Joseph Gradante (00:01.206)

What's up ladies and gentlemen, welcome to Orwellian Optics, a podcast by Allio Capital. I'm your host, Chief Executive Officer Joseph Ridante. I'm here with my Chief Investment Officer, AJ Giannone. What's up AJ?

AJ (00:13.244)

Hey Joseph, I'm your Chief Investment Officer, AJ Giannone. I'm also joined here by my co -host Chris Morgan. Chris, how are you?

Chris (00:22.145)

Hey, what's up AJ? Hey, Joseph. Hey everybody, Chris Morgan, Chief Operations Officer here. Got a good one for you today. We're going to talk about a couple things. The Fed cut rates yesterday, as you all know by now. So we're going to talk a little bit about what that's done to mortgage rates and this idea of a neutral rate. Both of those are actually higher. But first, I want to talk about the politics of all this. So they cut rates even though inflation is still high.

They haven't done it this close to an election in a really, really long time. So Joseph, make sense of all this for us.

Joseph Gradante (00:55.736)

Well, yeah, I think that's the key takeaway, right? think, you know, Michelle Bowman, you know, she was at the Senate vote, right, on the board of governors. She wanted to cut by 25 bips. They went with 50, you know, this close to an election. I think the question is, you know, would it really have made a difference if they waited until after the election? And to me, the answer is no. But, you know, we know, you know, obviously the chips are stacked in Harris's favor. And, you know, what does that mean, you know, for your portfolio? And,

You know, Trump's talked about doing a lot of things to the deep state and the media. I just, don't see any way that they're going to let this guy win, even if he does win. I just don't see them allowing him to take office. And so I think you've got to prepare your portfolio for that. And when they're cutting rates, really essentially, usually, right? It means money is cheap and it's going to prop up the stock market and then

Bond prices are also going to rise. But in this case, I'm going to sell the system. Not necessarily the things or the companies that are heavy AI, but yeah, I'm going to be heavy gold, heavy Bitcoin, definitely heavy oil. that's how I'm seeing it. AJ, you can speak to the technicals better, but I just think when you look at this from a macro perspective,

When you look at the three big things historically, right? That DAllio, Ray DAllio talks about these things, internal conflict, external conflict, and the monetization of debt, the debt cycle. When you look at Harris's proposals, it's just more government spending, it's more debt. We already are at an unsustainable level, both in public and private debt terms. And so if you're going to get increased taxes and increased regulations, that's

is inflationary, right? Because then companies have to offset those prices at the same time you're getting rate cuts. And so, yeah, that's how I'm seeing it. I think, know, it's going to... dollars are going continue to decline, right? And so I think, you know, that's going to play heavily into China's favor. And I think, you know, when you look at things internally, they're not getting any better. You have this populism on the left, populism on the right, this extreme polarization.

Joseph Gradante (03:16.344)

And that's usually the sign of a declining empire, right? Is that people can't come together and work together in each other's best interest. And then you have the external conflict. You have all this rhetoric between the US and China. You have increased military tensions. And then like I just talked about, the government continued to add to the debt levels, which is not how we get our... The way we would get out of this is we need to grow our way out of this. So we need to bring in more money than we spend. And that's not the direction that we're going.

So with that AJ, what do you think in terms of the technicalities around all this?

AJ (03:52.07)

Yeah, the debt cycle is absolutely the thing that keeps me up at night. When you think about what defines the level of investment that a country can make in its future, it's really all about the productivity of that country and the level with which it can leverage its balance sheet, its people, its productivity to generate the innovation required to build

and sustain the next generation of companies, the next generation of workers and employees and wealth creation that is going to define the next generation's story and their role in all this. with respect to the debt cycle and more specifically with respect to the rate cuts, you know, I think you saw a certain level of acknowledgement from Chairman Powell yesterday when he effectively, you know, was,

sort of saying like, the neutral rate of interest, which is a key concept here, is going to be higher now than it was pre -COVID, specifically going back to 2008 and the zero interest rate regime that kind of proliferated throughout the world in the wake of the great financial crisis. So what that means is effectively the neutral rate, which is, to define it, the rate of interest that the Fed sets on the federal funds policy rate,

that is neither inflationary or deflationary effectively, providing zero impulse to the inflation regime by setting it at a rate, is, you know, would effectively be the market clearing rate based on supply and demand in a environment where the Fed was not necessarily an actor. So, you know, in that particular case, what that means for households and for, you know, investors and for balance sheets to your point, Joseph, is that, you know, we're in a situation where

No candidate is talking about the deficit or the ballooning debt or the ballooning interest payments on that debt. You have the Fed that could be argued as behind the eight ball or is acting in a way that maybe isn't necessarily 100 % strictly within its mandate, maybe a little bit political, maybe a little bit overly aggressive in the sense that it's trying to influence the stimulation of the election and of the economy and of the real

AJ (06:13.03)

monetary flows that define what investments and what productivity increases are available to the average consumer. So from that perspective, I think we're in a real dangerous inflection point here where for a person who is looking to make hedges in their portfolio and is kind of looking to, God damn it, dude, can we clip there? Dude, my cat, man. I was trying to kick him out of here for the last five,

Chris (06:38.231)

Yeah, I got you.

