Cem Karsan: The Big Print Is Coming and the Government Will Buy Stocks

Cem Karsan (0:00)

There is a new big entrant, somebody sitting on the other side of the table, with a really big stack, who has been really bullying the market around. And not just a function of the cards, and that's government. The incentive force one outcome, which is obviously A, print money, because it's a golden goose. But two, buy stocks. What most people don't realize is that's what's coming, and not coming in two years, or three years, or five years. It's coming in the next three to six months.

Natalie Brunell (0:25)

Like the US government buying stocks.

Cem Karsan (0:27)

Yes, we've created a sovereign wealth fund. Japan did this for almost 20 years. Every new facility, every new thing has come out of major crisis. We are going to have something that is a major crisis. If you can control the direction of the market, you can manage that market, you are controlling liquidity. This is not conspiracy. This is reality. I'm not telling you what this is where we're eventually going. I'm telling you, we're going there in the next nine months.

Natalie Brunell (0:50)

So you're forecasting what, like a 20 percent drop, or it could be as bad as 40? Like what are your forecasts? Hey everyone. Welcome back to the show. Joining me here is Cem Karsan. He is the founder and CIO of Kai Wealth. Great to see you. Thanks for coming back on the show. It's been a while.

Cem Karsan (1:12)

It's good to be back.

Natalie Brunell (1:13)

Lots to talk about. A lot happening right now on the macro side.

Cem Karsan (1:16)

Is there anything? I don't know. Anything going on? Yeah. Well, you know what?

Natalie Brunell (1:20)

Where I want to start is, I feel like you've had some really interesting writing and tweeting lately about how you don't expect anything to happen until after midterms as far as maybe a market sell off, that the volatility is being dampened a little bit on the options side rather than amplified. So why don't we start there with kind of your macro overview?

Cem Karsan (1:40)

Yeah. I think there's a couple of important things to unpack here.

Historically for at least 10 years, my primary focus has been on macro and flows. What do I mean? Both thinking about the interaction of big picture macro forces, what that's, things that we talked about last time to some extent, right? Where is the world going based on these pressures and what does that tend to mean? On a one, five, even 10 year basis, right? Also, being an ex market maker in the option space, understanding options and volatility and flows really well, we're able to kind of navigate daily, weekly, monthly, even quarterly kind of forces based on what my market microstructure is doing.

And that, those two things together have been very powerful for a long time in terms of helping you predict where we're going. I think of that as like the cards that you're holding and the math that, you know, being able to understand what cards are being dealt at the table.

The problem is more recently, there is a new big entrance, somebody sitting on the other side of the table, right, with a really big stack, who has been really bullying the market around a bit, right? And not just a function of the cards, they're playing a bit differently than is necessarily just easy or typical or reactive. And that's government, right? We've had always the Federal Reserve, always, you know, Treasury involved. They've always been a player at the table, but they've always been very reactive and have had a general reaction function that has worked very kind of predictably, right? Starting in 2025 with the introduction of Trump, right? It's not just Trump, by the way, this is not a political argument. The administration, which we'll get to later, has been incredibly forced into a difficult situation and is having to react more aggressively. But it has gotten to the point, and has become very clear in the last year and a half, that the majority of playing a good hand, winning this game of poker, understanding where things are going, involves much more being able to read that entity on the other side of the table. And that's something we've really gone to work on in the last nine months, really since you and I have talked, and spent a lot of time and energy trying to think about what is the administration and the government at large having to do, why, and what does that mean there? What are the reaction functions that proactive actions are going to be, because that is increasingly becoming the majority of understanding, unfortunately, where things are and where they are going in the next month, three months, six months, year, even two, five years.