Gold Just Had Its Worst Week In 43 Years — Something Is Wrong With The System Beneath It

Gold recently fell off of a cliff. It had its worst week in 43 years, which is insane given that it happened in the middle of a war. Gold is supposed to be the flight to safety in times of trouble, and I cannot think of a time more troubling than the last 6 months. To set the context, the US launched a war against Iran, one of the world's largest oil producers. Iran struck back at the other big oil producers. The flow of Middle Eastern oil got stuck in the Strait of Hormuz, sending oil above $100 a barrel. To make matters worse, stock markets tipped into correction territory, and inflation fears came roaring back. But, instead of going up, gold crashed out. Gold's entire identity is being the commodity that everyone reaches for when everything feels dangerous. It has been that thing for 5,000 years. Every war, every banking crisis, every collapse of confidence in paper money, gold has gone up. But, gold just went down 11% in a single week during an active war. Something is wrong, and I don't mean wrong with gold. I mean wrong with the entire system beneath it. Look at the stats. Last week, silver also fell more than 14%. Aluminum posted its worst single day since 2018. Copper collapsed. Four completely different commodities getting crushed simultaneously day after day in the same window of time from the same geographical window. The explanation you'll hear is that the war has simply pushed oil prices up. Oil's inflationary. Central banks might hike rates. Gold hates higher rates, so gold dumps. Case closed. That explanation is tidy, I'll be the first to admit, but it is wrong. It misses entirely the paranoia that is building up in the system for a reason that virtually everyone is blind to, and I'm going to lay it all out right now. The commodity crash you are watching is not about commodities. It's about credit. The global monetary system requires something called the eurodollar to act as the hidden engine that moves money across every border on Earth. It is in the background running at all times, and most people just don't know how it works. And the check engine light on that machine just came on. And now we are seeing the same early warning signs in this hidden credit engine that we saw before the worst financial crisis in modern history. Lock in because in five easy parts, I'm going to walk you through how an incredibly important, but little understood, part of the global economic plumbing is getting clogged right now out of fear. A fear that has nothing to do with the war in Iran, but is nonetheless putting your entire portfolio at risk. I'll walk you through what's causing the fear and my go-forward strategy, but do not skip around on this one. If you miss any of these pieces, you're going to miss the biggest potential risk since 2008. So, welcome to part one, the gold sell-off that makes no sense unless you understand this. In March of 2020, as COVID shut down the entire world, gold dropped 8.9% in just four days. That was one of the sharpest short-term collapses in gold's modern history, and the reason was very specific. Investors were terrified, and they needed cash, actual dollars, fast. So, they sold whatever they could, gold, silver, anything liquid. They weren't giving up on gold. Gold is always going to have its place, but they were raising emergency money with the most liquid assets that they had. What just happened in the last week moved with almost the exact same fingerprint. The same assets, the same speed, the same pattern. So, the question is, if previous wars caused people to hoard gold, why is this one causing them to sell it? And why does it mimic 2008? As I outlined in the intro, the narrative that's spreading right now is that this sell-off is about the war causing inflation by spiking oil prices. And when inflation is high, rates have to go up. The gold sell-off merely tells you that investors are confident the Fed will hike rates. Because if they don't and yields turn negative, then gold would thrive and no one would be selling. So, that obviously isn't what's happening. So, all you're witnessing now is confidence that the Fed is going to hike rates due to the war. Why hold gold when bonds are paying 4%? Typically, that explanation would make a lot of sense. It's just that right now, there's evidence that that's not what actually happened. When gold investors fear a rate hike is coming that will destroy gold's value proposition, it produces a very specific kind of selling. A kind that we didn't just see. Namely, it's orderly. It's spread out across time zones as traders in London, then New York, then Hong Kong each process the same information and make the same portfolio decision. And it tends to hit gold specifically. Not copper, not aluminum, not silver, and certainly not all of them at once as they are very different value propositions. But that's not at all how this straight-up gold liquidation played out. What we actually saw went more like this. Three consecutive days of selling, Wednesday, Thursday, Friday. Each day heavier than the last. Gold down 4% on Wednesday, another 3.5% on Thursday, another 2% on Friday. This wasn't a gradual drift down. This was a sequence of serious blows. And the detail that puts the final nail in the coffin of the mainstream explanation, just look at what happened. Thursday was