Joseph Gradante (06:40.152)

The more you try to kick him out of the more he wants to come in.

AJ (06:45.352)

Dude, I was like stiff arming him off camera. I'm like, get the f

Chris (06:45.453)

Hahaha

Chris (06:51.501)

that it was not avoidable.

AJ (06:52.478)

Buddy. Yeah, like hang on one sec. I'll just clip there and I'll pick it right back up.

Chris (06:55.999)

Yeah, you're Yeah.

I want to ask about austerity measures and like the collapse of great powers.

from debt cycles.

AJ (07:09.191)

and most.

Joseph Gradante (07:10.402)

We'll ask about the mortgage rates first and then we can speak to you, I think.

AJ (07:12.851)

Yeah.

Chris (07:12.938)

Okay.

Chris (07:16.833)

Gotcha.

AJ (07:17.16)

Yeah, I'm going to just I'm going to start right back up.

AJ (07:23.486)

Just get my mental frame back. Here, hang on. guys. Give me one second.

Chris (07:26.049)

You're good.

Chris (07:32.365)

That's not going away.

AJ (07:33.81)

No, dude, of course not. Doesn't come around all day except when I gotta do a podcast.

Chris (07:39.24)

Mm -hmm.

AJ (07:40.926)

Alright.

AJ (07:44.814)

I'll just get my frame back.

AJ (08:07.246)

All right, so I'm just going to jump back in with something along the lines of like, that said, how are investors essentially like, all right, and with that said, what is an investor going to do to protect against some of these more nefarious outcomes in their portfolio driven by these massive unsustainable deficits and the Fed's reluctance to address them appropriately?

Chris (08:07.714)

Ready?

AJ (08:35.346)

and then just kind of go into your point, Joseph, about assets that react well to inflationary environments. Dude, cat.

Joseph Gradante (08:41.75)

So do you want Chris to go back to, what do you want? So it was me that asked you. So Chris, yeah, we go from, yeah.

AJ (08:48.604)

No, I can just because there were some pauses in there. In where I was talking, so I can just like be like, yeah. And with that said, my God, dude, I'm fucking losing it,

Joseph Gradante (08:59.382)

Is there a door that you can put in outside? No. I was just saying he must have no door. Cause I was like, that would be a logical answer. like, can't, so I get it. don't have a door in some of my rooms too.

AJ (09:01.092)

No, I have no door.

Chris (09:03.021)

Well, it's okay.

AJ (09:11.068)

I got a cool free gift for my office of like four grand.

Chris (09:15.085)

If he pops back up, we can cut it out. Or just show the cat.

Joseph Gradante (09:20.846)

No, but what I was gonna say is that you if you want to because I think the way fame's been doing it is cutting their windows You could start again if you want to so if you don't know where you were at You could do that because they're doing it by window So you could just act like you're answering the question again, and they could just cut to me and go to you So if you don't know exactly I don't remember what word you were

AJ (09:31.28)

N - Yeah.

AJ (09:37.532)

Yeah. Yeah, let me just do that. That'll just, and then, you know, if they want to like grab one of those things that I said before, they can do that, but I can just start over. right. Cool. All right. I'm just going to take it because we're still.

Joseph Gradante (09:42.612)

you

Chris (09:48.576)

Okay.

Joseph Gradante (09:51.448)

So Chris, mark the spot where I asked that second and then, you know, then there. Yeah.

Chris (09:57.303)

Okay.

AJ (10:05.768)

Alright, cool.

Chris (10:05.911)

and that was...

Okay, whenever you're ready.

