David Rosenberg: "Investors are Betting on a 1-in-20 Event"

00:56:16
https://www.youtube.com/watch?v=mh4Xale1f_A

Résumé

TLDRIn a discussion with Maggie Leggett, David Rosenberg, founder of Rosenberg Research, shares his analysis of the current financial markets. He expresses concern over the excessive pricing of U.S. equities, asserting that investor expectations regarding growth, particularly in light of advancements like AI, have been unrealistically optimistic. Rosenberg cautions against this overvaluation, arguing that U.S. equity investors have lengthened their investment horizons, potentially leading to disappointment. He instead favors treasury bonds, predicting that as the economy faces challenges, there will be a shift towards more conservative asset allocations, including cash. Rosenberg also emphasizes that fiscal policy is likely to be restrictive rather than stimulative under current conditions, further supporting his bullish stance on bonds. He acknowledges geopolitical risks and the overall uncertainty impacting the market but concludes that there are opportunities in undervalued sectors outside of the U.S. market, notably in Canada and Japan.

A retenir

  • 📈 The current equity market is overvalued, particularly in the U.S.
  • 💼 Investors should consider shifting focus towards bonds, especially treasuries.
  • ⚖️ Trump's trade and fiscal policies may lead to recessionary pressures.
  • 💡 He suggests maintaining cash reserves for financial flexibility.
  • 📉 Anticipated downward trend in inflation due to increased supply and economic factors.

Chronologie

  • 00:00:00 - 00:05:00

    The speaker discusses the current absurdity in market pricing driven by uncertainty surrounding Trump's actions, expressing a bullish sentiment on treasuries due to expected economic weakness and doubts regarding tax benefits from Trump.

  • 00:05:00 - 00:10:00

    David Rosenberg, founder of Rosenberg Research, shares his perspective on the uncertain economic outlook for 2025 and emphasizes the increased volatility and unpredictability involved in current market forecasting.

  • 00:10:00 - 00:15:00

    Rosenberg reflects on his previous bearish stance, indicating a reevaluation of the market dynamics, particularly regarding AI and innovation, acknowledging the potential for significant future growth in earnings despite potential overpricing in the market.

  • 00:15:00 - 00:20:00

    The conversation shifts to the historic nature of current market valuations, with Rosenberg highlighting how the market has priced in unrealistic future earnings growth expectations, recalling the dot-com bubble's surreal valuations during the late 1990s.

  • 00:20:00 - 00:25:00

    Despite acknowledging the promise of AI's productivity, Rosenberg warns that markets are currently pricing in an average of 20% earnings growth over the next five years, indicating a disconnect between stock prices and long-term historical earnings growth rates.

  • 00:25:00 - 00:30:00

    Rosenberg explains the relationship between equity risk premiums and the perception of volatility in equity markets, suggesting that the current perception of stocks as low risk may lead to complacency and potential shocks down the line.

  • 00:30:00 - 00:35:00

    Rosenberg shares insights on the bond market, addressing recent rising yields due to shifting expectations of Federal Reserve actions, comparing the current situation to historical trends in treasury yields and their economic implications.

  • 00:35:00 - 00:40:00

    The conversation touches on inflation concerns, with Rosenberg forecasting that inflation will ease due to various economic factors, leading to a potential environment of lowered interest rates and bolstered treasury performance over the year.

  • 00:40:00 - 00:45:00

    Rosenberg continues to express skepticism about Trump's economic policies, suggesting they may not generate the desired growth and could instead lead to economic contraction and heightened risks in capital markets.

  • 00:45:00 - 00:50:00

    Potential geopolitical risks are addressed, highlighting uncertainties with trade policies affecting not only the U.S. but also Canada, and reinforcing that global fallout could inadvertently contribute to domestic economic vulnerability.

  • 00:50:00 - 00:56:16

    The dialogue concludes with Rosenberg advocating for a diversification strategy that includes cash reserves and consideration of other asset classes such as gold, Japanese equities, and Canadian markets, contrasting with the prevailing focus on U.S. equities.

Afficher plus

Carte mentale

Vidéo Q&R

  • What does David Rosenberg think about the current equity market valuations?

    He believes the U.S. equity market is overvalued, with growth expectations excessively priced in.

  • What are Rosenberg's thoughts on Trump's policies?

    He views Trump's potential trade and fiscal policies as possibly recessionary and not beneficial for economic growth.

  • What investment strategy does Rosenberg suggest in the current market?

    He advocates for investing in bonds, particularly treasuries, and maintaining cash reserves.

  • Does Rosenberg believe inflation will continue to be a concern?

    No, he anticipates a downward trend in inflation, influenced by increased rental supply and other factors.

  • What sectors does Rosenberg find promising?

    He points to global aerospace, defense, healthcare, and undervalued regions like Canada and Japan.