the worst day. The selling in gold started just after midnight Eastern time. It ran hard until 8:00 a.m. Eastern. During those 8 hours, gold dropped as much as 5%. By the time New York traders sat down at their desks, the damage was already done. This is an Asian hours sell-off. Every single day, like clockwork. Now, ask yourself, are traders in Tokyo, Singapore, and Jakarta all waking up at the same moment, reading the same Fed minutes, and simultaneously deciding to dump gold because of rate policy? That doesn't make any sense. Again, it wasn't just gold, and it happened on the same days, the same morning windows. Silver dropped 12% in a single Asian morning session. Copper fell more than 3% in a Thursday morning session with a much lower low. Aluminum had its worst single day since 2018, an 8.4% collapse on the London Metal Exchange. When you see four different commodities, four different markets, four different reasons to own them, all having the same downward trajectory, in the same geography, at the same time, day after day, something very different is going on. This is not a question of gold. This is not about the war. Something else is at play. This isn't a portfolio decision because these assets are so different. They should not be responding to the same market forces. They're designed to respond to different forces. What we're seeing is a selling pattern created by things that are bought for disparate reasons, but sold for the same reason. They're commodities with highly liquid markets. Someone who sells gold at 2:00 a.m. Tokyo time does not want to sell gold. Gold has been one of the best performing assets on the planet for the last 2 years. Nobody wakes up in the middle of the night and says, "You know what? I've really had enough of this asset that's up 60% in a year." They sell a high-performing commodity like that because they need dollars right now. And they couldn't get them any other way, just like in 2008. So, why now? Simple. Asia is forced to import the majority of its oil, and a massive amount of that needs to come to the Strait of Hormuz. Now, we have to dig deeper to understand why they were forced to sell gold to get the dollars they need to buy the oil because that's not how this system is designed to work. And when you answer that, you understand exactly why I'm saying this is not about the war. This is about credit. In a healthy economy, here's how things should have gone. An Asian import company suddenly needs to replace oil it was expecting to arrive from the Gulf. No big deal. It's no small feat, but there is a system for this kind of thing. It's called the Eurodollar market. Step one is to call their bank. Buying a replacement supply of oil at emergency prices is going to require billions of dollars they didn't budget for. So, they're going to need to draw on a line of credit, but that's what the system is designed for. They tap that line of credit, and dollars arrive. Problem solved. No gold needs to be touched, no silver gets dumped. The whole thing happens essentially invisibly inside of the plumbing of the financial system. These systems are created by incredibly sophisticated people over very long periods of time to deal with things exactly like this. These kinds of loans happen all the time when the system is working, that is. But what happens if the bank says no when the importer calls to tap that line of credit? Or they say yes, but only to a small amount. Or they just defer for a month. Then, you're forced to sell whatever you can to get your hands on the dollars. You open your books, and you find the most liquid assets you hold. Assets you can sell globally at any hour and convert to dollars fast. Gold, silver, copper, aluminum, Bitcoin if you have it. You hit the button, and you do it in the early Asian session because that's when your trading day is open. That is what forced liquidation looks like. And that is precisely the signature we just watched play out across four different commodity markets over three consecutive days. But the liquidations aren't the story per se. They're the evidence of a deeper problem in the system. A problem that is way too familiar for anyone that lived through 2008. Asking why gold is falling is the wrong question. The right question is what happened to the credit market? Why couldn't these companies get the dollars they needed through normal channels? To answer that question, we have to go somewhere most people never go. Into the part of the global financial system that's largely invisible. The part with no government backstop. The part that runs on nothing but trust. Looking at this area kind of freaked me out. I'm going to be really honest with you because once you understand it, you understand why what's happening right now is a lot more serious than just a bad week for gold, and it's going to persist even long after we exit Iran. Welcome to part two, the hidden engine that runs the entire economic world. The global foreign exchange market processes 9.6 trillion dollars in transactions every single day, and yet most people have never even heard of it. And 89% of those transactions have US dollars on one side of the exchange. That number is so large, it barely feels real, and it's happening every day. For context, the entire US economy, every dollar of goods and services produced in a year, is only about 30 trillion dollars. The FX market moves a third