AJ (10:14.706)

Yeah, thanks, Joseph. The Fed cutting rates here is, I think, historic in a variety of ways. Like you mentioned, you have to go back quite a long time to find another instance of the Fed cutting rates this aggressively with an election right over the horizon. The tangible outcomes of this, I think, really worry me in respect to the Fed's really inability to address

the ballooning and ever expanding deficit in addition to the interest payments that continue to just build as a percentage of the federal budget and created a real risk that keeps me up at night on a fairly consistent basis around what this means for the average investor and the average citizen of this Republic. mean, you've got a situation where the deficit is continuing to expand, the budget's unbalanced. And to your point, in order to grow out of this, we need some

real willingness and some real momentum behind making investments that will drive productivity and innovation improvements to promote an outcome that is more likely to be positive, both from a fiscal perspective and just really for a quality of life perspective of the average person in this country. with that kind of framework in mind, when you see the Fed cutting rates and doing things that could otherwise be perceived as inflationary, even though

prices have really not come down from the highs that we've seen as a result of this inflationary impulse. Inflation is at the high twos, depending on whether you choose the PCE or the CPI metric and what timeframe you look at. with that kind of lens on this, I think it's really incumbent upon the average investor to take more ownership of this process themselves and try to come up with

you like you said, a macro view, a top -down view of what these risks are, because these are things that are not, you know, historically modeled. You know, we've never really seen a sovereign debt crisis in the United States. You saw a little hints of it in the UK with the pension crisis that they had a little bit ago, and it really forced the government to bring in some real fiscal austerity and some discipline into

AJ (12:35.676)

the discourse which had been previously lacking. And we see that here today. mean, nobody's talking about the deficits and we've got an election, you know, right over the horizon that should otherwise be a really powerful platform to address this critical issue that the country faces. And it's just completely being ignored, you know, for obvious reasons. Nobody wants to make those tough choices. But what that means is that it's up to, you know, people individually to make those choices for themselves. So, you know, when you think about what kind of assets

you'd want to add or include in your portfolio to best protect yourself against the kinds of things that, you know, this behavior from the Fed and from, you know, the fiscal side on the legislative branch, you know, pushing out increasingly inflationary bills and just reckless spending. You know, I think you have to really focus on those areas that you highlighted, Joseph. It's commodities, energy in particular. It's, you know, the hard metals.

It's all of those things grouped into an asset class perspective where you've got impulses and exposure to high growth assets like equities. You've got protection from inflation. You've got protection against black swans, specifically like in this case, sovereign debt crisis type of thing. And really, when you look at all that together, the result is that you end up with a portfolio that you necessarily wouldn't find.

at a Vanguard or a BlackRock or any of these major mainstream financial institutions. They're very heavily weighted toward the old school 60 -40 approach, which has worked well during various periods, but has also drastically underperformed relative to expectations over other periods. And that's a key piece of this.

Joseph Gradante (14:23.288)

You mentioned the UK and these legacy currencies, Japan, the UK, the US, they're all correlated. That is the legacy monetary system that we had coming out of World War II and it was initially Bretton Woods II and then you had 1971, we went off the gold standard. That's what's mainly been propped up by the IMF and the Bank of International Settlements. But that system is being challenged by the BRICS systems, which is Brazil.

Russia, India, China, South Africa, and people, they don't take that macro view of their portfolios. Like you said, I I look at some of just all the fintech companies and I see that they put out these charts, right? And they could say from 1920 onward as if that's where history started, right? And so, but what happened before then, right? Did the 19th century look like the 20th century? No, right? Because you have these cycles that have really happened for the past

Chris (15:13.44)

Thank

Joseph Gradante (15:23.074)

few hundred years and we are getting to the end of another one of these cycles. And I think the question is when it comes to internal conflict or external conflict, is it going to result in war in which the whole, like previously, right where the whole system was blown up and then it was started all over and then, you know, Britain was so beaten down for war too, it allowed the US to really just have this, you know, dominant sole place, you know, on the world stage. But that's quickly changing. And so,

And it's only, in my opinion, you're going to be exacerbated with a Harris presidency. It's amazing when you think about the fact that here's a guy that there was two assassination attempts on. They threw the entire judicial system at him. They threw the Senate and Congress at him with the impeachments. And yet people at the top, they don't understand that the snake has eaten itself. But at time they do realize it's going to be too late. And it has nothing to do with Trump.

And people focus on the zeitgeist of Trump. It's about the quality of life for all Americans. And are we raising our living standards or lowering our living standards? comes down, it's that simple. And we're lowering our living standards. And so for me, I'm selling a system and I'm going heavy. I'm going to be overweighted gold, overweight commodities, as you said, and I will have some Bitcoin in there, right? And that's the play. Yeah, I'm going to have exposure to AI, right? Because AI is leading this fourth industrial revolution.