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Défilement automatique:
  • 00:00:00
    uh I I think the markets are as
  • 00:00:01
    ridiculous pricing in one cut as they
  • 00:00:03
    were pricing at nine back in September
  • 00:00:06
    but I realize that a lot of this is just
  • 00:00:08
    uh you know risk management because we
  • 00:00:10
    don't know what Trump is going to do or
  • 00:00:11
    not do so basically I TI my hat to the
  • 00:00:14
    Bulls and I said um it could well be
  • 00:00:17
    that what's happened here is that us
  • 00:00:19
    Equity investors who have been long and
  • 00:00:21
    right that they probably have linken um
  • 00:00:24
    their investment Horizon and I guess
  • 00:00:26
    people think that Canada will just sit
  • 00:00:28
    down and take it you know once the ter
  • 00:00:30
    is on the trade war is on uh you can use
  • 00:00:33
    the trade tariff as a bargaining chip
  • 00:00:35
    but once it's done um Canada will hit
  • 00:00:37
    back I am bullish on treasuries because
  • 00:00:39
    I think that the economy is going to be
  • 00:00:41
    weak I don't think Trump is going to get
  • 00:00:44
    through uh the tax goodies that he wants
  • 00:00:46
    I I don't I I do not know what people
  • 00:00:49
    are looking at they they seem to think
  • 00:00:50
    that Trump has a magic wand
  • 00:01:00
    hi everyone I'm Maggie leg and today I'm
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    talking markets with David Rosenberg
  • 00:01:03
    founder and president of Rosenberg
  • 00:01:05
    research hi David it's great to see you
  • 00:01:07
    again yeah too Maggie Happy New Year to
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    you same same and I feel like we're
  • 00:01:12
    gonna kind of get shot out of a cannon I
  • 00:01:15
    don't know there's been a lot happening
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    even though we're like just getting
  • 00:01:18
    started the beginning of the trading
  • 00:01:19
    year but just give us a sort of reset
  • 00:01:22
    how are you feeling as you look ahead to
  • 00:01:25
    2025 what do you most focus on right now
  • 00:01:28
    well I I think that um
  • 00:01:30
    um we're all focused on how you uh
  • 00:01:34
    navigate uh your economic forecast and
  • 00:01:37
    your Investment
  • 00:01:39
    Portfolio in a complete bog of
  • 00:01:42
    uncertainty uh so um you know that's uh
  • 00:01:46
    that's why I think it's appropo you know
  • 00:01:48
    it's it's the Chinese year of uh the
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    wooden
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    snake which only happens every 60
  • 00:01:55
    years uh which is appropo because I
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    think that we're into uh
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    a bug of uncertainty that we probably
  • 00:02:03
    haven't seen in 60 years so uh I think
  • 00:02:06
    that uh you know that's the um the one
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    thing I will say in and I'm going to
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    asteris and caveat everything I'm going
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    to say and every forecaster uh should be
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    humble enough to realize that the error
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    term around any forecast for this year
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    is much wider than it's been in the past
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    and we have to acknowledge that yeah you
  • 00:02:28
    and you've been doing that in notes
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    really even when we spoke back in
  • 00:02:32
    October you could sort of see that you
  • 00:02:34
    were really doing some soul searching
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    and kind of so rebooting and and
  • 00:02:39
    figuring out you know whether you need
  • 00:02:42
    to change the way you're looking at
  • 00:02:43
    things and you've been kind of
  • 00:02:44
    cataloging that in your notes so do are
  • 00:02:48
    you even a bear anymore do we even call
  • 00:02:50
    you that everyone you know we know
  • 00:02:52
    famously jokes that you're a permit bear
  • 00:02:54
    I know you think you're not well
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    remember the the title of the report
  • 00:02:57
    they referring to was uh the lament of a
  • 00:02:59
    bear
  • 00:03:00
    uh so I didn't change the title to uh
  • 00:03:03
    you know um entering into the bull rink
  • 00:03:05
    okay it was it was an attempt and I
  • 00:03:08
    think you know we should all do that uh
  • 00:03:10
    in this um uh mugs game of a business uh
  • 00:03:14
    called uh economic and market
  • 00:03:16
    forecasting is uh to do an accounting I
  • 00:03:18
    guess the end of the year is always a
  • 00:03:20
    good time to do that and where you
  • 00:03:22
    missed a big call you know which I did
  • 00:03:24
    in the equity Market the US Equity
  • 00:03:26
    Market at least um to own up to it um I
  • 00:03:30
    never hide behind a rock I teach all my
  • 00:03:32
    staff that's not what you do you have to
  • 00:03:34
    own up to your bad calls and explain
  • 00:03:36
    what you missed and um whether or not
  • 00:03:39
    you're going to change course and if
  • 00:03:40
    you're not why and uh in that report U I
  • 00:03:44
    didn't offer any May aopa and I said
  • 00:03:47
    that explicitly and it didn't throw in
  • 00:03:48
    any towel it was really more um an
  • 00:03:52
    exercise and
  • 00:03:53
    responsibility responsibility and
  • 00:03:56
    accountability uh in terms of assessing
  • 00:03:59
    you know what went wrong with the call
  • 00:04:01
    in other words what is the market saying
  • 00:04:03
    or what is the market saying uh that I
  • 00:04:06
    wasn't
  • 00:04:07
    saying and so it's more what do you do
  • 00:04:10
    what do you do Maggie when you're out of
  • 00:04:12
    sync with a particular asset class
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    especially something as important as the
  • 00:04:15
    S&P
  • 00:04:16
    500 uh and so what do you do is you do
  • 00:04:19
    um some introspection uh and that's
  • 00:04:21
    really what it was it was uh my way of
  • 00:04:24
    explaining what happened in terms of the
  • 00:04:27
    Divergence between what I saw and what
  • 00:04:30
    the market did uh and then why I'm not
  • 00:04:34
    changing my opinion uh so basically I
  • 00:04:38
    tipped my hat to the Bulls and I said um
  • 00:04:40
    you know uh look it could well be that
  • 00:04:43
    what's happened here is that uh us
  • 00:04:46
    Equity investors who have been long and
  • 00:04:48
    uh and right uh that they probably have
  • 00:04:52
    lengthened um their investment Horizons
  • 00:04:55
    and that perhaps it's a situation where
  • 00:04:58
    12- month trailing and 12 blood forward
  • 00:05:00
    multiples um don't apply as much today
  • 00:05:03
    as they do in a normal cycle and when I
  • 00:05:05
    say a normal cycle I'm not talking about
  • 00:05:07
    but the uncertainty regarding um you
  • 00:05:09
    know Trump's uh immigration and trade
  • 00:05:12
    and fiscal policy I'm talking about uh
  • 00:05:15
    what happened with uh general of AI and
  • 00:05:18
    this uh tremendous shift in The
  • 00:05:19
    Innovation curve and uh of course people
  • 00:05:22
    came back and said to me well are you
  • 00:05:24
    some Johnny come lately and no we've
  • 00:05:26
    written a lot of reports on on the AI
  • 00:05:29
    Mania and I even had a a panel last year
  • 00:05:33
    in my webcast with some talked about it
  • 00:05:35
    at a conference yeah yeah that's right
  • 00:05:38
    uh and um I probably just
  • 00:05:41
    underestimated um the willingness and
  • 00:05:44
    the ability of the market to uh really
  • 00:05:48
    price in um you know a whole lot of
  • 00:05:51
    growth uh you know I I I would be the
  • 00:05:54
    first to say that uh yeah there are
  • 00:05:56
    going to be future productivity benefits
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    and the implications for uh corporate
  • 00:06:01
    cost reduction and uh profitability
  • 00:06:04
    coming out of uh this inflection point
  • 00:06:06
    in the technology curve and I'd be the
  • 00:06:08
    first to say that but it's really more
  • 00:06:10
    about the
  • 00:06:11
    magnitude so you know what's happened is
  • 00:06:14
    that and this is what I explained in my
  • 00:06:16
    report was that uh we went to a
  • 00:06:20
    situation where the market had gone
  • 00:06:23
    ahead and effectively discounted over
  • 00:06:26
    the next five years so I'm willing to go
  • 00:06:28
    beyond just 12- month tra 12 month
  • 00:06:31
    forward and uh willing to acknowledge
  • 00:06:34
    that markets have taken a longer term
  • 00:06:37
    view on this technology Revolution uh
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    and what they've done is taken the
  • 00:06:42
    five-year future EPS growth estimate all
  • 00:06:45
    the way up to
  • 00:06:47
    20% so the market is telling you that it
  • 00:06:49
    expects 20% earnings growth per year for
  • 00:06:52
    the next half decade which by the way
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    isn't
  • 00:06:54
    impossible it's happened 5% of the time
  • 00:06:57
    in the past Century but it is a one and
  • 00:06:59
    event and the last time it happened by
  • 00:07:01
    the way was during the internet wave uh
  • 00:07:04
    in the mid to late 1990s what hard to
