On this week's Stansberry Investor Hour, Dan and Corey welcome Ben Hunt back to the show. Ben founded Epsilon Theory, a newsletter with more than 100,000 readers that examines markets through the lens of narrative. He's also the president and co-founder of Perscient, an AI research firm and software company.

Ben kicks things off by discussing the "credit polar vortex" that the U.S. is facing today. He says that all credit to the bottom 40% of the country has essentially been cut off, leaving companies in distress and everyday Americans in crisis. And he notes that financial crises are always born in the financial sector, so this is a problem no matter how well AI and tech stocks are doing. Ben goes in depth on how this looming crisis affects regional banks, and he compares what's happening now with what happened in 2007...

This is counterparty risk that always leads to people not putting money into the system. That's what happened in '07. That's what happened in '08. You didn't trust your counterparty. And that same thing is happening today... The players on Wall Street are saying, "I don't trust." And when trust fails, it goes bad really fast throughout the entire financial system... I think we've got a few more months before the next shoe drops.

Next, Ben talks about the Federal Reserve's role in all this and how it acts as a backstop for commercial banks. He points out that the alternative asset managers that don't have this backstop have been the ones making all the loans in the economy, so that's where the danger lies. This leads to a conversation about gold's usefulness as a safe haven, the potential for rampant inflation, and a few things that give Ben hope for the economic future, including manufacturing and reshoring. And he also covers the topic of energy generation in relation to AI and its possible damage to the economy...

I mean, we're talking [about] rolling brownouts so we can keep the AI data centers going... We're looking at, in the next couple years, a couple hundred terawatt-hours shortage [of electricity]. It's got to come from somewhere, right? We can either allocate it to the data centers, or we can allocate it to the real economy. And if we allocate to the data centers, all these problems that we're describing about the K-shaped economy, they all just get a lot worse.

Finally, Ben shares how his investing outlook has changed over the years, thanks to fundamentals taking a backseat in importance to storytelling and narratives. He emphasizes that fundamentals still matter, but what's happening with the story is a bigger factor in making money in the market. As he says, it's value versus valuation. Ben then explains how he finds these stories regardless of the sector and how to track them...

The trick is to identify where [we are] in the script. Where are we in the story arc? Which story is in heavy rotation? Which story is popular right now? Oil prices, right? There'll be periods of time where you'll see it in the media. The story is "What's OPEC doing? What's OPEC+ doing?" Then there'll be periods of time where the story around oil is "What's demand? What's the marginal demand coming out of China for oil?" And that's the story that drives [prices].

Click on the image below to watch the video interview with Ben right now. For the audio version, click "Listen" above.

(Additional past episodes are located here.)

The transcript is coming soon.

This Week's Guest

Ben Hunt is the president and co-founder of Perscient, an AI research firm and software company that pioneered the use of language models and unstructured data analysis for investment strategies. In 2013, he launched Epsilon Theory, a newsletter and website that examines markets through the lens of narrative. Epsilon Theory offers fresh perspectives and insights into market dynamics for its more than 100,000 readers.

Before Epsilon, Ben managed a billion-dollar hedge fund and served as chief strategist and chief risk officer for a $13 billion asset manager. He earned a PhD from Harvard University, was a tenured political-science professor, and has co-founded three technology companies.