of that every day. And yet, the Federal Reserve has no direct authority over the vast majority of it. It's an absolutely staggeringly large pool of US dollars. And to understand why that matters and why it's directly connected to what just happened to gold, you need to understand the entire Eurodollar system and how it actually functions. The Eurodollar is not a separate currency and it has nothing to do with Europe. It is an extremely misleading name that confuses an otherwise relatively simple concept. A Eurodollar is simply a US dollar that exists outside of the United States, is held in foreign banks, used to fund global trade, and it operates almost entirely outside of the reach of the Federal Reserve. When a bank in Tokyo lends dollars to a trading firm in Singapore, those are Eurodollars. A bank in London extends a dollar credit line to an oil importer in Jakarta, Eurodollars. If a Japanese company wants to import furniture from Sweden, how does it pay? Eurodollars. You can't just hand over yen. IKEA has no use for yen in Stockholm. And the odds of some local Japanese bank having idle Swedish kronor sitting around are basically zero. So, what do you do? You stick a universal currency in the middle. One that's accepted in Tokyo and Stockholm, one that both sides trust and can use. That's the dollar. That's what a reserve currency actually is. Not just what central banks hold in their vaults, not the ability to price oil in one denomination. It's having a universal medium that makes it possible for a Japanese company to pay a Swedish company cleanly, cheaply, and without a bilateral currency agreement. And that system collectively is known as the Eurodollar. And it moves money across every border on Earth. But there is a crazy twist. Eurodollars are created out of thin air and destroyed just as easily in a constant credit-based cycle of monetary birth and death. We'll get back to the show in just a second, but first, let's talk about gold. Gold is the right asset these days, but most people are using it wrong. They buy it, hold it, and then wait for the price to go up, but that price is still denominated in dollars, so you haven't actually escaped the system. You're still playing by its rules. That's the shift Monetary Metals helps make possible. They've built a way for your gold to earn yield, paid not in dollars, but in more physical gold, up to 4% per year. More ounces compounding in hard money every single month. You're growing the quantity of the hardest asset on Earth, and storage and insurance are included. So, there's no hidden fees that are going to eat away at your yield. Most people are passively absorbing inflation. This is exactly how you actively compound your way out of that. Click the link in the show notes or visit monetary-metals.com/impact to learn more. This is a paid advertisement. And now, let's get back to the show. We will get right back to the show in a second, but first, let's talk about surviving holiday travel and snacks. You can't control your holiday travel. Flights get delayed, plans fall apart, you end up stuck in some airport terminal watching the clock while your only food options are overpriced garbage. That's why I always travel with Paleo Valley beef sticks in my bag. They are not only an insurance policy, they're a fantastic snack, and they stop me from getting stuck somewhere hungry with only terrible options. Most people cave when they're hungry, desperate, and they just basically are willing to compromise at that point to eat something, anything. I do not want that to happen to me. These beef sticks are 100% grass-fed, grass-finished beef. 6 g of protein, zero sugar, no artificial preservatives, and don't let holiday travel derail your health. Be prepared for the holidays, get up to 35% off your order. Click the link below to save. And now, let's get back to the show. Every time a global bank extends a dollar of credit, it creates eurodollar money that did not exist just seconds before. And every time that credit line matures and doesn't get renewed, that money ceases to exist. I don't mean this is a metaphor. This is not technically money creation. However, this is real money appearing and disappearing based on the decisions of private banks operating outside of any central bank's jurisdiction. Now, that creates a critical vulnerability. Unlike Federal Reserve dollars, which can sit on a balance sheet indefinitely, eurodollar credit has a maturity date. Typically, a very short maturity date. A lot of it only exists overnight. The long-dated stuff is still only 30, 60, or 90 days. These short duration sound like they should make the system safer, but in actuality, it does the exact opposite. When a bank decides not to roll over a 30-day credit line, that money doesn't slowly wind down. It doesn't taper. It just disappears. Sometimes in 30 days, sometimes overnight. The hole opens instantly. And if hundreds of banks make that same cautious decision at the same time, which is exactly what happens when trust erodes, the system doesn't slow, it just seizes up. Now, here's the question that everyone asks at this point as they begin to understand this. Can't the Fed just fix this? Nope. The Fed can only create domestic reserves. It controls the money supply inside the United States, but eurodollars exist outside of its jurisdiction. The Fed has no direct lever to pull. It can set up