  • 00:07:07
    assess is you know are we in 1996 are we
  • 00:07:10
    in 1997 or are we in 98 or
  • 00:07:13
    99 um but historically over fiveyear
  • 00:07:17
    intervals uh because profit growth is a
  • 00:07:19
    mean reverting series uh you tend to
  • 00:07:22
    average around 7% to 8% per year on a
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    five-year tagger you know compound
  • 00:07:28
    annualized growth rate and earnings and
  • 00:07:30
    we're about triple that right now in
  • 00:07:31
    terms of what is embedded so I was just
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    decided I'm not going to tell people
  • 00:07:36
    what to do I'm going to tell people this
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    is what the market is telling you it
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    expects this is the embedded valuation
  • 00:07:44
    on a five-year basis not one year not
  • 00:07:46
    two years fiveyear basis I have people
  • 00:07:49
    say to me oh I think that AI is going to
  • 00:07:51
    be so powerful uh that we're going to
  • 00:07:53
    get 30% earnings growth per year for the
  • 00:07:56
    next five years to which I say well then
  • 00:07:57
    this Market is for you yeah and then
  • 00:07:59
    when people say oh I didn't realize that
  • 00:08:01
    so much low term growth was priced in uh
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    I I'm more comfortable with 10 to 15%
  • 00:08:07
    and even that strong to which I say well
  • 00:08:09
    maybe you want to either uh you know
  • 00:08:11
    take chips off the table uh or protect
  • 00:08:14
    your portfolio in different ways uh from
  • 00:08:17
    the downside given that there might be
  • 00:08:18
    too much priced in so that was really um
  • 00:08:21
    what I what I did was um give to the uh
  • 00:08:25
    client base what the market is telling
  • 00:08:27
    you and then you decide whether you
  • 00:08:29
    agree or disagree with the market you
  • 00:08:31
    know for example something else was what
  • 00:08:33
    does it mean when the equity risk
  • 00:08:35
    premium is a
  • 00:08:37
    zero uh it means that the investors are
  • 00:08:40
    treating the equity Market as a riskless
  • 00:08:43
    asset it's putting the equity Market on
  • 00:08:45
    the same risk uh level as the treasury
  • 00:08:48
    bill Market uh of course treasury bills
  • 00:08:51
    have no duration risk they have no
  • 00:08:53
    Capital risk but the markets are telling
  • 00:08:55
    you when the Erp is zero that the Equity
  • 00:08:59
    Market has become a riskless asset class
  • 00:09:02
    now look if you are comfortable with
  • 00:09:04
    that if you're comfortable with the view
  • 00:09:06
    that the collection of companies in the
  • 00:09:08
    S&P of 100 the collection of stocks that
  • 00:09:10
    basically become zero beta if you
  • 00:09:13
    believe that then this Market is for you
  • 00:09:16
    if you believe that we're going to have
  • 00:09:17
    20% earnings growth for the next 5 years
  • 00:09:20
    average annual then this Market is
  • 00:09:23
    perfectly priced for you this Market is
  • 00:09:24
    for you not for me but for you so what I
  • 00:09:27
    try to do is just uh was just was just
  • 00:09:30
    diligently and eloquently in a cion way
  • 00:09:33
    try to outline what it is the market is
  • 00:09:35
    telling you I did not believe for a
  • 00:09:37
    second that we would get to this stage I
  • 00:09:39
    I knew that AI would be powerful I
  • 00:09:41
    didn't know it was going to be causing
  • 00:09:43
    investors to price in the same sort of
  • 00:09:45
    growth rates that we had back in the mid
  • 00:09:47
    to late 1990s now that didn't last but
  • 00:09:49
    generative AI uh is a you know is a new
  • 00:09:53
    very powerful application and the chips
  • 00:09:56
    needed for it and uh very powerful no
  • 00:09:58
    doubt about it uh but it is not the
  • 00:10:01
    internet I mean the Internet it's it's a
  • 00:10:03
    product of the internet like everything
  • 00:10:04
    else is the internet was like uh
  • 00:10:07
    electricity um but anyway uh I guess I
  • 00:10:11
    just
  • 00:10:12
    basically um underestimated uh you know
  • 00:10:16
    Bob Ferrell's uh rule number four which
  • 00:10:19
    is that exponentially Rising markets go
  • 00:10:22
    further than you think and this Market
  • 00:10:25
    went further than I thought but the
  • 00:10:27
    second part of Bob Federal SCH number
  • 00:10:28
    four is is that these sort of markets
  • 00:10:31
    don't end up correcting by going
  • 00:10:34
    sideways yeah yeah so at some point and
  • 00:10:37
    this is this is the battle that a lot of
  • 00:10:39
    people are I think going through
  • 00:10:41
    including listen everyone is I I think
  • 00:10:45
    you can say almost everyone has some
  • 00:10:48
    exposure to mag 7 right it's been the
  • 00:10:50
    whole market and I think a lot of people
  • 00:10:52
    are trying to figure
  • 00:10:53
    out is this going to end badly have we
  • 00:10:57
    baked in have we pulled forward all that
  • 00:11:00
    growth and and how does this play out
  • 00:11:02
    and what happens from here so how do you
  • 00:11:05
    how do you reconcile this this idea now
  • 00:11:08
    okay maybe this isn't irrational if the
  • 00:11:11
    the the sort of best case scenario plays
  • 00:11:13
    out with AI and it is this just magical
  • 00:11:16
    transformation versus we're out over our
  • 00:11:19
    skis already how do you make a
  • 00:11:20
    determination of that or how are you
  • 00:11:22
    telling people to try to approach that
  • 00:11:24
    question because it's almost impossible
  • 00:11:26
    to know right well you know we're we're
  • 00:11:30
    talking about stocks we're not talking
  • 00:11:32
    about
  • 00:11:34
    companies uh you know these companies
  • 00:11:36
    have real business models they have real
  • 00:11:38
    growth and real growth
  • 00:11:40
    prospects uh you know Nvidia is not a
  • 00:11:43
    doom but where these are great companies
  • 00:11:46
    uh but you know Cisco was a great
  • 00:11:48
    company intel was a great company IBM
  • 00:11:50
    was a great company Dell was a great
  • 00:11:52
    company intel was a great company and um
  • 00:11:54
    they all got caught up in that whole
  • 00:11:56
    internet Mania I mean we call it a dot
  • 00:11:59
    it was a broadly based um rally what we
  • 00:12:02
    used to call TMT back then
  • 00:12:05
    technology n right and so uh well but
  • 00:12:09
    some of those weren't great companies
  • 00:12:11
    the ones the ones that went under um but
  • 00:12:13
    companies like Cisco and Microsoft you
  • 00:12:16
    know these are bellweather technology
  • 00:12:18
    Giants uh with real business models uh
  • 00:12:21
    and um they were they went down for the
  • 00:12:23
    count and we're in the penley Bots for
  • 00:12:25
    about a decade right so we're not
  • 00:12:26
    talking about companies and who's going
  • 00:12:28
    to argue that the internet was a game
  • 00:12:29
    changer for everybody um who's going to
  • 00:12:32
    argue that but it didn't prevent the
  • 00:12:34
    markets from over
  • 00:12:37
    anticipating uh the growth that was
  • 00:12:38
    going to happen uh and then what happens
  • 00:12:41
    is the you have a reset now at that
  • 00:12:44
    point you also had tremendous overc
  • 00:12:45
    capacity being built up in uh fiber
  • 00:12:48
    optics and Telecom equipment and uh
  • 00:12:51
    wiring and so on and so forth and
  • 00:12:52
    there's no evidence that that's happened
  • 00:12:54
    just yet uh but like I said before um
  • 00:12:58
    we're building in to a situation where
  • 00:13:01
    the markets have discounted the growth
  • 00:13:04
    already uh and it's discounting already
  • 00:13:07
    a one and 120 event um so as far as I'm
  • 00:13:11
    concerned it's probably with no degree
  • 00:13:13
    of certainty because there's still so
  • 00:13:14
    many unknowns we don't even know how how
  • 00:13:16
    is AI even going to be
  • 00:13:18
    regulated um however I would say broadly
  • 00:13:21
    speaking and don't forget this has had
  • 00:13:23
    an impact uh throughout the entire stock
  • 00:13:26
    market uh because it's not just about AI
  • 00:13:29
    and it's not just about the chips uh
  • 00:13:32
    it's had a spreading impact throughout
  • 00:13:34
    the entire Market because everybody is
  • 00:13:37
    going to benefit from it this is going
  • 00:13:39
    to be a
  • 00:13:40
    major element of cost production and
  • 00:13:43
    productivity in the future it's not just
  • 00:13:45
    about the purveyors of AI uh technology
  • 00:13:48
    it's also about all the consumers of it
  • 00:13:50
    which will be everybody um so it's very
  • 00:13:53
    broadly based uh and I'm not going to
  • 00:13:55
    say that every sector or every region
  • 00:13:57
    for that matter shares the
  • 00:14:00
    um Dynamics when it comes to excessive
  • 00:14:03
    valuation uh my point was that if we
  • 00:14:07
    can acknowledge that investors have
  • 00:14:11
    lengthen their time Horizon yes then we
  • 00:14:15
    can look at Future growth embedded in
  • 00:14:18
    the stock market and it's not just the
  • 00:14:19
    mag 7 stocks the broad Market has 20%
  • 00:14:24
    and this is important Maggie because
  • 00:14:25
    everybody is buying index funds uh all
  • 00:14:28
    the 401 Cas or in these um or in these
  • 00:14:31
    passive index funds they're all linked
  • 00:14:33
    to the S&P 500 um so it's the overall
  • 00:14:37
    index uh and the overall index is priced
  • 00:14:40
