PodcastDavid Lin ReportMark Skousen

The 'Black Swan' That Wipes 50% Of Market Value | Mark Skousen

The discussion weighs strong growth indicators—including GDPNow above 5%, rising B2B spending, and gross output growth—against stubborn inflation, affordability concerns, and large federal deficits. It also examines risks to Treasury demand, from the Japanese carry trade and private credit to the possibility of hedge funds stepping back from the market. Skousen sees Treasuries as a more prominent bubble risk than stocks, but warns that a sharp rise in rates could still trigger a rapid market decline, potentially reaching 50%.

Government DebtInterest RatesInflationRecession RiskMarket ValuationsRisk Management

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Key Takeaways

The host says consumer spending remains a primary driver of real GDP despite deeply negative consumer sentiment, while Skousen argues that conventional GDP misses much of the business-to-business activity he considers central to the economy. He points to a 13.8% second-quarter rise in B2B spending and 5% growth in real gross output, versus 2.2% growth in real GDP, as signs of strength in supply-chain activity.

Skousen calls the Iran war a major political blunder, arguing that it lacked congressional authorization and could hurt the president in November; he presents that electoral impact as a forecast, not a settled outcome. He also says the prolonged war and rising gasoline prices are adding to stubborn inflation and affordability concerns among voters.

Skousen describes AI as supporting business investment—including surging data-center spending behind the B2B increase—while also eliminating some jobs and creating others. He says 80% of employees work in the supply chain and more than 60% of spending is in the B2B sector, and worries that graduating seniors may struggle to find jobs during the transition.

GEO-POLITICS

Iran War Risks — Skousen calls the Iran war a major blunder, arguing that it lacked congressional authorization and could hurt the president in the November elections. He presents this as a political forecast, not a settled outcome.

“However, I am concerned about this neverending war against Iran. This was an executive decision. Did not have congressional support…”—

ECONOMY

GDPNow Estimate — The Treasury Secretary cited the Atlanta Federal Reserve’s GDPNow estimate of more than 5% growth for the quarter, while acknowledging that the estimate is noisy. Skousen agrees that growth is strong and says his gross-output statistic points to higher third-quarter GDP.

“An acceleration in the economy and Americans keeping more of what they make…”—

War And Inflation — Skousen argues that inflation remains stubborn, citing rising gasoline prices and the prolonged war as inflationary factors. He also says affordability concerns are affecting millions of voters.

“You can't deny the war is lasting a lot longer than anybody expected. this is inflationary. the affordability issue…”—

Spending And Sentiment — The host says BEA data show consumer spending remains a primary driver of real GDP growth, even as surveys indicate consumers have not felt this bad in decades. The host points to the gap between measured spending and reported consumer mood.

“Consumer spending continues to be a primary driver of real GDP growth according to the BEA. That's surprising…”—

MARKETS

Stress Triggers — Skousen identifies the $1.5 trillion Japanese carry trade and a possible squeeze in private credit as potential sources of financial stress, even while the economy appears healthy. He frames these as risks, not predictions of a crisis.

“So while the everything looks good right now, some event can come along, the Japanese carry trade, for example, that's a $1…”—

Treasury Demand — Skousen recalls days in 1980 when Treasuries reportedly had no bids, saying rates had to reach 21% twice—in 1980 and 1981 or 1982—to attract buyers. He uses this history to illustrate how rates might have to rise if Treasury demand weakened.

“Listen, in 1980, there were a couple of days where there was no bid on treasuries…”—

FORECASTS

Treasury Bill Crisis — Skousen predicts a potential Treasury bill crisis, arguing that central banks may not be willing to buy Treasuries and that private equity and hedge funds are supporting the market. He warns that if hedge funds exit, the Treasury may have to raise rates further to attract buyers.

“And I do predict, I'm along with Steve Hanky here…”—

Inflation And Rates — Skousen says inflation and interest rates tend to move together over the long term. He argues that rising inflation, the war, and the deficit are adding to inflationary pressure, implying that persistent inflation could keep interest rates elevated.

“There's a direct correlation. No question about it…”—

Debt And Yields — Skousen asks what would happen if the Treasury could not sell $7 trillion in debt turnover that year. He suggests that if investors demanded 6% or 7% yields, government borrowing costs would rise.

“What if the Treasury can't sell $7 trillion this year? They have to That's the turnover just this year. $7 trillion of the government debt…”—

Intro.

Skousen agrees that growth is strong, citing gross output, but disputes the claim that inflation is under control and highlights rising prices and affordability pressures.

Strong Growth, Stubborn Inflation

Skousen argues that business-to-business spending across production stages matters more than consumer spending alone, pointing to a sharp increase as evidence of economic strength.

Why Business Spending Matters More

The speakers examine how AI investment and productivity gains are accompanying weak job creation, with Skousen describing employment as being in a difficult transition.

AI Boom, Weak Job Growth

Skousen warns that deficits and reliance on hedge funds and private equity to buy Treasuries could threaten demand and force the government to offer sharply higher yields.

Growing Treasury Crisis Risk

They discuss possible triggers for a financial shock, including the Japanese carry trade, private-credit strains, Treasury issuance, and a sudden loss of bond buyers.

What Could Break the Economy?

Skousen says Treasury-market risk may be greater than stock-market risk, while persistent inflation and heavy borrowing are lifting yields even as AI shares advance.

Rising Yields vs. Stocks

He treats a rapid market collapse as a serious but poorly timed risk, saying he remains invested while keeping a potentially severe downturn in mind.

Preparing for the Next Black Swan

Skousen favors AI-related technology stocks, Bitcoin, and energy income stocks, while expressing less enthusiasm for gold, silver, utilities, staples, and retail.

Stocks, Bitcoin, Gold & Energy

Skousen links strong gross-output growth to business spending and money-supply growth, but says inflation and affordability concerns remain and may limit public approval.

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Important Disclaimers

Not Investment Advice: For education only — not financial, tax or legal advice.

AI-Generated: Made by AI from source transcripts and may contain errors.

No Guarantees: Past performance does not predict future results; investing carries risk.

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