dollar swap lines with foreign central banks, essentially lending reserves to the ECB or the Bank of Japan, who then filter those dollars out to their local banks, but those programs are indirect, they're slow to activate, and they're politically constrained. They also have a whole bunch of limits. The real backstop of the euro dollar system is not the Fed. It's just confidence. And nothing more. As long as people believe it, it works. If they stop believing it, it freezes. Banks keep rolling credit because they trust their counterparties. They trust that the firms are lending to will be able to pay them back. They trust the system will keep functioning. The moment that trust starts to crack even slightly, the rational move for every individual bank is to pull back. Not because they know someone is going to fail, but because they can't afford to find out the hard way. This is why it all rhymes with 2008. Because that's exactly what happened in 2008. And that's the exact situation we're heading into once again right now. The oil shock created a sudden, massive spike in dollar demand from Asian importers that were scrambling to replace their Gulf supply. They needed billions in emergency credit that they hadn't planned for. They went to the banks, and the banks, for a shocking reason we're about to discover, were already tightening long before the first missile was ever fired in the Iranian war. But, if the trouble began before the war, and the war is merely highlighting a systemic weakness, what is that weakness? What's really going on? Welcome to part three. We've seen this movie before. September 15th, 2008. Lehman Brothers files for bankruptcy, and the world shuddered. Within 24 hours, the global credit system, the same euro dollar system we just walked through, began to seize up. Not slow down, not tighten, just stop. GE Capital, one of the largest and most respected financial operations in the world, suddenly can't access short-term funding. Harvard University struggles to roll its commercial paper. Companies across America start to worry about making payroll. The Federal Reserve's own internal notes from that week describe what is happening in a single phrase that is truly haunting. And I quote, "We came as close as we have ever come in history to a total cardiac arrest, not just of the American economy, but the entire world economy." End quote. That's not hyperbole. That's the official assessment from the people who were in the room. 2008 was a much-studied show, but there are still parts of it that people just don't understand. For instance, it wasn't a mortgage crisis. In the same way this moment is about gold of the war, the mortgages were just the trigger. The euro-dollar system freezing due to well-founded paranoia around an unknown amount of toxic asset exposure was the actual loaded gun. If you look at 2008 through a forensic lens, what you'll see is a horror-movie-style atmosphere of extreme fear and paranoia. No one knew what was hiding around the next corner, and that made the entire euro-dollar system, which runs on trust, begin to freeze in terror. Hopefully, that's starting to sound familiar with what's happening right now due to private credit. By 2008, every major bank on Earth knew they were sitting on exposure to mortgage-backed securities. Everyone knew their own books were dirty. The problem was they didn't know how dirty everyone else's books were. Why? Because the banks had spent years taking pools of mortgages, slicing them up, repackaging them into complex securities, and burying them three layers deep inside of off-balance sheet vehicles that nobody had to disclose clearly. You could lend 500 million to a bank that looked perfectly healthy on paper, and that bank could be carrying 50 billion dollars in toxic exposure that had been structured specifically to be invisible. Nobody knew where the bodies were buried, including the banks themselves. So, here's the choice every bank faced in September of 2008. Sure, I could extend this credit line to my counterparty. They look fine on paper, and maybe they actually are fine. But, if they're not, if they're the next Lehman, I will lose everything. And when there's that much uncertainty, the rational choice for every single bank was to stop lending. Not because they knew someone was going to fail, but because they couldn't afford the risk that they might. This is what actually causes a credit freeze. It's not one bank deciding to pull from one client, it's every bank independently making the same cautious, rational decision at the same time. And when that happens simultaneously across the entire global system, the euro-dollar machine stops creating money instantly, and the global economy seizes. Because the money is just suddenly gone. It literally doesn't exist. Before Lehman collapsed, there was still trust in the system that kept the euro-dollar flowing. There was still a widespread belief that the authorities would step in and backstop whoever needed saving. Too big to fail. You've heard that That belief was the last thread of confidence holding the system together and keeping it functioning. When Lehman filed for bankruptcy, it became clear that not everyone was going to be saved, and every bank suddenly looked at every other bank and saw a potential Lehman. Hence, the near-fatal cardiac arrest. Now, with that understanding, let's take a fresh look at