    for 20% earnings growth per year for the
  • 00:14:43
    next five years like I said before
  • 00:14:45
    beauty is in the eye of the beholder
  • 00:14:46
    there's people that actually believe
  • 00:14:47
    that's going to happen to which I say
  • 00:14:49
    well then you should be comfortable
  • 00:14:51
    being in the stock market you see I'm
  • 00:14:52
    not there I I don't believe that it's
  • 00:14:54
    going to be that powerful that earnings
  • 00:14:56
    growth is going to be triple the
  • 00:14:57
    historical Norm over 5e period uh so I
  • 00:15:01
    just say that um you know that that the
  • 00:15:03
    ship is sailed what we going to tell
  • 00:15:06
    people we're going to tell people to go
  • 00:15:07
    long growth stocks and uh technology in
  • 00:15:12
    late 99 early 2000 that the ship sailed
  • 00:15:15
    there's no sense you know what are you
  • 00:15:17
    gonna do you're gonna you're gonna jump
  • 00:15:18
    in front of the steamroller to chase
  • 00:15:20
    nichels at this point so you know 100%
  • 00:15:23
    you know uh I I did miss that call I
  • 00:15:26
    made other calls uh that worked out very
  • 00:15:29
    well actually taking on less uh risk
  • 00:15:32
    risk adjusted Returns what people should
  • 00:15:34
    focus on uh people ultimately grade you
  • 00:15:37
    on your S&P 500 column now went to the
  • 00:15:39
    S&P 500 although a lot of my clients you
  • 00:15:41
    know that that's that's their domain
  • 00:15:43
    that's their life um but I I will say
  • 00:15:46
    that um no matter what metric you want
  • 00:15:48
    to look at um the stock market is just
  • 00:15:53
    too
  • 00:15:54
    expensive and you know price is what you
  • 00:15:57
    pay uh and and then it is a value that
  • 00:16:01
    what you end up getting uh so if you
  • 00:16:04
    want to take a look at a at a at a
  • 00:16:06
    real valuation metric uh that looks at
  • 00:16:09
    valuations over 10e Cycles uh go to the
  • 00:16:12
    cape you know the Schiller uh cly
  • 00:16:16
    adjusted price earnings multiple um and
  • 00:16:19
    it's 37 right now uh the last time we
  • 00:16:22
    went into any year with a 37 multiple
  • 00:16:25
    was uh well was 2022 well we know what
  • 00:16:28
    happened next
  • 00:16:29
    nobody anticipated a 30% draw down that
  • 00:16:33
    year in cyclical stocks and before that
  • 00:16:36
    you got to go back to
  • 00:16:38
    2001 so we have a situation where
  • 00:16:41
    looking at the cape which is something
  • 00:16:43
    that I look at and it's not a it's not a
  • 00:16:45
    market timing tool but I'm not a market
  • 00:16:47
    timer everybody thinks they can time the
  • 00:16:49
    market uh it's like hitting a hole in
  • 00:16:51
    one in Gulf maybe if you're lucky it'll
  • 00:16:53
    happen once in your lifetime but we are
  • 00:16:56
    in the top 3%
  • 00:17:00
    EV valuations and the cape goes back to
  • 00:17:02
    1921 there's no valuation metric that
  • 00:17:05
    has that rich a Time series we're in the
  • 00:17:07
    top 3% Maggie that is a 2.3 standard
  • 00:17:12
    deviation you know the only 2.3 standard
  • 00:17:15
    deviations that I will ever invest in is
  • 00:17:18
    uh in the other direction when the SV of
  • 00:17:21
    100 price is multiple is like eight back
  • 00:17:23
    in the summer of
  • 00:17:25
    1982 so went back in the history and
  • 00:17:29
    found that if you have five or 10 year
  • 00:17:31
    investment Horizons when the starting
  • 00:17:33
    point is
  • 00:17:34
    37 on the cape
  • 00:17:37
    multiple uh the forward returns and it's
  • 00:17:41
    the only time when you're over 35 on the
  • 00:17:43
    cape it's the only trunch out of all the
  • 00:17:45
    tranches where your future returns three
  • 00:17:48
    threee fiveyear 10 year that are
  • 00:17:50
    negative now maybe that's not going to
  • 00:17:52
    help you if you're thinking what am I
  • 00:17:54
    going to do next week or next month or
  • 00:17:56
    next quarter but there's a lot of uh
  • 00:17:58
    penion funds and Sovereign wealth funds
  • 00:18:00
    and family offices that do have five and
  • 00:18:03
    10 year Horizons yeah and we a 37 think
  • 00:18:07
    about a 37 a 37 Cape
  • 00:18:12
    multiple so no I'm not going to
  • 00:18:15
    invest this way in a two plus standard
  • 00:18:18
    deviation event um people can argue that
  • 00:18:21
    well you you could have said that last
  • 00:18:23
    year but last year the multiple was uh
  • 00:18:27
    uh mobile lower is today like we're
  • 00:18:29
    really in nosebleed territory and
  • 00:18:31
    there's a lot of growth priced in I you
  • 00:18:33
    know and then we have to ask ourselves
  • 00:18:34
    the question why is Warren Buffett
  • 00:18:36
    sitting on 30% cash and he's being
  • 00:18:39
    laughed at he's being laughed at like he
  • 00:18:41
    was laughed at back in the late 1990s
  • 00:18:43
    when he was being called a lite and
  • 00:18:45
    didn't understand technology but he's
  • 00:18:47
    never been a 30% cash before and of
  • 00:18:50
    course the market is ripped in his face
  • 00:18:52
    just like it's ripped in my face um but
  • 00:18:56
    both of us will be there and pick up the
  • 00:18:58
    piece because we're going to have the
  • 00:18:59
    liquidity uh when that time comes of
  • 00:19:02
    course I think he'll he'll move the
  • 00:19:03
    market more than I will so let me ask
  • 00:19:06
    you David so people and I and I think
  • 00:19:07
    there are a lot of people who share this
  • 00:19:09
    concern who've watched the gains and
  • 00:19:11
    think you know it feels like um we're
  • 00:19:14
    overextended and I'm worried about my
  • 00:19:16
    Equity exposure let's talk about bonds
  • 00:19:18
    for a moment because you know
  • 00:19:21
    traditionally that would be an asset
  • 00:19:22
    class people would look to uh but as we
  • 00:19:25
    speak us bond yields are moving higher
  • 00:19:28
    what what what what's happening with
  • 00:19:29
    bonds what are you seeing
  • 00:19:32
    there it's um all reflected in the um
  • 00:19:38
    shifting expectation of what the fed's
  • 00:19:40
    going to be doing and what's happening
  • 00:19:42
    right now is we are
  • 00:19:44
    replaying what happened in the opening
  • 00:19:46
    months of
  • 00:19:48
    2024 now if you remember we Peak at 5%
  • 00:19:51
    in the 10-year treasury note yield back
  • 00:19:54
    in October of
  • 00:19:57
    2023 and then the 10-year note went from
  • 00:20:00
    5% and by late December of 2023 we were
  • 00:20:04
    at 3.8% we went down 120 basis points
  • 00:20:08
    and that was even in the face of a
  • 00:20:10
    cumulative deficit of the time of over
  • 00:20:11
    $500 billion for all the people to say
  • 00:20:14
    well it's all about fiscal policy we had
  • 00:20:16
    treasury Supply up the wo in that
  • 00:20:18
    three-month period the 10-year note
  • 00:20:20
    yields went down 120 basis points
  • 00:20:23
    October
  • 00:20:24
    2023 to December
  • 00:20:27
    2023 and what Happ happened was that uh
  • 00:20:29
    the FED started talking doish Le and the
  • 00:20:32
    market started pricing in fed Ray
  • 00:20:35
    Cuts now what happened was
  • 00:20:38
    that exactly this time last year we got
  • 00:20:41
    a couple of hot CPI PC deflator core
  • 00:20:44
    inflation prints a lot of that was in
  • 00:20:46
    health insurance and auto insurance and
  • 00:20:49
    uh the rents were not behaving very well
  • 00:20:52
    and Powell sort of pulled back on
  • 00:20:55
    publicly on his comfort level on this
  • 00:20:59
    inflation uh and so he caused the
  • 00:21:01
    markets to price out the FED uh the
  • 00:21:05
    markets went ahead and priced in a lot
  • 00:21:06
    of fed easing at the end of 2023 and
  • 00:21:09
    they were forced by all the forward
  • 00:21:11
    guidance out of the FED to pull back
  • 00:21:13
    that expectation so the next thing you
  • 00:21:15
    know uh we go from the 3.8% low in the
  • 00:21:19
    10-year note in late December 2023 and
  • 00:21:22
    by April 2024 this is only in the short
  • 00:21:24
    span of three or four months uh we're
  • 00:21:27
    back to 4.7 % about where we are right
  • 00:21:30
    now so we went back up uh 90 basis
  • 00:21:33
    points in short order did the world
  • 00:21:35
    change in three months Maggie that the
  • 00:21:37
    world change no what changed was what's
  • 00:21:40
    the FED going to do and the market pull
  • 00:21:42
    back those easing expectations so we're
  • 00:21:45
    just reliving history and not history of
  • 00:21:47
    a long time ago history of a year ago so
  • 00:21:49
    here we are and we go all the way down
  • 00:21:52
    to uh 3.65% of the 10year note around
  • 00:21:56
    the time of the September meeting of
  • 00:21:58
    last
  • 00:21:59
    year and uh the uh the FED is talking
  • 00:22:04
    doish and the fed's telling us they're
  • 00:22:06
    going to be cutting rates four times uh
  • 00:22:10
    this year uh the market goes ahead and
  • 00:22:12
    prices a nine rate Cuts so it was a case
  • 00:22:15
    of the markets FR running the
  • 00:22:17
    FED uh and um that was what happened
  • 00:22:20
    back at the
  • 00:22:22
    3.65% lows on the 10-year treasury yield
  • 00:22:26
    last
  • 00:22:27
    September thek markets are pricing in
  • 00:22:29
    nine R Cuts nine R cuts for this year
  • 00:22:33
    and the FED says no that's not going to
  • 00:22:35
    happen and they stuck with four and then
  • 00:22:37
    at the December meeting they went down
  • 00:22:39
    to two and now the market is basically
  • 00:22:42
    priced for about one R cut and not fully
  • 00:22:45
