Lehman vet Lawrence (Larry) McDonald issues a major DEFCON 3 warning on his 21 systemic risk indicators, predicting a “violent storm” of AI job destruction for the middle class. In this interview, recorded on September 10, 2025, The Bear Traps Report founder tells Kitco News’ Jeremy Szafron why your 401k has been “hijacked by AI” and reveals his full investing strategy for the crises he sees coming.
Larry McDonald argues that while the stock market celebrates all-time highs, a series of systemic crises are converging. He details the “Crisis of Confidence” in the bond market, where so-called ‘safe’ assets are in a historic rout; a “Crisis of Reality,” a deep disconnect between the AI hype and the physical constraints of the energy grid; and a “Crisis of Policy,” where a trapped Federal Reserve is being forced into a policy error by unsustainable government debt.
This is a must-watch interview for any investor seeking to navigate the stagflationary environment, the turning credit cycle, and the great rotation into hard assets like gold, silver, copper, and energy. Larry provides his latest trades, including why he’s selling major mining stocks and buying “beaten up” natural gas and coal names.
Guest: Lawrence (Larry) McDonald
Position: Founder, The Bear Traps Report
Bio: Larry McDonald is the New York Times bestselling author of “A Colossal Failure of Common Sense,” a former vice president of distressed debt and convertible securities at Lehman Brothers, and one of Wall Street’s most respected risk managers. His macro letter is followed by top hedge funds and sovereign wealth funds globally.
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00:00 – Intro
01:13 – The Real Inflation Data vs. The “Hammered” Consumer
03:39 – BREAKING: My Systemic Risk Indicators Just Hit “DEFCON 3”
07:14 – The Credit Time Bomb: “Contagion is Spreading”
11:25 – The REAL AI Trade: Short the Hype, Long the Plumbing
14:59 – The “Great 401k Hijacking”: Dark Side of Passive Investing
17:45 – How the S&P 500 is “Being Destroyed by Gaming”
18:18 – The AI Revolution Bifurcates: China vs. The US
19:47 – Why the “Sell China, Buy India” Trade Failed
20:21 – My Strategy for Copper and Gold
24:35 – My New Top Trades: “Beaten Up” Coal & Natural Gas
28:30 – Bitcoin vs. Gold: The “Pumpers and the Strippers”
29:42 – Final Predictions: “The Sky is the Limit for Copper”
#LarryMcDonald #Recession #Stagflation #AI #Nvidia #Gold #Silver #Copper #Investing #KitcoNews #CreditCrisis #401k
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The videos are not intended to provide trading advice, and the views expressed do not necessarily reflect those of Kitco Metals Inc. Kitco News, its anchors, producers, and reporters are not responsible in any way for the performance or actions of any sponsor, advertiser or affiliate of Kitco News. In no event will Kitco and its employees be held liable for any indirect, special, incidental, or consequential damages arising out of the use of the content in this video.
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44 Comments
A powerful discussion with Larry McDonald. He laid out a series of major warnings: a "DEFCON 3" systemic risk alert, a "violent storm" from AI job destruction, and a coming credit crisis.
The big question is: Which of these risks do you believe is the single biggest threat to your portfolio right now?
Just re-read "HOUSE OF CARDS" by William D. Cohan. The incredible greed and excess at Bear Stearns and Lehman Brothers that is detailed in this book is truly beyond belief. Executives at Bear Stearns making 60 million dollars a year plus bonuses!! The money changers' manipulation and hubris knows no limits. The hedge Funds run by Bear Sterns were basically criminal enterprises. When the collapse finally came in 2008 ALL of them walked away with NO consequences. They basically destroyed the American economy and ended up keeping their ill gotten gains. The Federal Reserve bailed them out , along with the collapsing financial system, at the expense of the average American. The original greed issue was never addressed and it's rearing it's ugly head again today. It's just a matter of time! The next collapse will incorporate current greed and excess combined with past issues that were never addressed. Much of the American public is clueless, while watching their TVs and concerned with the dysfunctional love lives of people like Taylor Swift. Stand by……..
Again President Dumbo
Bottom 60% elected this and should go to hell.
Larry has an amazing point about the gold – bitcoin ratio. He is right!
Boom. You ain’t got no money.😂😂😂😂😂
Nobody’s gonna stock up watch😂😂😂😂😂😂😂
I agree. Sell Bitcon and buy XRP.
Hard assets will suffer before bounch back. Hard assets demand qe to go higher and we are nowhere here.
Register the statement…markets pricing in sustained inflation. He is correct in this statement. But markets….are way wrong. Huge deflation ahead and…..then inflation
Walle, Walle > Wall-Stress
Well, don't tell that silly old Warren Buffett about this! He's got over $341 billion in the USD! No gold, no silver, etc. Can you believe it? What does he know?
Great interview. Larry should continue to write his theoretical books while the quants and practitioners continue to monitor the markets and stay nimble with their allocations. He should continue to liquify his positions, putting aside his rainy day USD funds for the "great puke" which BTW is a great characterization since everyone including Warren Buffet seems to be waiting for it), or pump up the titular gold asset whose price action has gone hyperbolic and central govts have almost stopped buying it.
Love the non stop doomsday talk. As long as this continues I keep buying – thx!
This guy is one of a kind, nice
DEFCON 2 to DEFCON 3 is a DOWNGRADE of threat assessment from 2nd most severe ("fast pace") to middle ("round house"). Did you mean DEFCON 4 to 3, or 3 to 2?
Thank you. Great information
😂😂😂
stagflation
just so you know if you go from defcon 2 to defcon 3 things are getting better … the lower the defon the worse
The worst the economy does, the better the markets will do. Don’t forget that.
Excellent interview.
FYI “Def Con 1” is scarier than “DefCon5”. The lower the number the more urgent the scenario.
Nothing will change.
Boneheaded comments
Bro you have seen nothing. Trump said HE WANTS PRIVATE EQUITY IN 401ks. RIP middle class.
Those over valued PE run companies in your portfolios will blow your 401k.
Great interview!
Bought Hecla at $8 🙌
Gold and silver bullets for the bear wolves😂
That's an award winning comb over.
The fed is giving money to the markets.That is why everything's gone wild.They have socialized the markets whenever a company gets in trouble.They give them money.That's the reason why the economy can be bad.But the market can be high
❤
I think this guy is full of 💩💩💩💩💩
Get to the facts
Don't talk about my anium
expensive energy in us? the biggest Bitcoinminer nation…. booom
GREED AND FOMO now in the driver's seat .
Riding the Bitcoin wave
Remember that there is no better hard than bitcoin. It beats the pants off gold and silver every single time.
Coal is still an expensive energy source compared to solar. So I'm not touching it.
Jeremy is a damn good interviewer!
100% in gold and silver junior ming sticks 🎉
3:34 AI ? Artificial Incompetence 😂
Interest rate junkies. 0.25% down pa. Stocks 10 % up per month 😂🤦