna create a lot bigger problems next cycle in terms of inflation, big inflation. Um, I'm just saying it's almost it's the only tool you have. You're either gonna, if you're a policymaker, you're gonna say, let the system crash and pick up the pieces afterwards, and that's I mean, that's major depression. Or you're gonna say, we can't let this go, and you're gonna have to step in and step in with a lot of money. Um, if you let a gold back dollar uh or gold back currencies anywhere, it limits what you can do. Um so I think I think it will pick up speed in terms of uh wanting to do that on the other side of this once they see where inflation's going, but I don't see it happening in the next couple of years. Right.

SPEAKER_03

You know, that's uh I love Judy Sheldon. She's been on this show a couple times. I mean, we'll have her back on again. Is the gold-linked reset a rescue plan or is it proof that the fiat system already failed?

SPEAKER_00

Um I I think they see it as uh proof that the system's already failed and they need to fix it. Um uh uh you know, I don't I don't look at it as a rescue plan. I I view it as people looking backwards at what happened saying we've got to fix this, you know, we've got to figure out something better. But I it's gonna be very hard to do if gold's you know on its way to 20,000 uh late this decade, early next, and you know you're you're trying to figure out how do you how do you tie it to your currency. It's gonna be an expensive proposition uh to do. Um so I I think it's a you know, let me put it this way the Austrian Austrians have been talking about reset for a long time, uh, and like it's right around the corner for a long time. Um I I think it's more likely we see a reset middle of next decade when everything comes crashing down. Because I I you know this global bus is not is not that depression. I I think we're at the end of a super cycle, which I define as a long cycle between two depressions, the 1930s being the last depression, I think the mid-2030s being the next depression, and it happens to be 100 years, it's not I'm not doing it based on that. But um, I think if we if we get what I'm calling for in terms of global bust, and the inevitable response to that is 20 trillion from here and 50 trillion maybe from the central banks overall or whatever, um you're gonna see inflation, I think, by early next decade in the 25% range. We got I was I was around as a uh pension equity manager back in the early 1980s when we saw you know 20% inflation. Um, I think we're gonna exceed that uh and in this country. So 25% inflation gets you, you know, interest rates probably up in the high teens. Um, and if you have interest rates in the high teens and you have um you know debt, you know, global debt, which is three say 330 trillion today, could be 450 trillion or more uh after the bus because of all that will happen during the bus, mostly sovereign. Um, and and uh obviously government debt here that's through the roof. How you can't solve that equation. You we can't we can't service our debt at 5%. I don't know how we're gonna service it at 15 or 20 percent. So so that that's where you then can get a collapse following that. Um and it's in that collapse, which will I think be far bigger than the 1930s. Um, it's in that that you know, you're gonna be rebuilding whatever and starting from scratch. I think you could see something then, but you could also see a lot of other things, including totalitarianism and anarchy, etc. It's hard to know what will come out of something as dire as that.

SPEAKER_03

Yeah, yeah, well said. Uh history does tend to repeat itself. And uh, I mean, we've been talking here for almost 50 minutes. The contrary in me has to ask, because I mean, obviously, every macro forecast carries risk, and you've been calling for the sequence for some time. What specific data points, or would it be policy shift, or maybe a market action that would have to cross your desk to prove you wrong or force you to kind of abandon that 80% bus thesis?

SPEAKER_00

Yeah, I was gonna say, yeah, we're we're so far into the bull market, I'm you know, I'm right about that. Well, wherever it tops out, uh you know, I I was pretty much the the uh one lone voice out there talking about these crazy numbers of you know, I've raised my numbers from you know 6,000 to 7,000 to 8,000 to 9,500 now. So um, but you know, we're so far along in that. So that's not wrong. But the bust is the area where, yeah, I could be wrong. Um and um maybe we have an ordinary recession to end this cycle. The the thing that really uh stands out for me is the leverage. I just even though a lot of it is sovereign, I just think we are there's a lot that isn't sovereign, and we are so over-leveraged in so many places, and we're so far removed, even though it's just last, you know, really the last big cycle is 2008. Um you know, people have forgotten some of those lessons. So um, but I could be wrong, I guess, um, in that you don't have something as severe as that.

SPEAKER_03

Right.

SPEAKER_00

Uh, and if you don't have something as severe as that, you're not gonna have the the you know, the huge unwind uh in the financial system. Um, you know, um I'm confident that we're heading for it, but that's where I'd be forever.

SPEAKER_03

You can't print forever, it seems like, you know. Uh okay, I want to leave uh the viewers with kind of a hard takeaway. I mean, for the investors sitting at home right now, they're watching this, you know, they've been watching this intensely, they've felt the inflation, they've felt debasement. I mean, what is the single kind of undeniable macroeconomic signal that tells you, or not tells you, maybe tells them that the melt-up phase is over and it's time to reassess their exposure?

SPEAKER_00

Yeah, again, like I said earlier in this, it's it truly is going to be sentiment. I think when you see all of Wall Street talking very bullishly and telling you this thing has legs and can run until 2028 or 9 or what have you, uh, they give you the AI story that is, you know, just beginning. It's in its infancy, it's got a long way to go. When they're all in, when they've put all their chips in, uh and retail will be there too, um, it's at that point that I will say, um, maybe you're gonna miss out on some upside, yeah, but boy, this thing can't can't go on forever. And and there's, you know, sentiment is sentiment drives my work. It's my you know, it's the priority thing in my work. When when sentiment is that far bullish, um, it's time to say it's at least begin hedging my way to the other side, you know, whether you whether you go all out or whether you just start unwinding, but people should know that um they don't want to be too early, because what will happen is if, and this has happened already for a lot of people, I think, they go, I'm not smart enough to pick the top, this thing's you know, already a bubble, I'm getting out. And I just forewarn them that what's gonna happen based on my read of psychology of a lot of people is that um let's say this thing does run another 30%, they're gonna they're gonna be saying, Wow, I misread that, I gotta get back in. Everybody's telling me this thing has legs and I got to get on. And then they end up you know outsmarting themselves. They got out uh too early and they got back in right at the wrong time. So just understand yourself and know your your kind of psychological makeup. If you can fight the crowd, and then that's not a big deal for you. Uh being early is a lot better than being late. But just know that there is that risk of getting out too early. On the other hand, also know that when this thing unwinds, it'll unwind fast because of that leverage. So um the top doesn't mean it tops one day and it's straight down the next. You know, tops are a process and they can last for a month or two, uh, or they can unwind, you know, the first step down could be fast and then some kind of walking around the bush. But um, but just know that the other side of this can be faster than the build-up to the top.

SPEAKER_03

Yeah, well said. David Hunter, Chief Macro Strategist at Contrarian macro advisors. Uh, thank you for walking us through the data and the mechanics of the forecast today. Uh, interesting times, David. That for sure. Thanks, Jeremy. I appreciate your time. Thanks so much for joining us. All right, I'm Jeremy Saffron. Thank you for watching Kitco News. Be sure to subscribe. Let us know what signal you're watching to know when the market turns. We'll see you next time.

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