    priced in till September so the most
  • 00:22:48
    important determinant for yields out the
  • 00:22:50
    curve is expectations of fed policy
  • 00:22:53
    that's why the FED matters and in this
  • 00:22:56
    case it's not a a matter of
  • 00:22:59
    action it's a matter of words because
  • 00:23:01
    the fence cut rates 100 basis points um
  • 00:23:04
    you know since the the jumbo cut in
  • 00:23:07
    September uh and the yields have only
  • 00:23:09
    gone up and the average interest rate in
  • 00:23:12
    the private sector households of
  • 00:23:13
    businesses since the jumbo cut in
  • 00:23:16
    September the average interest in the
  • 00:23:18
    private sector has gone up 70 basis
  • 00:23:20
    points yeah normally when the FED Cuts
  • 00:23:22
    rates under basis points and say a three
  • 00:23:23
    or four month span the average interest
  • 00:23:26
    rate in the private sector which is what
  • 00:23:27
    matters goes down 70 basis points this
  • 00:23:30
    time around they've gone up 70 basis
  • 00:23:32
    points people don't realize that there's
  • 00:23:33
    actually been a considerable tightening
  • 00:23:35
    in overall Financial conditions when you
  • 00:23:37
    consider what the average funding cost
  • 00:23:39
    has been people say the feds cut
  • 00:23:40
    interest rates for who they've cut the
  • 00:23:43
    funds rate who borrows the funds rate
  • 00:23:46
    you don't borrow the funds rate I don't
  • 00:23:47
    borrow the funds rate Banks borrow the
  • 00:23:49
    funds rate in the overnight Market what
  • 00:23:51
    matters is what's the transmission
  • 00:23:53
    mechanism from fed policy uh to interest
  • 00:23:56
    rates in the broader economy they have
  • 00:23:58
    gone up uh significantly and that's
  • 00:24:01
    probably one of the reasons why the
  • 00:24:02
    stock market of late um has been
  • 00:24:04
    struggling because let's face it the S
  • 00:24:06
    of 100 first hit 6,000 you know people
  • 00:24:10
    are still talking about uh the bull
  • 00:24:12
    market as if it's
  • 00:24:14
    present but we hit 6,000 on the S&P 500
  • 00:24:17
    for the first
  • 00:24:19
    time the week after the election the
  • 00:24:22
    week after the
  • 00:24:23
    election and we've just been flooding
  • 00:24:26
    around ever since uh range trading in a
  • 00:24:30
    classic what I think a technical analyst
  • 00:24:32
    would say a classic topping
  • 00:24:34
    formation so uh so so so just to just to
  • 00:24:38
    go back I I do think I think that this
  • 00:24:39
    is going to be the last time we got the
  • 00:24:41
    4.7% on the 10year
  • 00:24:44
    note was uh in April of last year and
  • 00:24:48
    you threw on the towel on bonds then was
  • 00:24:49
    a big mistake because we we went down
  • 00:24:51
    more than 100 basis points in the next
  • 00:24:53
    six months uh I think that the Market's
  • 00:24:56
    way overd at pricing in nine cuts since
  • 00:24:58
    September and we swung the
  • 00:25:00
    pendulum completely the other way by
  • 00:25:03
    pressing in just one Ray cut because
  • 00:25:06
    they're in my opinion on a snowball
  • 00:25:07
    chance in hell that the FED can not
  • 00:25:12
    bring the funds rate to even its
  • 00:25:13
    estimate of neutral which is around 3%
  • 00:25:16
    I'm lower than that they will bring the
  • 00:25:19
    funds rate to neutrality the equilibrium
  • 00:25:23
    rate because I do believe that the
  • 00:25:24
    unemployment rate will be drifting
  • 00:25:26
    higher uh I think it's going to get to 4
  • 00:25:29
    and a half% um by March remember the
  • 00:25:32
    fed's forecast for the end of the year
  • 00:25:35
    is
  • 00:25:36
    4.4 uh and uh I think that there's going
  • 00:25:39
    to be a lot of downward momentum on the
  • 00:25:41
    inflation side a lot of that coming from
  • 00:25:43
    rents and the fact that the boomman
  • 00:25:45
    insurance costs looks to be in the
  • 00:25:47
    rearview mirror uh the strong dollar and
  • 00:25:50
    the action and commodity markets
  • 00:25:51
    probobly speaking we look at base metals
  • 00:25:53
    and look at
  • 00:25:54
    textiles um you know oil is just
  • 00:25:57
    basically a natural gas have been range
  • 00:25:59
    trading I think that the surprise on
  • 00:26:01
    inflation because that's all I hear
  • 00:26:02
    about is inflation angst once again
  • 00:26:04
    inflation anxiety this debate will just
  • 00:26:06
    not die down no matter what um but what
  • 00:26:09
    people are ignoring is the fact we have
  • 00:26:11
    a massive pipeline of Rental Supply
  • 00:26:14
    coming into the market this year and
  • 00:26:15
    finally we're starting to see the
  • 00:26:17
    deflation and rents in real time
  • 00:26:19
    starting to populate the CPI and the PC
  • 00:26:21
    deflator I think those prices will be
  • 00:26:24
    how far down inflation goes in the next
  • 00:26:26
    year so I think in a minimum minimum and
  • 00:26:29
    this is just logic that the FED is going
  • 00:26:31
    to get to neutral and if they go down to
  • 00:26:33
    3% on the funds rate and I think there's
  • 00:26:36
    a chance it could go lower I think the
  • 00:26:38
    markets are as ridiculous pricing in one
  • 00:26:41
    cut as they were pricing in nine back in
  • 00:26:43
    September but I realize that a lot of
  • 00:26:45
    this is just uh you know risk management
  • 00:26:48
    because we don't know what Trump is
  • 00:26:49
    going to do or not do uh but if we get
  • 00:26:52
    down just to neutral that's your base
  • 00:26:54
    case neutral and how many easing Cycles
  • 00:26:56
    end with the funds rate above neutal
  • 00:26:58
    Neal not too many well yield curve
  • 00:27:01
    Dynamics would take the 10year no yield
  • 00:27:03
    by two or below 4% and from 460 470
  • 00:27:07
    right now you go down back to 4% we were
  • 00:27:10
    just there not too long ago that's going
  • 00:27:12
    to be more than a 10% Total return for
  • 00:27:14
    the 10year treasury and that's actually
  • 00:27:15
    my highest conviction call for the year
  • 00:27:17
    your bullish treasuries oh I don't mind
  • 00:27:19
    being uh out of consensus at all uh and
  • 00:27:24
    uh I'm naturally a contrarian investor
  • 00:27:27
    um so yeah am I am bullish on treasuries
  • 00:27:30
    because I think that the economy is
  • 00:27:31
    going to be weak I don't think Trump is
  • 00:27:34
    going to get through the tax goodies
  • 00:27:36
    that he wants I think that I don't I I
  • 00:27:39
    do not know what people are looking at
  • 00:27:41
    they they seem to think that Trump has a
  • 00:27:43
    magic wand uh he does in some respects
  • 00:27:46
    he could do in trade policy and tariffs
  • 00:27:48
    whatever he wants of course he could
  • 00:27:50
    ignite a global trade War I don't think
  • 00:27:52
    other countries are going to said i'
  • 00:27:53
    leave by uh he puts a 25% tariff on
  • 00:27:56
    Canada the premier of onario said go
  • 00:27:59
    ahead and do that President Trump and we
  • 00:28:01
    will cut off your electricity uh Canada
  • 00:28:03
    is a major exporter of electricity
  • 00:28:05
    natural gas oil and critical minerals to
  • 00:28:08
    the United States not well known um and
  • 00:28:11
    I guess people think that Canada will
  • 00:28:13
    just sit down and take it but I don't
  • 00:28:14
    think that I don't think they will
  • 00:28:15
    because it's you know once the Tariff is
  • 00:28:17
    on the trade war is on uh you can use
  • 00:28:21
    the trade tariff as a bargaining chip
  • 00:28:23
    but once it's done um Canada will hit
  • 00:28:26
    back and I think there'll be a lot of
  • 00:28:28
    industry push back um so that leads us
  • 00:28:31
    to the realm of the unknown and maybe
  • 00:28:33
    the FED just sit back because there's
  • 00:28:34
    going to be all sorts of different
  • 00:28:35
    counterveiling forces in the interim the
  • 00:28:38
    recession nobody sees coming actually
  • 00:28:40
    comes because this will be a significant
  • 00:28:42
    shock obviously more to Canada uh but
  • 00:28:45
    Canada is still an economy that's not
  • 00:28:48
    the same size as the us but it is the
  • 00:28:50
    same size as California and I can tell
  • 00:28:52
    you that the California went in a
  • 00:28:54
    recession the rest of the US would go
  • 00:28:56
    into a recession okay so uh there's all
  • 00:28:58
    these spin-off effects and Domino
  • 00:29:01
    effects um Canada could actually have a
  • 00:29:03
    detrimental impact on the US economy so
  • 00:29:05
    I but who knows what Trump's going to do
  • 00:29:07
    he so
  • 00:29:08
    unpredictable um that remains a big
  • 00:29:11
    unknown um but I would say that I have a
  • 00:29:14
    different inflation view than most
  • 00:29:17
    others uh I think there's a whole
  • 00:29:19
    industry of people out there that just
  • 00:29:20
    make it their business to forecast
  • 00:29:22
    inflation no know when we do a bottom up
  • 00:29:24
    and top down view on inflation the trend
  • 00:29:26
    is going to be down I think the will be
  • 00:29:28
    surprised I think the FED did its risk
  • 00:29:30
    management I think it deliberately
  • 00:29:33
    implemented its own view of what tariffs
  • 00:29:35
    are going to look like when they went
  • 00:29:38
    from 2.2 to
  • 00:29:39
    2.5% on the core inflation forecast for
  • 00:29:42
    the end of this year I think we're going
  • 00:29:44
    to be below 2% on core inflation and uh
  • 00:29:49
    they're at 4.4 on the unemployment rate
  • 00:29:52
    I think we're going to be well above
  • 00:29:54
    that by the end of the year so you know
  • 00:29:57