this gold collapse. Because the stability of the euro-dollar market flow is way too reminiscent of 2008. The war in Iran merely created a spike in dollar demand. That's all. If the euro dollar market wasn't already drenched in paranoia, it should have been a relatively easy problem to solve. So, the question you should be asking is how is the private credit market causing that strain? Private credit markets have been showing signs of stress since late 2024. The warning signals first started coming from the repo markets. A repo, which is short for repurchase agreement, is essentially a very short-term loan between banks, where one bank sells an asset like a treasury bond to another bank overnight with an agreement to buy it back the next morning at a slightly higher price. That tiny price difference is the interest. Banks do this constantly, every day, to make sure they have enough cash on hand to keep operating. It's the most basic fundamental form of liquidity in the entire financial system. When the repo market gets weird, when the interest rates spike unexpectedly, or when banks start getting cagey about who they'll lend to overnight, it is one of the earliest warning signs that trust between financial institutions is starting to fray. And right now, it's fraying. One of the clearest signals of this fraying comes from something known as the cross currency basis. This is one of the most precise pressure gauges in the entire global monetary system. I'll explain what it means in a minute, but for now, just know it dropped hard in the fall of 2024, and that is a very bad sign. The cross currency basis specifically measures the cost of accessing dollars through the swap market. It's always the dollar versus some other currency in the swap market. So, it's dollar to the euro, dollar to yen, dollar to the Swiss franc, and so on. Each pair has its own basis reading, but they all tell the same thing from different angles. How hard is it to get dollars right now? And what premium are people paying to get those dollars? When analysts talk about the cross-currency basis as a system-wide signal, they're typically looking at the dollar basis across multiple USD to other currency pairs simultaneously. When they're all moving negative together, that's the signal. It means the dollar is harder to get and is therefore spiking in value against currencies. And when it isn't isolated to one region or one currency, whatever the problem is, it's global. Starting in the fall of 2024, the cross-currency basis dropped very rapidly, meaning everyone trying to get dollars was suddenly paying a premium. Said another way, traders used to get a dollar for every dollar's worth of value in their local currency that they were swapping for dollars. But in the fall of '24, they started getting significantly less than a dollar for their dollar's worth of local currency. They were being asked to pay a premium because dollars were hard to find. And it is only tightened further since the war began. Analysts who were paying attention flagged this back in 2024, but nobody listened. It's at that edge of being just complicated enough that most people never map this out. But it controls so much of your life and the impact on your portfolio. Unfortunately, we all have to wrap our heads around this. The oil shock did not create a fragile system. It collided with a system that was already fragile due to the increasing systemic risk growing inside of the private credit market. I did a full deep dive on exactly what's causing that increasing risk, and you can watch it right here. When you combine an already fragile system with a sudden, massive spike in dollar demand, the feedback loop accelerates fast. Falling commodity prices signal stress, falling currencies signal stress, and stress signals are exactly what convince banks to pull back further, which causes more stress signals, which causes more pullback, and the problem becomes a runaway train. Now, here's the part of the 2008 parallel that gives me heart palpitations. In 2008, the system got hit cold. The banks were overextended, but at least they had been operating in conditions of relative stability right up until the big stressor hit. The shock was external, it was sudden, and it hit an otherwise healthy system. This time, the system is already sick. The private credit stress, the euro-dollar tightening, the repo market signals, these were all alarm bells that were going off before the war began, which means even if the war is over by the time you hear this, the system still has a growing problem of unknown magnitude. In 2008, the question became whether the system had the tools to absorb a sudden shock. Right now, the question is how sick is the system exactly? The oil shock will almost certainly pass quickly when we exit the war, but the underlying problems in the private credit market continue to loom large whether we're in the war or not. And there is one more piece to all of this. There's a very specific technical dynamic in the dollar markets right now that analysts are only beginning to talk about, and it suggests the pressure we can see on the surface may be significantly understating the actual pressure building underneath of it. Welcome to part four. The amplifier nobody's talking about. At the end of January 2026, just weeks before the first missiles hit Iran, a research paper was published in the Journal