And there's going to be some companies there that stay resilient. think the multinationals, I mean, yes, they might be dragged down, overall, think they're still probably, over the long term, it's good to have say an Amazon in your portfolio, like this stock that I will probably never sell in my lifetime. Of course that could change, but we'll see. But yeah, I agree with your points, AJ. And I think people just need to really, as you said, it's these traditional asset managers, institutions, they're not.

Chris (16:55.819)

you

Joseph Gradante (17:15.906)

They're not explaining this to retail investors. and he goes back to the odd -bought theory, and I think a lot of people are set up to fail, unfortunately. And so, Chris, you know, with that, what do you have next on your agenda there?

Chris (17:25.783)

Yeah.

Definitely. You said a lot of interesting things there. One of them, history didn't start in 1920. That's so good. Sometimes we just, you we think we're taking a good big look back at history and what's happened. And oftentimes we're just taking a tiny step. If we do take that big look back, we'll see, like you mentioned, things go in these cycles and generally they come crashing down when debt cycles get out of control. Then you see these drastic austerity measures and the collapse of these great civilizations. So,

What are, where are we looking right now AJ? Are we in a situation where we really, really need to be worried? Is this under control? Will either of these candidates do anything to help us here?

AJ (18:09.778)

We are absolutely in a situation where everyone who, you know, at least envisions themselves living in this country over the extended period of time should very well be concerned. You know, the practical outcome of a sovereign debt crisis whereby, you know, effectively both institutions and individuals lose confidence in the ability of the U .S. to meet its debt obligations would cause interest costs to

rise dramatically. I hesitate to use the term skyrocket because I think there's a natural element of just demand from things like pensions and 401ks that will always provide a little bit of a buffer because we're so wealthy. But at the end of the day, if interest costs on our debt skyrocket and yields really do increase dramatically, we're going to be in a really difficult position from a fiscal perspective. And that always ends up back on the

balance sheets and the income statements of everyday Americans. Politicians can talk all they want about taxing billionaires and taxing the rich. There is just not enough income and not enough wealth there to extract to solve these problems without targeting the middle class. And that's really the core of this issue is that the irresponsibility of successive administrations kind of tying it back to that neocon theme where, you know, the politicians have really just been

of the same party for the last 30 years of just selling out the future in the middle class at the expense of a handful of paid constituencies. There's really no outcome here where the middle class doesn't have to pay the bill. And that's reality of the situation we're in. And the only remedy for that is for us to make the key investments now while we still have time to do things like promote

a increase in the quality of education that raises up the likelihood that people can innovate, start businesses, create companies and join the ranks of the entrepreneurs that generate the wealth and drive the innovation that keeps this country at the forefront of the world economic stage and do things like the CHIPS Act, example. Well, debatably very inflationary. mean, spend billions of dollars. You need to be

AJ (20:36.986)

at the forefront and leaders in all the core areas of technology innovation that are going to define power in the 21st century. you know, if we're spending all of our money on interest payments for things like bloated social services, frankly, catastrophically run health care, and all these other things that suck up giant relative percentages of the federal budget, we're going to be left with nothing.

Joseph Gradante (20:42.05)

you

AJ (21:06.482)

you know, really substantive to deploy in pursuit of really staying at the top end of the spear in terms of being able to define what it means to be a successful great power in the 21st century. And Joseph, I mean, you know, I don't know what you think about it, but to me, that's really what it comes down to. It's like, if we don't address these issues now, then we are increasingly backed into a corner and, I don't know what we do about it at that

Joseph Gradante (21:32.76)

We're not addressing those issues. And I almost think it's intentional because the data is so clear, right? Data is obvious, right? We showed the other day what's happening, where we rank on the world stage from an education standpoint. And you you just, you look at say, you know, the corruption, our system is rancid. I mean, you know, the teachers union, for example, and you know, the democratic party and the war on charter schools. mean, right? Like what was the...

Chris (21:34.657)

Anything.

Joseph Gradante (22:00.888)

What was the reason for that? right? Charter schools were a good thing. There was no, you know, data driven reason. It was just about, you know, entrenched power. And so if education's on the decline, right, there's no prospect for innovation. mean, this country does not have the same mentality that it had, you know, that made it the world leader, right? I mean, at one point we accounted for over 50 % of the world's production, right? There was this can -do attitude.