    this is a me I live in a world you know
  • 00:30:00
    my industry is such that your
  • 00:30:01
    assumptions drive your conclusions so
  • 00:30:03
    people say to me you put 10 economists
  • 00:30:04
    in a room they all have different
  • 00:30:06
    forecast what's going on well because
  • 00:30:08
    the assumptions are different my
  • 00:30:10
    assumption is the economy is going to be
  • 00:30:12
    soft my assumption is that inflation is
  • 00:30:14
    going to go down my forecast is that my
  • 00:30:18
    assumption is that the labor market is
  • 00:30:19
    going to be loosening why would they be
  • 00:30:21
    bearish on on bonds and if people say
  • 00:30:24
    well we'll look at the fiscal side well
  • 00:30:26
    with all due respect you know when had
  • 00:30:28
    that Monumental rally in the 10-year
  • 00:30:30
    treasury note yield from April of last
  • 00:30:33
    year uh to September and and it was
  • 00:30:36
    almost uh it was a 100 basis point
  • 00:30:38
    meltdown in treasury yields uh we had a
  • 00:30:41
    trillion dollar cumulative fiscal
  • 00:30:43
    deficit
  • 00:30:45
    deficits have a 20%
  • 00:30:47
    correlation with the direction of
  • 00:30:49
    Treasury yields it's not
  • 00:30:51
    zero but the direction of fed policy has
  • 00:30:53
    a 90% 90% correlation with where
  • 00:30:57
    Treasury are going and that's actually
  • 00:30:59
    been most of this story have five year
  • 00:31:01
    fiveyear forwards moved uh since
  • 00:31:03
    September no uh we've had hardly any
  • 00:31:05
    movement whatsoever in five or 10 year
  • 00:31:07
    inflation break evens from the tips
  • 00:31:09
    Market it's been all about the term
  • 00:31:11
    premium as the markets reset to a more
  • 00:31:14
    hawkish fed now the one thing I think
  • 00:31:17
    that separates my view from everybody
  • 00:31:19
    else is I don't think there's going to
  • 00:31:20
    be fiscal stimulus this year uh and I
  • 00:31:23
    don't know what people are looking at I
  • 00:31:24
    mean Mike Johnson barely got the gavel
  • 00:31:28
    by a handful of votes uh we have what
  • 00:31:31
    does he have he's a a one- seat majority
  • 00:31:33
    in the house well the Bill's got to Pure
  • 00:31:35
    the house there's there's nothing I mean
  • 00:31:38
    it could be called the bully pulpit in
  • 00:31:40
    the in the Oval Office that much is true
  • 00:31:42
    but you have more than 30 Freedom caucus
  • 00:31:45
    members who really don't give a damn and
  • 00:31:49
    they are not going to be sending on to
  • 00:31:50
    any tax reduction Bill absent absent
  • 00:31:55
    spending restraint which is where maybe
  • 00:31:57
    Elon mus is going to come into the
  • 00:31:59
    picture so I actually think that for the
  • 00:32:01
    first time in a decade first time in a
  • 00:32:03
    decade what's going to make this year
  • 00:32:06
    different uh is going to be that it's
  • 00:32:08
    going to be a year of fiscal drag not
  • 00:32:11
    fiscal stimulus so people don't realize
  • 00:32:13
    that half the growth in the economy the
  • 00:32:14
    cycle the American exceptionalism as
  • 00:32:16
    it's called half the
  • 00:32:19
    growth has come directly and indirectly
  • 00:32:21
    from Uncle Sam's
  • 00:32:23
    generosity yeah you can buy growth uh
  • 00:32:26
    through six % plus deficit GDP ratios as
  • 00:32:30
    as long as that's going to last but
  • 00:32:33
    that's been the story that's been the
  • 00:32:34
    story for the the American
  • 00:32:35
    exceptionalism Americans has always been
  • 00:32:37
    exceptional I love the fact that people
  • 00:32:39
    have to take a phrase or take a
  • 00:32:41
    narrative to fit to the price action us
  • 00:32:44
    exceptionalism when was the US not
  • 00:32:46
    exceptional you know so uh it's
  • 00:32:49
    basically what's what makes the US
  • 00:32:52
    economy with the
  • 00:32:54
    illusion of stronger growth than
  • 00:32:56
    everybody else in the world is everybody
  • 00:32:58
    else in the world is running deficits of
  • 00:33:00
    3% of
  • 00:33:01
    GDP and America the Bastion of
  • 00:33:03
    capitalism is running deficits north of
  • 00:33:05
    6% in GDP that's been the story but I
  • 00:33:08
    think I think that comes to an end this
  • 00:33:09
    year so you you said you think that uh
  • 00:33:13
    you are you are different in that you
  • 00:33:14
    think that Trump policies both trade and
  • 00:33:19
    fiscal are actually potentially
  • 00:33:21
    recessionary or a dragon growth and
  • 00:33:25
    instead of instead of inflationary
  • 00:33:27
    because that's what everyone worried
  • 00:33:28
    about right tariffs will be inflationary
  • 00:33:30
    growth going to be off the charts that's
  • 00:33:31
    going to be inflationary they're going
  • 00:33:32
    to spend like crazy that's inflationary
  • 00:33:34
    you see it as having a dampening effect
  • 00:33:36
    well firstly you could have both uh and
  • 00:33:39
    that's when people will talk about the
  • 00:33:40
    stat inflation risk I think that the
  • 00:33:44
    tariffs will be an immediate price
  • 00:33:47
    shock uh the question is who's going to
  • 00:33:50
    Bear the brunt uh will it be the foreign
  • 00:33:53
    producer will it be the domestic
  • 00:33:55
    importer will it be the consumer the
  • 00:33:58
    will be shared uh and
  • 00:34:01
    so it's a penalty let me ask you a
  • 00:34:03
    question we're talking about treasuries
  • 00:34:05
    relative to fiscal policy in the US but
  • 00:34:08
    uh people have been pointing out uh that
  • 00:34:10
    it's not just the US that Global bond
  • 00:34:12
    yields are rising and um Brent Donnelly
  • 00:34:15
    if any of you follow him in his note
  • 00:34:17
    this morning um pointed out that UK
  • 00:34:19
    30-year is at its high since 1998 um
  • 00:34:23
    ours is high Japan's tenure is the
  • 00:34:25
    highest since 2011 why Global is it a
  • 00:34:28
    global situation that people are overly
  • 00:34:30
    worried about inflation or getting the
  • 00:34:32
    inflation story wrong is it concerns
  • 00:34:34
    about debt are what are investors
  • 00:34:36
    worried about why do we see This Global
  • 00:34:39
    rise in yields well I guess everywhere
  • 00:34:42
    except for China um but the just as
  • 00:34:48
    um you know in in glob what's the leader
  • 00:34:52
    in terms of global Equity Market
  • 00:34:54
    sentiment is thep f00 everybody keys off
  • 00:34:57
    the
  • 00:34:58
    when it's the global bond market
  • 00:34:59
    everybody keys off the 10year treasury
  • 00:35:02
    right so it's influencing so it's really
  • 00:35:04
    this this this you know this all started
  • 00:35:07
    with the radical shift in fed
  • 00:35:10
    expectations and and it'll end uh in the
  • 00:35:13
    same way that it did uh last year uh so
  • 00:35:17
    I would say that uh you know who's the
  • 00:35:20
    you know the there's the dog in the tail
  • 00:35:22
    uh but the it it you know you have the
  • 00:35:27
    ECB meetings sure you got the bank of
  • 00:35:29
    England meetings you got the bank Canada
  • 00:35:31
    meetings the B
  • 00:35:33
    meetings does anything
  • 00:35:36
    stop does anything stop like how they
  • 00:35:39
    stop on fomc meeting days you know you
  • 00:35:44
    can't you know I I could walk on a
  • 00:35:46
    trading floor and uh and um you know I I
  • 00:35:52
    will not see at an ECB meeting I I'll
  • 00:35:55
    I'll walk by the trading floor and on
  • 00:35:57
    the TV I might not see Christie lagard
  • 00:35:59
    okay but I'll tell you something on fomc
  • 00:36:02
    day uh on the second day of the meeting
  • 00:36:05
    when Jay Powell is at the podium uh at
  • 00:36:08
    2:30 in the afternoon everybody's TV is
  • 00:36:10
    on so the the the the you know this is
  • 00:36:14
    this is part of the American
  • 00:36:15
    exceptionalism everything keys off the
  • 00:36:17
    S&P 500 and everything in fixed income
  • 00:36:20
    keys off the 10e
  • 00:36:21
    traditional so if we see a situation
  • 00:36:23
    where Bond bond yields are falling
  • 00:36:26
    prices are rising
  • 00:36:28
    uh what does that mean for equities can
  • 00:36:30
    equities also hang in in the face of a
  • 00:36:32
    recession will they pay more attention
  • 00:36:34
    to the lower yields that had been the
  • 00:36:35
    case for a while or again does that does
  • 00:36:38
    the threat of recession put equities at
  • 00:36:41
    risk us equities well you know waiting
  • 00:36:43
    for the recession is like it's like a
  • 00:36:46
    classic case of waiting for godo uh it
  • 00:36:48
    hasn't happened and nobody thinks it's
  • 00:36:50
    going to happen I almost feel like I'm
  • 00:36:52
    back in uh 1989 and uh 2000 and 2007 you
  • 00:36:57
    know we waited for the recession didn't
  • 00:36:59
    come let's move on and then next thing
  • 00:37:01
    you know you get hit by a
  • 00:37:03
    2x4 um no if you if you have a recession
  • 00:37:06
    if you have a recession two things
  • 00:37:08
    always happen Bond yelds go down and
  • 00:37:10
    Equity prices go down in every recession
  • 00:37:14
    uh you get a you know you get earnings
  • 00:37:17
    contraction uh and you get a because of
  • 00:37:20
    the uncertainty that
  • 00:37:22
    recessions um uh in gender then you get
  • 00:37:27
    a fight to safety and you get a
  • 00:37:29
    reduction of the demand for credit and
  • 00:37:31
    the FED Cuts interest rates so
  • 00:37:34
    treasuries rally Equity prices go down
  • 00:37:38
    this happened in every single recession
  • 00:37:39
    1981 82 1990 91 uh 2001 2002 uh 200 and
  • 00:37:47
