Why Gold Sentiment Turned Negative
Sentiment in gold, silver, and mining stocks is unusually poor right now, but this is nothing new — poor sentiment has defined the entirety of this bull market. Investors were never genuinely excited about mining stocks because they never believed in the rally in gold and silver to begin with. The metals have actually performed well if you zoom out over the last seven, eight, or twelve months. What we are seeing now is simply a pullback from a recent euphoric period, not a failure.
Two forces have deepened the negativity. First is the new fear of a hawkish Federal Reserve that markets expect to come out swinging with rate hikes. Second, and more psychologically important, is the fact that gold went down during the war. That single observation has led many people to question whether gold is even a safe haven anymore — "Hey, why did it go down? Why didn't it go up?"
The answer is that they overlooked the run-up. Gold rose so much before the war that it had already priced the war in before it happened. By the time the conflict actually arrived, it was a classic case of "buy the rumor, sell the fact." On top of that, gold was deeply overbought going into the war. Had the war begun with gold still near $3,000 and silver near $30, both would have surged dramatically during the conflict. The only reason they came down is precisely because they had gone up so much immediately beforehand. The "metals don't work anymore" narrative is therefore false sentiment built on a misread of timing. Markets routinely front-run fear long before television narratives catch up, and mistaking consolidation for failure is exactly how positions get transferred from patient holders to institutions.
Crypto Stole Gold's Thunder — But That Is Reversing
Over the past decade, a great deal of gold enthusiasm was siphoned off by crypto and Bitcoin. That is where all the action, the hype, the Wall Street money, and the political clout became concentrated. It stole gold's thunder.
But as the air comes out of the Bitcoin bubble — and it is coming out, and will only come out faster as more people recognize it — that spotlight will shift back to gold where it belongs. The typical Bitcoin holder right now is like a deer in the headlights: frozen, not even realizing what is coming. They are all going to get hit by a Mack truck.
To the extent crypto plays any role in the future, it will be through tokenized gold. The future of blockchain is gold, not Bitcoin. Rather than making gold obsolete, blockchain actually makes gold better — more fungible, more divisible, more portable. It makes gold better money. Bitcoin was never money, even though it lived on a blockchain. Gold has always been money, and tokenizing it makes it even better money, doing everything Bitcoin merely promises to do but cannot. Even the World Gold Council is participating in exactly this kind of tokenization effort. The deeper question worth watching is whether institutions ever truly replace gold at all, or whether they simply used volatility to redirect retail enthusiasm elsewhere. Investors protecting purchasing power should watch where custody, settlement, and reserve structures evolve — not where excitement peaks.
What Happens When the Fed Raises Rates
Question: If the Fed raises rates, what is the biggest thing to re-rate? If markets move, what moves the most?
When the Fed starts raising rates, expect gold to go up. It is again "buy the rumor, sell the fact" — everybody already knows rates are coming, so getting it over with shifts the focus. Once hikes begin, the realization sets in that the hikes are not enough, that they will weaken the economy, and that a weaker economy creates bigger budget deficits. All of that is bullish for gold.
By the time a rate cut actually arrives, gold should be rising. But we may never get that rate cut. Between now and any first cut, we could see a big drop in the stock market, really negative economic data, and very weak jobs reports. That sequence would force the Fed to take rate hikes off the table entirely — and that is what would send gold through the roof. This sequence has repeated before major repricings: rate expectations peak just before confidence cracks. Markets care less about the first hike than about whether policymakers can survive the consequences of tightening. If growth weakens while deficits expand, the narrative shifts from fighting inflation to managing instability.
The Fed Cannot Stop Printing
Raising rates is not enough on its own. The deeper reality is that the central bank cannot stop printing money. The balance sheet is still expanding — it expanded just last week. The Fed has to keep buying bonds and keep doing quantitative easing, because if it does not buy these bonds, who will?
Question: Will shrinking the balance sheet be the Fed chair's next move?
No — he cannot shrink the balance sheet; he is going to expand it. The proof is simple: if he genuinely wanted to shrink it, he would be shrinking it right now instead of expanding it. Instead, he is setting up a task force to study the problem, which is a way of not actually solving it. The government is now running deficits of roughly $3 to $4 trillion a year when you compare spending to revenue. Where will that money come from? Only the Fed. The Fed will have to buy a great deal more government debt, creating money out of thin air and generating inflation to do it. Otherwise, long-term interest rates would soar.