You know, I mean, you can go back to, you know, the turn of the century, but really coming out of World War II, there was this, you know, spirit in America of, hey, we're willing to work overtime. You know, we're willing to do whatever we have to do to be successful. Now it's everyone gets a trophy, you know, and everything is declining. And so in my opinion, you know, China is just, you know, they are going to surpass us as the world's leading economy. And, you know, I think the hope is that

when something big happens, that people will wake up and realize that we have to focus on the things that we agree on and work together and have civil discourse if we are going to solve our problems, right? And I think the hope for me is that on the world stage at least, that humanity is at a point where it won't come to war, that nations will be able to work together and say, okay, this is what you're going to produce and this is what we're going to produce.

and that everybody can thrive. Globalization can work the same way the United States works if we have less polarization. I think, but right now, right now, in my opinion, there's just going to be more more polarization until this thing comes through ahead. when it comes to monetary policy and fiscal policy, you have to remember Keynes, I mean, if you look at the Keynes High Bay, Keynes wanted to use monetary policy

Judiciously, he was an arting capitalist like people on the left out talkeens as if he was the socialist the guy was a steadfast capitalist. It was only supposed to be used in times of crisis But we see right now what's happening. It's being abused rights being politicized and this is what's happened for quite some time and so Fractional Reserve Banking has led to this point with globalization that the middle class has been completely decimated and fiscal policy is supposed to

Joseph Gradante (24:25.688)

be a part, it's supposed to be managed properly, right? So that then monetary policy can come in and help out when we have these externalities, if you will, when we have these crisis, maybe every 25, 30 years, but that's not the case, right? So we're completely mismanaging fiscal policy, and then we're abusing monetary policy to bail us out of the mismanagement of fiscal policy, and that's just not going to work. And I think

The world sees that and that's why you see the continued decline of the dollar. But unfortunately, the average person is not looking at these things like the price of gold and the decline of dollar. There's a reason for that, right? Because people are selling the US system, right? And so to me, Harris presidency means that you continue to sell the system.

AJ (25:13.948)

Yeah. And the final point that I want to make there is that, like you said, the bill always comes due. Nobody's addressing it. They're just kicking the can down the road. And at the end of the day, it's the middle -class taxpayer who's going to foot the bill for this in one way or another. with that as a lens, mean, the biggest component, I think, of most people's spending and their daily expense

Joseph Gradante (25:22.359)

Exactly.

AJ (25:42.568)

profile is housing. I you've got a house purchase coming up potentially. Like, how are you thinking about this?

Chris (25:48.932)

Yeah, coming up in the next year or so. From that standpoint, I was excited to see rates come down a little bit, but it only lasted a second, right? We saw the 10 -year come down a little bit, and in the 10 years, well, it used to be anyway, what mortgages were kind of benchmarked on. Now it seems to be more like a floor. Can you talk to me a little bit about that, AJ? How'd that happen yesterday? Mortgage rates went up, actually, after they cut rates.

AJ (26:11.582)

Yeah, and I mean, this speaks to some of the intricacies of monetary policy that Joseph was outlining there. Usually, mortgage rates are set at some spread to the 10 -year yield. And when the Fed updated their rate forecast yesterday, come out and Chair Powell has a press conference and he talks about all the different data that he saw and the lodge behind his decision making.

the key kind of concepts that he was outlining was that rates are likely to be higher for longer. And what that meant was that the market looked at that and said, okay, you we're not going back to this ultra low interest rate regime that we saw pre -COVID. So you actually saw the 10 year yield come down a little bit like you indicated right after the 50 basis point rate cut announcement. But then it spiked after that when Palette indicated, hey, rates are not going back to where they were before this. So

For the average person who's looking to buy a house, this is a bit of a double -edged sword. On the one hand, you get the indication like, hey, rates might be coming down at the short end of the curve. But if they're going up at the long end of the curve, that doesn't necessarily help anybody. The fact that mortgages are priced off of the 10 -year yield means that where long -term rates go, mortgage rates will soon follow. There's a little bit of variation there like you highlighted, but it's really a

fairly tight relationship over a medium or longer term. And what that means is that we've already seen all this massive home price appreciation. So generally, monetary policy has a bit of a lag effect to it. You wouldn't expect that home prices would start to come down as a result of potential Fed cuts until maybe a year or two at best after the start of the rate cut cycle. In the meantime, mortgage rates

going back up a little bit, potentially a little bit more, if we see a continuation of the growth theme play out a little bit, although that's certainly debatable, is gonna put home buyers in particular in a really tough spot. Because as you've seen, mean, purchasing power is certainly down over the last couple of years. A greater and greater percentage of people's disposable income has gone to things like groceries and just really the everyday necessities.