of Futures Markets that basically nobody read. Its title was The Dollar's Double Life: Not All Dollar Appreciations Are Born Equal for the Cross-Currency Basis. Buried inside of that paper is a finding that I think changes the entire picture of what's happening right now, and it suggests that the pressure we've been tracking, the repo market stress, the cross currency basis tightening, the commodity liquidations, may be significantly understating how bad things actually are. Here's what the paper found. The dollar doesn't always behave the same way when it strengthens. The impact of a rising dollar on the global funding system depends heavily on what exactly is causing it to rise. Specifically, the researchers identified two regimes, what they call a high dollar regime where the dollar is already strong and expected to stay that way, and a low dollar regime where the dollar has been weaker and is just beginning to move higher. In a high dollar regime, the markets have already adjusted. Hedging strategies are in place, the system is calibrated to dollar strength, so further appreciation doesn't create as much additional stress. But a low dollar regime, where the dollar suddenly starts surging from a position of relative weakness, the tightening effect is dramatically more violent. The system hasn't adjusted. Hedges aren't in place. Investors who are comfortable holding unhedged dollar assets because the dollar looked weak suddenly need to scramble. The whole market reprices at once. The researchers describe it as something like an amplifier effect. The same dollar move produces a much bigger shock to the funding system when it comes from a low dollar starting point. Here's what should get your attention. For most of the period leading up to the Iran war, the dollar was in a low dollar regime. It has been weakening for months. The market had oriented itself around that. And then, the Iran war hits, and the dollar surges. Exactly the kind of sudden transition from low to high that the paper identifies is maximally disruptive, which means the cross currency basis tightening we've already been seeing, it's being amplified. The commodity liquidations we watched play out over three consecutive days, amplified. The dollar funding squeeze that Asian importers are expecting right now, amplified. The stress on the surface is real, but the stress underneath the surface is likely worse than the surface numbers suggest. Think of it like an earthquake. The magnitude on the seismograph is what it is. But if the earthquake hits ground that's already saturated from weeks of rain, the damage is far greater than the magnitude alone would predict. The ground gives way in ways that otherwise wouldn't. This is the situation right now. An already saturated system hit by a sudden dollar surge. In the exact regime transition that researchers now tell us produces the most violent response. And here is the thing that binds all four of these parts together. Everyone screaming about inflation right now is looking at the wrong instrument. The commentators calling for dollar collapse, dollar debasement, dollar destruction, they're also looking at the wrong instrument. A rising dollar is not debasement. It's the opposite. A rising dollar in the eurodollar market means the global system is screaming for dollars and can't get enough of them. It means credit is contracting. It means money, real money, eurodollar money, the kind that moves the world is disappearing faster than it's being created. So you can get this weird cognitive dissonance while the Fed in the US is printing like crazy, but the eurodollar market is contracting. And you've got to look at both. And depending on how you're allocated, it may have one impact on you or the other. And depending on what system it's in, will determine how amplified the effect becomes. Now, what's happening right now in the eurodollar market is deflation. Not the deflation of falling prices on a grocery store shelf. The deflation of the monetary engine itself now running in reverse. And here's what makes that so dangerous at this specific moment. The system was already fragile before the war because of the private credit market. The war amplified existing stress. The dollar transition regime is now amplifying it even further. These three things are not adding together, they're multiplying. We're not watching a bad week for gold, we're watching the early signal of a system under the kind of compounding pressure that historically does not resolve smoothly. Which means the only question that actually matters right now is given all of this uncertainty and potential compounding effect, what do I do about it when there are more threats on the horizon? Welcome to part five. What do you do now? The war didn't create the fragility in the system. The war revealed it, but inevitably, given that private credit stress is still building up, was building up before the missiles were fired, and will continue to build long after we exit the war, regardless of what's happening in the Middle East today, there are certain things about my go-forward approach that are unlikely to change. Here are the five things that I'm specifically doing in this moment. First, I'm trying to understand what I actually own and what it needs to survive. Some assets require a smoothly functioning credit system to hold their value. Private equity, leveraged real