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Five Fast Lessons From New Orleans

When Lloyd Blankfein asked Guy Adami to join J. Aron & Co. — the fixed-income, currency and commodity group at Goldman Sachs — the young trader asked for time to think about it. Blankfein’s response is something Adami remembers well: “Guy, you have all the time you need. I just need an answer before you leave this room today.”

“I was being tested,” Adami recalls. He took the job and never looked back. “I trusted my instincts … I think we’re all born with great instincts.”

The trader and TV personality has come a long way since then. His experience at Goldman Sachs eventually led him to CIBC World Markets and, from there, to CNBC where he landed a role as one of the original cast members of “Fast Money,” the trader-centric program now in its 12th year.

The move from commodity trader to TV personality was challenging. When pressed by his employer to choose between his day job and an unproven television gig, Adami once again went with his gut. “I was in my early 40s, three kids, mortgage, the whole rig, and I said, ‘I think you’re making a mistake, but if you’re asking me to choose, I choose CNBC — I quit.’”

The trader, who had been making a living trading commodities, made his biggest trade ever — he traded careers.

“Don’t allow people to define who you are” was the message he delivered to a packed room at the 44th New Orleans Investment Conference earlier this month, where he and an impressive cast of industry experts gathered to tackle key challenges facing U.S. and global investors.

“Rich Dad Poor Dad” author, Robert Kiyosaki, urged attendees at his presentation to “learn from real teachers, those who do what they teach, not fake ones.”

Sounds like good advice, so, in case you missed the event, here are my five fast lessons.

1. DON’T IGNORE THE MATH — GOLD’S TIME WILL COME

Brien Lundin, president and CEO of Jefferson Financial, delivers the welcoming address at the 2018 New Orleans Investment Conference.

Government spending is out of control. Perhaps this is not news to you. However, upon closer inspection, the numbers are rather shocking.

In his opening address, conference host Brien Lundin outlined an inescapable web of government largesse and central bank meddling that, in his calculation, will surely send the gold price higher.

In particular, Lundin points to the gross federal debt: “It is too large right now to be managed by any other means other than some significant degree of depreciation of the dollar.”

“We can’t grow our way out of this debt. It’s crushing.”

According to Lundin, the federal debt is growing much more quickly than people realize in part due to off-budget spending. “[The] federal deficit for 2018 is projected to come in at only $793 billion. Yet, federal debt for fiscal 2018 [has] grown $1.2 trillion over the previous year because of $400 billion to $500 billion in off-budget spending.”

“If you and I decided to do off-budget accounting like this in our business, we’d go to jail.”

Extrapolating the current trendline, Lundin estimates the federal debt will reach $30 trillion by 2022 — his point being, the federal debt is already out of control.

But the situation is not without precedent.

“Back in ancient Greece there were probably Peter Schiffs and Rick Rules and James Grants walking around in their robes, saying, ‘Debt is out of control! Spending is out of control!’”

Yet time and time again, these warnings fall on deaf ears.

Lundin points out that, by the government’s own measure, the U.S. dollar has lost roughly 87% of its purchasing power since silver was removed from coinage in 1965.

“Over the wide sweep of history, when the dollar goes down, gold goes up.”

2. THE UBER BUBBLE — WE ARE LIVING IN THE BIGGEST BUBBLE EVER

Second Foundation Partners Co-Founder Ben Hunt speaks at the 2018 New Orleans Investment Conference.

This, according to Ben Hunt of Second Foundation Partners, is the bubble of everything. “As a country, you can’t be richer than your economy grows.”

Mike Larson of Weiss Ratings calls it “the Uber Bubble” and points out that, this time, the range of affected assets is much broader. As proof, he points to Leonardo da Vinci’s “Salvator Mundi,” which reportedly sold for approximately $450 million, and NFL franchises, which, he notes, are up 146% in the last quantitative easing period.

Not surprisingly, Peter Schiff, president of Euro Pacific Capital, agrees — and goes one step further. When asked about the new bearish tone on Wall Street, he responds, “I still think those warnings are too tepid; they’re just not nearly bearish enough.”

“They don’t appreciate the severity of what is about to happen. They look back at 2008 as some kind of reference point, like that’s as bad as it’s going to get.”

If you believe Schiff, things are about to get much worse.

“We have an abnormal amount of debt. Because [interest] rates were kept so low for so long, everybody borrowed more money. It can never be repaid. In fact, it can’t even be serviced if interest rates even approach normal.”

So, what will pop the Uber Bubble?

Hunt thinks surging inflation is a possibility. “It has to be something that undermines market global confidence and the ability of central bankers to bail us out … to rescue us.”

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