AJ (28:32.318)

required to get by because of the fact that things are generally 20 to 30 % more expensive than they were a couple years ago. So now you're in a situation where Fed policy is effectively influencing directly your quality of life because it's defining what the amount of interest that you're going to pay on a home purchase is. And that defines really as a direct function, the affordability and how much house you can afford to buy with your salary.

especially when you consider the fact that your salary's going a less far than it was a couple years ago. So when you put all that together, like I said, people who are looking to buy a house are in a really tough spot. So the...

Chris (29:14.601)

It sounds, I'm more confused now AJ, I'm in a tougher spot. It sounds like the landscape of risk on and risk off has completely changed. you know, I want to buy a house in the short term. have this pool of money. I don't want it to just sit in cash, but I don't want to put it in the markets either. You know, I don't know. What do I do?

Joseph Gradante (29:32.458)

Is there this new equilibrium? mean, that's the only, I think, potential out of all this. And I mean this global equilibrium where you accept this bifurcated system in the US, right? Between those at the extreme top and basically the rest of the US. You have different quintiles in there, right? You'll have people at the complete bottom, then you have people at the low middle and the middle, but compared to the rest. is there this place that...

the world kind of just settles into and accepts in that things are maybe denominated in dollar prices, but the dollar continues to decline and the US and China work together. mean, with the Harris presidency, there's so much corruption. I mean, I don't know, right? I don't know. I do think at home having stuffed government, which we're likely to have, I mean,

Republicans are going to win the Senate for sure because they have Ohio and they have West Virginia. And so does that help kind of massage things, you know, in the sense that, you know, the left isn't able to, when I say the left, I mean the right, as we've talked about before in this podcast, it's a well in optics, ignorance of strength, right? In the book 1984. So when I say left, I mean the real right. But if they're not able to pass those policies that would lead, I mean, we've already mismanaged

spending in this country as much as we possibly can. And it just seems like, you know, they keep finding, they keep finding a way to, you know, kick the can down the curve. so this thing, you know, should have come to a head already. And so is there this kind of agreement globally that they're going to keep perpetuating the system? Because the people at the top are incentivized to keep it going. I, know, to me, you still, like I said, I'll load enough on gold energy, but I will still have exposure to

AJ (31:00.306)

Don't speak too soon.

Chris (31:02.497)

Hahaha

Joseph Gradante (31:24.716)

the companies that are, you know, some of the things that I like and the companies that are most exposed to AI because AI is certainly going to lead, you know, this work leg of the industrial revolution. think, you know, and when it comes back, I mean, before we go, I do want to ask this question, guys. So which president paid off the national debt?

AJ (31:45.448)

What was that, Jackson?

Joseph Gradante (31:48.216)

I know, I want you guys to be telling you don't know. I know I've given you the answer already. All right, so go back, go back. I'll say it again.

Chris (31:52.319)

Okay, here, hold on. Hold on. Okay.

Joseph Gradante (32:00.502)

Wait, what did I say again? You don't remember what said?

AJ (32:02.078)

So you said, ask you guys a question, which president paid off the national debt?

Joseph Gradante (32:06.281)

Can I just say that Chris? that enough? Or do have to go back and say the whole thing over? Okay.

Chris (32:09.121)

Yeah, yeah, yeah. You can just say which pro, yeah, national bet. Whenever you're ready.

Joseph Gradante (32:15.414)

Yeah, before we go, I mean, I do want to ask this kind of trivia question here. Which president paid off the national debt as we speak of monetary policy? Only one has in US history.

AJ (32:26.782)

That's a good question. You got me there. What is it?

Chris (32:27.543)

Hmm, really good question, good trivia question.

Joseph Gradante (32:31.576)

Take a guess, take a guess, take a guess, Chris. You know history pretty well. No.

Chris (32:32.161)

Later.

Bill Clinton. I want to say it was sometime in the 19th century.

AJ (32:39.464)

Teddy Roosevelt.

Joseph Gradante (32:42.058)

Andrew Jackson, right? And he threw out, he threw out the central bank because he wasn't a fan of fiat currency and he knew it would be this inflationary tax essentially on US citizens. And so yeah, Chris Biddle was the head of the second bank and Jackson used his veto power to throw Biddle and who was the, I can't remember who the South Carolina Senator was that he had a collusion with, Calhoun, John Calhoun, right? They were colluded and they thought Jackson would not use the veto power, but he did.

AJ (32:43.708)

Nah.

Chris (32:43.766)

Alright, alright.

Chris (33:07.661)

Calhoun, yeah, yeah.

Joseph Gradante (33:11.968)

and he threw out the second bank and sure enough, we were able to pay off the national debt. Clinton balanced the budget, right? Because I think H .W. Bush, going back to his promise, read my lips, right? He ended up raising taxes and that. So yeah, we had a little bit better fiscal management there because we were leading the world in growth and innovation at the time. And Clinton managed things a lot like a Republican would, right?