estate, high-yield debt. In a credit contraction, these are going to get hit first, not because the underlying businesses are necessarily bad, but because the cheap funding that supported their valuations start to disappear. All of us should take that with us as we audit what we own. Ask honestly, if credit tightens significantly from here, what happens to this asset? Second, trying to make sure that I do not confuse the noise with the signal on the dollar. The loudest voices right now are screaming dollar collapse, debasement, and inflation, and historically, that has been where I've spent all of my focus as well. Given our reckless spending, inflation remains a threat that I am certainly hedging against, but a rising dollar due to crisis-led deflation in the euro-dollar system is not strength. It's distress, and I'm factoring that into my thinking. It means the world is desperate right now for dollars that it can't get enough of. It means the monetary engine itself is contracting. Be careful not to look only at the US and the Fed and go all in on a bet on inflation at the exact moment that the wider monetary system is at risk of deflation. Watch the dollar and the cross-currency bases. When they move together in the direction we've described, the distress signal is getting louder and louder. Take that into consideration. Third, I'm maintaining enough liquidity to preserve my optionality. That's such an incredible weapon right now. It is not a weakness. I know a lot of people are going to warn you that it is. Warren Buffett built a $381 billion cash pile while I'm sure a lot of people are laughing at him. He's not scared. I think wisely so. He's giving himself choices, namely the ability to follow the great advice to be greedy when everyone else is terrified, to buy great assets at panic prices while everybody else is being forced to sell. I'm keeping enough cash on hand to cover 3 years, but I always advise people to at least keep 6 to 12 months of cash so that you wouldn't need to change your lifestyle if something goes wrong. Not because cash is a great long-term investment, it's not. Odds are it's just going to get eaten by inflation if you're holding dollars, but I do it because without that buffer, you become one of the people who gets forced to sell at the worst possible time. The goal is to never be forced to sell, ever. Fourth, I'm as always diversifying across economic forces, not just ticker symbols. Owning 10 different stocks is 10 bets on equities. Real diversification means assets that respond differently to the the stressor. Hard assets, commodities, gold, Bitcoin, equities, and yes, personally, I do not plan to sell my gold even after it's worst week in 43 years. Listen, that's just me. You need to make up your own mind. I'm not saying you guys should do the same, but my mental model is that despite the people being forced to sell it right now, it's still a good hedge against massive uncertainty that I see looming on the horizon. Lastly, do not panic. None of what I'm telling you is meant as a prediction that 2008 is about to repeat. It's simply an argument that the early warning signals that preceded 2008 are present and describe a system that may be in a more fragile state than what existed before 2008 began. Your mental model is likely to benefit from knowing that fact as you think about the potential changes you want to make to your allocations. But even if I'm right about that, it doesn't mean the economic world is about to implode. The people who got hurt the worst in 2008 weren't the ones who held through it. They were the ones that panicked at the bottom or were in an economic situation where they were forced to sell because they didn't have enough capital on hand. As always, guys, stay emotionally sober and build a strategy that can weather attacks from any acute direction. Don't go all in on gold or tech or oil or anything else, and don't pull the rip cord on things that are likely to bounce back. The goal is a portfolio that can breathe when the credit markets are suffocating that is indeed the major stressor that's playing out right now. There is no such thing as a permanently invincible portfolio. Just aim to be resilient enough to survive the disorder that we're living through and still be standing when the dust settles. Nobody knows exactly how any of this is going to play out. What you can control though is your position relative to the range of potential outcomes. Are you fragile? Built for glory in one scenario, but vulnerable to being wiped out if it doesn't arrive? Or are you anti-fragile? Built to survive multiple outcomes and maybe even benefit from the volatility itself. That's the only question that matters. Not which way gold goes next week, not whether we stay in the war or get out, not whether the Fed cuts or hikes. The system is constantly sending out signals. Make sure you're listening. All right, if you guys want to join me live as I discuss issues just like this, make sure you subscribe right now and join me live Monday, Wednesdays, and Fridays. You can chill in the community or argue. All right, guys. Till next time. Be legendary. Take care. Peace. If you like this conversation, check out this episode to learn more. If you have dollars in your wallet, just know that money only has value because of oil. And right now, the US is in danger of getting tricked into a protracted ground