    uh8 no9 uh they go down together and
  • 00:37:51
    then at some point uh the clouds part
  • 00:37:54
    and uh the stock market gets to a
  • 00:37:56
    ridiculously keep uh Point uh and it's
  • 00:38:00
    time to do the asset mix the other way
  • 00:38:02
    but recessions have that constant
  • 00:38:04
    Dynamic there's one thing that is just a
  • 00:38:07
    truism that Bond deals and Equity prices
  • 00:38:10
    go down together in recessions um but
  • 00:38:13
    typically they will bot them before the
  • 00:38:14
    recession
  • 00:38:16
    ends so you don't you so even though
  • 00:38:18
    you've sort of taken a look and and sort
  • 00:38:22
    of done an inventory about the equity
  • 00:38:24
    situation and sort of changed how you're
  • 00:38:27
    thinking about Market expectations it
  • 00:38:30
    doesn't sound like you've changed your
  • 00:38:31
    thoughts on on the recession even though
  • 00:38:34
    it hasn't been showing up why is that
  • 00:38:36
    because you you don't think there'll be
  • 00:38:37
    the fiscal spending that was in place
  • 00:38:39
    before that prevented it what why would
  • 00:38:43
    you change your sort of thinking a
  • 00:38:45
    little bit on stocks and what's driving
  • 00:38:47
    expectations there but not on the
  • 00:38:49
    economy because I I think that um
  • 00:38:52
    interest rates in a credit driven
  • 00:38:54
    economy matter a lot um but the lags
  • 00:38:57
    could be very long the lags were very
  • 00:38:59
    long in that cycle when I was at mother
  • 00:39:02
    Merill uh when everybody was saying
  • 00:39:04
    where's this recession already in 2007
  • 00:39:07
    but what got in the way of all the um
  • 00:39:09
    interest rate increases that greenpan
  • 00:39:11
    and beri put into the system uh was that
  • 00:39:14
    people were still managing to extract um
  • 00:39:17
    uh home equity to sustain their
  • 00:39:19
    consumption uh and uh they did that
  • 00:39:22
    until they couldn't do it anymore and
  • 00:39:23
    this time
  • 00:39:24
    around uh it's been uh the excess
  • 00:39:28
    savings file which was much more
  • 00:39:30
    powerful than I
  • 00:39:31
    thought uh that those stimulus checks
  • 00:39:34
    the two trillion that were given to
  • 00:39:36
    anybody with a pulse back in the winter
  • 00:39:39
    of uh of
  • 00:39:41
    2021 uh that had a lingering impact that
  • 00:39:44
    money couldn't be spent all at once and
  • 00:39:47
    it was the gift that kept on giving on
  • 00:39:49
    top of that it's uh been the fiscal
  • 00:39:51
    stimulus that's been the big story I'm
  • 00:39:54
    not going to say that ABS in the fiscal
  • 00:39:55
    stimulus we would have had a recession
  • 00:39:58
    but consider that GDP growth would have
  • 00:40:00
    been closer to say 1 to 1 a 12% than 2
  • 00:40:03
    and a half to
  • 00:40:04
    3% uh we've had tremendous fiscal
  • 00:40:07
    stimulus uh and uh that thwarted my
  • 00:40:10
    recession call I didn't anticipate it I
  • 00:40:12
    did not anticipate for the second year
  • 00:40:13
    in a row we'd have the deficit in excess
  • 00:40:17
    of 6% of GDP uh that's unbelievable and
  • 00:40:22
    so again where do your substance drive
  • 00:40:25
    your forecast I come back to that my
  • 00:40:27
    assumption was that we're not going to
  • 00:40:29
    get the degree of fiscal stimulus that
  • 00:40:31
    we got last year on the spending side
  • 00:40:33
    and this actually transcends just what
  • 00:40:35
    happened with consumers still spending
  • 00:40:37
    those excess savings those pandemic
  • 00:40:39
    savings this was actually just the
  • 00:40:41
    government sector uh you know we're into
  • 00:40:44
    the first two months of the fiscal year
  • 00:40:47
    uh the deficit is up
  • 00:40:49
    64% the deficit up
  • 00:40:52
    64% in the first two months of the
  • 00:40:54
    fiscal year if left unchecked the
  • 00:40:56
    deficit is is going to go from almost $2
  • 00:40:59
    trillion to almost $4
  • 00:41:02
    trillion you don't think that the
  • 00:41:03
    freedom caucus members like they don't
  • 00:41:06
    see that uh spending is up Pro exit Pro
  • 00:41:11
    program spending is up 20% year every
  • 00:41:14
    year and government revenues are down 7%
  • 00:41:19
    yeah that doesn't sound weird to you
  • 00:41:20
    Maggie that government revenues are down
  • 00:41:22
    7% do you know why because of all the
  • 00:41:24
    sub all the Biden all the Biden
  • 00:41:26
    subsidies if there's an EV subsidy here
  • 00:41:28
    for consumers there's a chip subsidy
  • 00:41:30
    over here for
  • 00:41:32
    manufacturers H so that's what we're
  • 00:41:35
    talking about here we're talking about
  • 00:41:37
    6% deficit GDP ratios normally you would
  • 00:41:40
    run those to fight a
  • 00:41:42
    recession so it's interesting that
  • 00:41:44
    apparently we don't have a recession we
  • 00:41:45
    have a fiscal policy that's implemented
  • 00:41:48
    to fight a recession oh but there's no
  • 00:41:50
    recession but a fiscal policy aimed at
  • 00:41:52
    fighting a recession so this is just a a
  • 00:41:55
    classic case of of cognitive this this
  • 00:41:57
    but people don't know what does the
  • 00:41:59
    emperor look like dis robed once we
  • 00:42:01
    start
  • 00:42:02
    to get to a more sensible fiscal policy
  • 00:42:06
    now you're going to say well Donald
  • 00:42:07
    Trump won't allow it to happen to which
  • 00:42:09
    I say
  • 00:42:10
    well he doesn't control a fiscal policy
  • 00:42:13
    say Congress doesn't uh say congress
  • 00:42:16
    rolls over and does allow it to happen
  • 00:42:17
    does the bond market step in I don't you
  • 00:42:20
    don't really buy into the bond vigilante
  • 00:42:23
    could I I I think that I think that if
  • 00:42:25
    Trump gets what he wants on
  • 00:42:28
    SCH uh then my bond call is probably in
  • 00:42:32
    trouble my bond call is in trouble uh
  • 00:42:35
    but you know I'm looking at it trying to
  • 00:42:38
    look at it rationally I'm not looking at
  • 00:42:40
    it
  • 00:42:40
    emotionally I'm not one of these people
  • 00:42:42
    to say well these Republicans and
  • 00:42:45
    Congress only got elected because of
  • 00:42:47
    Donald Trump they owe Donald Trump well
  • 00:42:50
    actually um you know Trump won the
  • 00:42:52
    election fair and square but with half
  • 00:42:54
    half the national vote and he's
  • 00:42:57
    operating let's just look at the real
  • 00:43:00
    let's look at this realistically and
  • 00:43:01
    rationally they got they got they got a
  • 00:43:04
    one vote they got one vote they can't
  • 00:43:06
    afford to lose more than one vote yeah
  • 00:43:08
    for any house or any bill that's going
  • 00:43:10
    to get through the house there's all
  • 00:43:12
    fiscal stimulus unless the house is
  • 00:43:14
    going to approve it and the house is
  • 00:43:16
    replete with fiscal
  • 00:43:18
    conservatives and this is different this
  • 00:43:20
    is not
  • 00:43:22
    2016 everybody was on board with taking
  • 00:43:24
    the top marginal corporate tax rate from
  • 00:43:26
    35 to 21% and make America more
  • 00:43:29
    competitive we're going to take that
  • 00:43:31
    down from 21 to 15% but what are the
  • 00:43:34
    offsets in terms of the uh restraint
  • 00:43:37
    side uh we don't even know how you know
  • 00:43:40
    will all of the
  • 00:43:43
    2017 income tax uh
  • 00:43:46
    Cuts will they all be extended Beyond
  • 00:43:50
    this year will they will they because
  • 00:43:52
    don't forget that the CBO scoring is
  • 00:43:55
    going to have something to say about
  • 00:43:56
    that
  • 00:43:57
    because if they aren't allowed to Sunset
  • 00:44:01
    all these deficit projections in the
  • 00:44:02
    future that you see about that causes
  • 00:44:04
    your eyes to just bug out they include
  • 00:44:07
    those tax costs from 2017 to
  • 00:44:10
    Sunset so we're going to build the
  • 00:44:13
    scenario where they're going to we're
  • 00:44:15
    not going to have any of those we see
  • 00:44:17
    this is what happens is that what what's
  • 00:44:19
    supposed to be temporary is never
  • 00:44:21
    temporary right uh you know the the the
  • 00:44:24
    the tax increases in the 1930s in the
  • 00:44:27
    40s uh you know to fight World War II uh
  • 00:44:30
    they stayed with us until Ronald Reagan
  • 00:44:33
    won the election in 1980 didn't come
  • 00:44:34
    down till 1986 they stay permanent and
  • 00:44:37
    then we have all this pandemic era
  • 00:44:39
    spending to fight the pandemic what do
  • 00:44:40
    you know the spending stays permanent
  • 00:44:43
    and we have tax cuts in 2017 that were
  • 00:44:46
    designed to expire this year no no no no
  • 00:44:49
    so it's temporary becomes permanent but
  • 00:44:51
    you see uh it's going to have a more
  • 00:44:53
    pernicious impact what's different for
  • 00:44:57
    the typical fiscal Hawk and there's a
  • 00:44:59
    lot of them in the
  • 00:45:01
    house is that back when Donald Trump won
  • 00:45:05
    the election in 2016 the deficit to GDP
  • 00:45:07
    ratio was 3% not 6% plus uh the debt to
  • 00:45:12
    GDP ratio is 30 percentage points higher
  • 00:45:15
    now than it was back then and back then
  • 00:45:18
    interest costs on the debt were
  • 00:45:20
    absorbing 8% of the revenue stream it's
  • 00:45:24
    doubled since then to 16% and going up
  • 00:45:27
    up so this is not lost on fiscal
  • 00:45:30
    conservatives uh Donald Trump is not a
  • 00:45:32
    fiscal conservative um but he does not
  • 00:45:37
    control fiscal policy uh he controls
  • 00:45:39