Chris (33:25.238)

Mm -hmm.

Joseph Gradante (33:41.388)

The great 90s and 80s, those days are gone. so, yeah, you have to, I think, leverage up your portfolio, in my opinion, from a top -down approach. It's really unprecedented in these times. And so, for me, I'm not going to have exposure to bonds, right? For me, it's going to be the equities that I believe are going to be more resilient in this environment, right? And I think are going to do better, not just because of monetary policy, because I think the effect of monetary policy is waning. You're getting diminishing returns on its efficacy.

But I do think there's multinationals and the companies that have exposure to AI that will continue to do well. then, know, Bitcoin, I think is going to do well just because it's kind of a digital gold. And that's where I think the younger generation is going to hedge. But gold for sure. And most importantly, commodities, particularly energy, right? Because, yeah, we are not even close to solving climate change, right? The innovation and technology just isn't there. And so, but you're going to have increased

regulations around energy, but there's going to be continued demand, and so that's going to cause the price to go up. It's just as simple as supply and demand. So that's how I see things playing out. But anything else, Chris, before we go, or is that pretty much it?

Chris (34:54.528)

That's it. We covered a lot of bases there. I think that was a really good summary of what to do right now. It's a little bit scary out there and unfortunately it's only going to get scarier. You know, it seems that there's a lot of instability and really the answer is to position yourself for all environments. So AJ, if you want to close us off here with a little summary of what do we do.

Joseph Gradante (35:14.06)

But just say that again, I'm gonna close this off. We gotta keep it consistent.

AJ (35:17.992)

Here, give me an avenue here. I want to add something at the end too. And if you guys want to cut it at the end, can, but just...

Joseph Gradante (35:21.922)

Okay.

Chris (35:25.621)

Yeah. So yeah, so it seems like the best thing to do right now is just to position your portfolio for any environment really. But AJ, any final thoughts around this?

AJ (35:36.946)

Yeah, I think the core thing here, like Joseph highlighted, is that you have to take a big picture approach. It's looking at long -term debt cycles. It's looking at things from a first principles perspective of like, is this a sustainable way to run a country? Is this a sustainable way to conduct fiscal and monetary policy? Taking things in a four -year cycle is maybe emotionally convenient, but it's not necessarily productive towards

creating the types of outcomes that I think we're all, again, to Joseph's point, in alignment on as citizens, as people, building the innovation, creating the investments in our future. And when you look at our competitors on the world stage, specifically China, this is something where I think that they have a fundamental edge, is they're able to take a longer term view. And obviously there are trade -offs there with respect to the fact that there's maybe a limited element of individualism or democracy or some of the core

values of freedom and individualism that we hold so dear here. So we have to fight, I think, extra hard against that real, maybe limitation isn't the right word, against that real summary issue that we have to address, the fact that China's got a extreme level of motivation. They have a massive advantage in terms of population. They have a willingness to

bend the rules and in some cases break the rules to achieve their objectives. And they can take a longer term cycle. So if we want to be competitive, we have to take action now in the areas that are going to be most impactful. And, you know, the way that this kind of explodes in our faces is really if we end up, you know, in a hot war scenario. And I don't think anyone wants that. I would hope, Joseph, that your assessment is correct is that, you know, as citizens of this world in a 21st century,

that leaders in both China and the US can kind of agree to keep maybe the rhetoric hot and the weapons cool. The outcome of this is by no means certain though. So it's imperative that you position your portfolio in a way that's going to be robust across all scenarios and across all regimes, whether that's a hot war, whether that's a debt cycle, whether that's second rebound in inflation because pal,

AJ (38:03.324)

went off half cocked here, whatever it is, you have to take that top down approach and see these things for what they are and really build your portfolio in a way that's both robust and opportunistic. And that's really where we think we're going to be trying to drive that messaging. And Joseph, that's, think the core of what it is to be an informed investor is to really see through the noise and try to figure out what makes the most sense just from a

data -driven perspective from a logical perspective and from the perspective of someone who is interested in really the best outcomes.

Joseph Gradante (38:40.714)

No, that's exactly right. There's just too many unknown variables. mean, how things play out with Taiwan. mean, there's just so many unknown variables. Obviously the Russia equation, NATO, all that. for me, you have to be defensive and account for that potential black swan event, but have your portfolio be dynamic in the sense that it's elastic and it can capture opportunistic upside. So there's just going to be a lot of idiosyncrasies in global markets and you have to be positioned for that.