The reason private buyers cannot fill the gap is structural. The traditional big buyers of Treasuries were foreign central banks — and they are no longer big buyers. US government trust funds, like the Social Security trust fund, were also major buyers — but the Social Security trust fund now sells US Treasuries every year. It is a seller, not a buyer. Is the public a big buyer? No. The public is not buying Treasuries in any meaningful way, and the average American is broke and has no money for them anyway. The real constraint on policy, then, is not inflation targets — it is debt absorption capacity. Officials can discuss "normalization" all they want while balance-sheet support remains structurally necessary.
Why There Is No Real Demand for Government Debt
When the average American does decide to invest, he does not want a 4% yield. He is buying SpaceX; he wants to go to the moon. He does not want to clip a 4% or 5% coupon — and he would not want it even if Treasuries paid 6% or 7%. There is simply no demand there. So the Fed will supply it.
But it should not. The Fed should allow the collapse and force the government to cut spending. The government should be cutting Social Security, Medicare, national defense, government pensions, and all farm subsidies — all of it should be cut. If the Fed simply refused to buy all this debt, spending would be cut. But the Fed will not do that. Instead it will cooperate with and enable the profligacy, exactly as it has since Greenspan.
Inflation Is the Expansion of Money and Credit
Question: What is the more important tool for fighting inflation — the money supply (balance sheet size) or interest rates?
Both, actually, and they tend to go together, though the money supply is central. Inflation is fundamentally an expansion of money and credit. Prices rise because there is more money chasing a fixed supply of goods — but credit functions just like money. You can have no money at all, walk into a store with credit, and buy all kinds of things. Credit acts like money in an economy. So inflation is the expansion of money and credit together: more credit means more money, which means higher prices.
The Fed controls both the money supply and the price of credit. We have had artificially low interest rates and an expanding balance sheet, and that has been the source of our inflation. To deflate, we would need to shrink the balance sheet and let interest rates rise. But if we did that, the entire house of cards erected on top of all that cheap money would come crashing down — and that is precisely what nobody wants. When speculation becomes more attractive than lending, capital markets begin signaling stress before economists do. Credit expansion can disguise scarcity for years, then unwind suddenly.
Trump, Housing, and the Defense of Paper Wealth
This unwillingness to let asset prices fall is visible in housing policy. Talk to the president about housing and he says he wants home prices to keep rising — even though homes are already unaffordable and first-time buyers are now around 40 years old, because that is how old people must be before they can afford to overpay for a house.
The motive is to keep older people feeling rich. The aim is for those who bought homes 20 or 30 years ago at much lower prices to stay rich on paper, with prices never coming down. But if mortgage rates rise to 8%, 10%, or 12%, home prices have to come crashing down — and they would probably fall even further if the Fed did the right thing.
In his own words, the president put it this way: existing homeowners "we're going to keep wealthy. We're going to keep those prices up. We're not going to destroy the value of their homes so that somebody that didn't work very hard can buy a home." His stated plan is to make homes easier to buy — to get interest rates down — while also protecting existing owners from a collapse in their wealth.
The contradiction is obvious. He wants to make it easier to overpay for homes by lowering mortgage rates so buyers can borrow more to overpay, rather than letting prices fall back to affordable levels. He wants to protect the beneficiaries of a housing bubble so the bubble does not pop and make them less rich. But they never should have been this rich in the first place — it is all on paper. What is a house worth that you cannot sell? Ultimately a house is worth only what a buyer can afford to pay. If you imagine your house is worth a million dollars but the highest offer you ever received was $700,000, then your house is not worth a million — regardless of what you think. If you cannot sell it for a million, it is not worth a million.
Question: Is he right though? It is not just houses — wealthy people own stocks, and if the housing or stock market collapses, we go into recession. Doesn't he have a point?
He does have a point. But the solution genuinely involves bursting a lot of bubbles; asset prices have to come down. And because he refuses to let asset prices fall, goods prices will rise instead. Either way, real asset prices are going to fall no matter what the president does. The genuine conflict is not between growth and recession — it is between preserving paper wealth and restoring purchasing power.
Inflation as a Hidden Substitute for Correction
If asset prices can be propped up with the Fed's help, consumer prices go up instead. So rather than your house losing half its value outright, everything you want to buy doubles in price. It seems as if your house held its value because the number stayed the same, but in real terms it has effectively lost half its worth because everything around it became twice as expensive.
They cannot create real wealth out of thin air. They can play with the numbers by creating inflation and make people feel richer — "Look, I have a million-dollar house!" But if that same person has a $10,000 box of cereal in the pantry, what is that million-dollar house really worth? Inflation becomes a political substitute for market correction precisely because it hides losses in nominal terms. Investors protecting wealth should measure outcomes in real terms, not by their account statements.
What He Would Do as Fed Chair
Question: If Trump invited you to be the next Fed chair, what would you do — you can't raise rates too high, you're in a quandary?
He has already called me a loser, an idiot, so I don't think I'll be appointed. But if I were chairman, the buck would stop with me. I would let everyone know the Fed is no longer in the business of monetizing government debt. There would be no "Fed put" in the market — if the market drops, the market drops.
Question: The moment you say that, won't we get a 700-point drop in the Dow?
Probably much more than that — it would drop a lot more than 700 points.
Question: You're okay with that as Fed chair, given the ripple effect across the whole economy if the wealth effect holds?
Yes. The question is whether I want to rip the Band-Aid off or peel it off slowly — and I want to get it over with. I know it will be bad; it will just be worse if we don't do it. Had I been made Fed chair 20 years ago and done the right thing, we would be in great shape now. It would not have been as painful then as it will be now — but the fact that it is painful does not mean you don't do it. The real policy divide is not growth versus recession, but immediate pain versus accumulated fragility. Markets tolerate discipline early and punish avoidance later; postponement does not lower the cost of correction — it compounds it.
Greenspan's Legacy and the Coming Crash
Question: Alan Greenspan passed away today. What was his legacy?
He wrote the playbook everyone is now following. He was the architect of the house of cards that collapsed in 2008. I blamed him for the 2008 financial crisis years before it happened, because his policy mistakes were clearly setting us up for it. The crisis blew up on Bernanke's watch, but Greenspan created the problem — and I described it for years before it detonated.
Bernanke, then Yellen, then Powell all followed the Greenspan playbook: kick the can down the road, keep interest rates artificially low, expand the balance sheet. That is what put us in today's situation. A real crash is coming — the subject of one of my books — and it is the direct result of the Greenspan playbook that every successor has followed and that I believe the next chair, Warsh, will follow too. The policy framework built after 2008 is now creating the next instability.
Strategy: The Tortoise, Not the Hare
Question: You once said you'd be much richer if you'd put all your money in the Magnificent 7 a decade ago. We can't turn back time — what are you doing for the next decade? It's not too late.
Yes, I'd be far richer if 15 years ago I'd put everything into Bitcoin — but I didn't, and that doesn't mean I'm going to do it now. Bitcoin is actually lower now than it was four or five years ago. From a pure trader's standpoint I was wrong; I could have bought that "crap" 15 years ago, sold it five years ago, and made a fortune. But I have never been wrong on Bitcoin in my fundamental understanding of it — only as a trader who missed the trade.
The same applies to many AI stocks. I do own a couple. In fact, I own one stock I'm up almost 100x on — but when I bought it, I didn't even know it was an AI stock; it wasn't one at the time, it simply became one. So I got a little taste of that move. The biggest missed opportunity is rarely what destroys portfolios — the chase after it usually does. Investors often confuse identifying excess with timing it, then abandon discipline near the end of a trend.
I could have made much more had I put a larger percentage of the portfolio into those names, but I am a value investor. I don't buy into hype. I want to win like the tortoise, not the hare — to actually cross the finish line, not sprint into the lead, run out of breath, and drop dead before making it.
So I am still buying what I have always bought: precious metals, mining stocks, commodity stocks broadly, energy, agriculture, emerging markets, value and dividend-paying companies, and foreign stocks. Last year was a great year — possibly the best year of my career on the long side — and I think it was a breakout year. After a modest pullback, international stocks are still beating the US market year-to-date. Gold stocks have turned slightly negative, but only barely, and I expect them to end up beating both the S&P and the Nasdaq on the year. We will see how the rest plays out — the year is not quite half over.
The broader lesson is that durable wealth is usually built in periods nobody wants to own. Value, commodities, and real assets remain overlooked precisely because they lack the excitement premium — and institutions often accumulate them quietly while public attention stays fixed on recent winners. Anyone thinking in decades rather than quarters should separate popularity from positioning, and measure success in real purchasing power rather than nominal account balances.