And I think that's really what we're trying to accomplish at Allio Capital here. That's why we're trying to inform investors so that they can take this individualistic approach. Can we go back and I can say that again, Chris? I had it good, but I didn't know what I wanted to close out there with at the end. AJ asked me a question, right? And what did you say, AJ, again?

Chris (39:31.053)

Okay.

Chris (39:34.541)

you

AJ (39:36.843)

I just kind of left it off with like, you know, that's why like, you know, all these different things, like that's why you have to build a portfolio.

Joseph Gradante (39:42.166)

Yeah, yeah, yeah, yeah, yeah. Yeah, okay, I got it. So I'm ready. Tell me when to go, Chris. Yeah, that's exactly right, AJ. I mean, and that's everything we're trying to accomplish at Allio Capital, right, is to help people take this top -down macro approach to investing. There's just too many unknown variables, and global markets are gonna be idiosyncratic, and you have to have a portfolio that's dynamic, in the sense that it's defensive, and it's positioned for a potential Black Swan event.

Chris (39:46.165)

Okay, and go.

Joseph Gradante (40:11.81)

but at the same time it has the elasticity to capture upside, right? And so, with that folks, thank you for joining us on Arwellian Optics. Tune in next time, we're gonna discuss the difference between Ray DAllio's investment style, George Soros' investment style, and Warren Buffett's investment style, and which style we think is most appropriate right now for capital market conditions. I gotta do that again, I'm sorry. I fucked up there at the end.

Chris (40:39.391)

Okay. Yeah, you

Joseph Gradante (40:40.018)

I had that so can I just say the end or I'm doing

AJ (40:42.642)

Yeah, because you paused. There was a nice pause in there. So you can just pick it up with like, join us next time or whatever.

Chris (40:42.988)

Yep.

Chris (40:48.313)

Yeah, exactly.

Joseph Gradante (40:51.66)

So say thank you for joining us or just say, is that what I said there?

Chris (40:55.207)

So you said, yeah, yeah. So I would start with thank you for joining us. You know, check us out.

Joseph Gradante (41:00.278)

With that folks, yeah, yeah, there we go. That's what I was trying to remember.

Chris (41:04.237)

and whenever you're ready.

Joseph Gradante (41:07.49)

With that folks, this has been another episode of Rebellion Optics. Thank you for joining us. Don't forget to hit like, subscribe, look for us on YouTube, Spotify, Apple Podcasts, or wherever you get your podcasts from. join us next time. We're gonna discuss, you know, different screen, Ray DAllio's investment approach, George Soros' investment approach, and Warren Buffett's investment approach, and how these three different philosophies are, I'm so, man, fuck.

Chris (41:34.669)

You could just go, you can start it and how these actually.

Joseph Gradante (41:40.578)

So I'm gonna leave that where the reason why I got nervous ahead I'm gonna leave this stuff check this out and like what do I what do I sick is the guy so I have this guy Louis Bernstein I'm working with that's why I'm getting nervous because you see so what is he was telling me I there's something I'm missing at the end as far as like click the link

AJ (41:58.59)

Click the link in the description to like and subscribe or something like that. That's what every, every.

Chris (41:58.709)

like and yeah

Joseph Gradante (42:02.112)

Is that the same as like, so don't forget to hit the link and like and subscribe. Is that it? I don't watch social media, man. So except I watch YouTube, but like, don't, I don't pay attention to like, you know, what's relevant on what stations.

Chris (42:11.343)

Something like that, yeah, like don't forget to hit.

AJ (42:17.008)

No, I think it's just hit the hit. Yeah, don't forget to like and subscribe. I think it's because there's two buttons. There's a like button and a subscribe button underneath each video. So I think that's what everybody asks is like, you know, thanks for joining us. Like make sure to like and subscribe, you know, and catch us next time on Apple Music Spotify.

Chris (42:18.709)

Yeah, don't don't fi

Joseph Gradante (42:35.766)

All right, yeah, go, I got it, I got it, Chris. I'm just gonna go really slow.

Chris (42:40.309)

Okay, and go.

Joseph Gradante (42:43.49)

With that folks, it's been another episode of Aweolean Optics. Thank you for joining us. Tune in next time. We're gonna really discuss the different screen, Ray GAllio's investment philosophy, George Soros' investment philosophy, and Warren Buffett's investment philosophy, and which one we think is most appropriate for current market conditions. Don't forget to like and subscribe. Check us out on YouTube, Apple, Spotify, wherever you get your podcasts. Peace, love, see you next time.

Chris (43:09.805)

Thanks everybody.