    foreign policy he controls trade
  • 00:45:43
    policy uh he's got executive order
  • 00:45:46
    privileges 100% does not control fiscal
  • 00:45:48
    policy and so I think and there's no
  • 00:45:52
    such thing as a sure thing I can't say
  • 00:45:53
    this is an ironclad guarantee but it's
  • 00:45:55
    just what I'm seeing with my two eyes
  • 00:45:58
    yeah then no I don't think that we're
  • 00:45:59
    going to be getting through uh the tax
  • 00:46:02
    relief that the markets have priced in
  • 00:46:06
    uh and um and so I think that will come
  • 00:46:09
    as a big disappointment I think this
  • 00:46:11
    will be a year of fiscal drag and that's
  • 00:46:15
    again one of the cornerstones for why
  • 00:46:17
    I'm more bullish on bonds than I am on
  • 00:46:20
    stocks so if that's the surprise that um
  • 00:46:23
    bond yields bonds rally um in inflation
  • 00:46:27
    comes down more than expected um the FED
  • 00:46:30
    is able to cut rates and the risk one of
  • 00:46:34
    the risks is that if you're wrong if
  • 00:46:37
    we're wrong on the fiscal and they do
  • 00:46:40
    pass through and they do spend more um
  • 00:46:43
    then then that Bond calls that threat
  • 00:46:45
    any other surprises or risks out there
  • 00:46:49
    that you're thinking about or keeping an
  • 00:46:50
    eye on well of course there's those all
  • 00:46:52
    sorts of uh um geopolitical risks as
  • 00:46:56
    well um you know what's going to happen
  • 00:46:59
    in terms of Iran what sort of sanctions
  • 00:47:02
    how's that going to play out uh the the
  • 00:47:04
    vacuum we see in Syria and of course um
  • 00:47:07
    you know the mid East in general uh how
  • 00:47:10
    ultimately the Russia Ukraine war gets
  • 00:47:13
    resolved um China uh
  • 00:47:17
    Taiwan uh you know there's uh such just
  • 00:47:20
    that
  • 00:47:21
    demestic policy backdrop between fiscal
  • 00:47:25
    immigration uh
  • 00:47:27
    tariff and of course the FED domestic
  • 00:47:30
    policy in general we're in a a bog of
  • 00:47:32
    uncertainty right now uh and look at the
  • 00:47:35
    effect we V from pricing in nway Cuts
  • 00:47:38
    just a few months ago to basically
  • 00:47:39
    almost nothing in short order and this
  • 00:47:42
    is all just because to large extent
  • 00:47:44
    Donald Trump getting elected in November
  • 00:47:47
    uh and then we have the
  • 00:47:48
    geopolitics how are you feeling about
  • 00:47:50
    Europe a lot of people sound very
  • 00:47:51
    bearish on Europe like Europe is a
  • 00:47:53
    failed experiment you see headlines like
  • 00:47:55
    that all the time well it and so there
  • 00:47:57
    and and and but yet the European stock
  • 00:47:59
    market outside of France had a
  • 00:48:01
    phenomenal year I mean go figure that
  • 00:48:03
    you know we're talking about stock
  • 00:48:05
    markets the the the the Euro stocks did
  • 00:48:07
    did well last year and I I I I agree you
  • 00:48:09
    know that's what I mean it's not always
  • 00:48:10
    about the fundamentals this has been a
  • 00:48:12
    momentum driven Market you know
  • 00:48:14
    globally um you know you have uh the
  • 00:48:18
    bank Japan was a great place to have
  • 00:48:20
    money last year of course you want to
  • 00:48:22
    adjust for the currency but you got a
  • 00:48:24
    central bank uh you know when it's head
  • 00:48:27
    in the sand it's like ad Dearing the
  • 00:48:29
    headlights to to normalize interest
  • 00:48:30
    rates even in line with the rate of
  • 00:48:32
    inflation uh Japan a great a great stock
  • 00:48:35
    market last year um and and Europe did
  • 00:48:39
    just great with the economy flatten its
  • 00:48:41
    back but you're quite right uh I think
  • 00:48:43
    that I don't see where the growth idst
  • 00:48:45
    there's actually the growth impetus in
  • 00:48:46
    Europe is in what we used to call the
  • 00:48:48
    pigs right and these pigs can fly uh so
  • 00:48:52
    what we were Bast of cases uh you know
  • 00:48:55
    the um uh the uh the the periphery of
  • 00:48:58
    Europe is where the is where the growth
  • 00:49:00
    is uh in core Europe uh and mostly
  • 00:49:04
    France and Germany are beset by um huge
  • 00:49:07
    political problems uh and um and
  • 00:49:10
    stagnant economies and I guess you could
  • 00:49:13
    also throw that maybe to a lesser extent
  • 00:49:15
    over to the
  • 00:49:16
    UK uh even in India growth estimates
  • 00:49:19
    there are coming down I don't see where
  • 00:49:21
    the big where's the impetus everybody's
  • 00:49:23
    raising their Global GDP growth numbers
  • 00:49:25
    for next year I don't I don't see where
  • 00:49:26
    that's coming from I guess it's really
  • 00:49:28
    coming from because people think that
  • 00:49:30
    Trump is going to get what he wants uh
  • 00:49:32
    that the US economy has become
  • 00:49:36
    miraculously uh impant to the business
  • 00:49:38
    cycle and that Donald Trump is more
  • 00:49:40
    powerful than mother nature and that's
  • 00:49:42
    basically what the belief system is um
  • 00:49:45
    but I look around the world and uh I
  • 00:49:47
    can't I can't find significant Pockets
  • 00:49:49
    uh of economic strength that would
  • 00:49:51
    really matter uh from a global GDP
  • 00:49:55
    standpoint um so I would tend to agree
  • 00:49:57
    with you and I I would I would just say
  • 00:49:59
    that you know look you're getting paid
  • 00:50:01
    four and a half percent to be in
  • 00:50:02
    cash and what if what if this turns out
  • 00:50:05
    to be 2022 2022 we had a big draw down
  • 00:50:10
    in the stock market but rates are almost
  • 00:50:12
    a zero you there was nowhere to go there
  • 00:50:14
    was no B big safety beles now you got
  • 00:50:17
    concerns over duration which I
  • 00:50:19
    understand uh Donald Trump has created a
  • 00:50:22
    bit of a problem for investors wanting
  • 00:50:24
    to lengthen their bond duration I get
  • 00:50:27
    that there's duration risk in bonds and
  • 00:50:30
    uh the stock market despite you know oh
  • 00:50:32
    my God all the talk Santa rally here
  • 00:50:34
    Santa rally there the stock market's
  • 00:50:36
    done nothing for three
  • 00:50:38
    months um but what makes this different
  • 00:50:42
    and the FED seems to be moving to the
  • 00:50:44
    sidelines at least for now as you're
  • 00:50:45
    getting paid 4 and a
  • 00:50:46
    half% to be in uh in treasury bills and
  • 00:50:51
    I know that's not exciting but you know
  • 00:50:53
    my major theme for this year from an
  • 00:50:55
    investment standpoint point is a year
  • 00:50:58
    and this is what happens when you're in
  • 00:50:59
    a bug of uncertainty bug of uncertainty
  • 00:51:01
    risk premum in theory and in practice
  • 00:51:05
    risk Pria should be going up uh
  • 00:51:09
    Ergo the theme is Preservation of
  • 00:51:13
    capital and the preservation of cash
  • 00:51:15
    flows and so uh to borrow the uh you
  • 00:51:18
    know Simon AAR funkle it's a bridge over
  • 00:51:21
    trouble water I want and the trouble
  • 00:51:24
    water has got a wooden snake in it
  • 00:51:27
    yeah and I want to I want to cross that
  • 00:51:28
    bridge and turn more bullish in
  • 00:51:31
    2026 that that was exactly what I was
  • 00:51:33
    going to ask you is where do you wait
  • 00:51:34
    and it sounds like the answer is Cash do
  • 00:51:36
    you look at things like gold and hard
  • 00:51:39
    assets uh is that an option as
  • 00:51:41
    well yeah look if I better understood
  • 00:51:44
    Bitcoin Bitcoin to me is just gold with
  • 00:51:46
    20 times the volatility and it's a it's
  • 00:51:49
    a hard asset uh you know U but uh and
  • 00:51:52
    still second Bull on gold absolutely uh
  • 00:51:56
    and uh I think that uh Global Aerospace
  • 00:52:00
    defense should be a good place to be the
  • 00:52:02
    healthc care Healthcare actually should
  • 00:52:04
    be a good place to be as well because uh
  • 00:52:06
    that space is really cheapened up a lot
  • 00:52:08
    it's actually tied for third uh on our
  • 00:52:12
    on our sector list so it's not as if I'm
  • 00:52:14
    I'm not telling people hey go out and
  • 00:52:16
    buy bait beans can tuna uh and Barb Wire
  • 00:52:20
    and soff shotguns okay there's things
  • 00:52:22
    you can do um you know we we're we're
  • 00:52:24
    seconds on Japan as well
  • 00:52:27
    uh if you want to play and we we think
  • 00:52:29
    like basically we're value we we we are
  • 00:52:32
    we are always looking to valuations and
  • 00:52:35
    they're not timing tools but we're
  • 00:52:37
    long-term investors and we like
  • 00:52:38
    valuation not as a timing device that's
  • 00:52:41
    a that's what people the multiples are
  • 00:52:43
    so crazy high the pits will come on TV
  • 00:52:45
    and say you can't use multiples they're
  • 00:52:48
    not a timing device okay thanks but for
  • 00:52:52
    long-term investors they're either the
  • 00:52:54
    starting point on the multiple is the
  • 00:52:55
    head window
  • 00:52:56
    Tailwind um you know it'd be wonderful
  • 00:53:00
    for me to think I'd love to invest in
  • 00:53:02
    China but there's too much too much
  • 00:53:04
    there's too much geopolitical risk and
  • 00:53:07
    uh too much um uh concern I have over
  • 00:53:11
    their uh um lack of policy impetus they
  • 00:53:15
    they they they seem to be thinking that
  • 00:53:16
    they have a carrying out policies to
  • 00:53:19
    address the liquidity crisis when they
  • 00:53:20
    actually have a solvency crisis they're
  • 00:53:22
    in a true classic balance sheet
  • 00:53:24
    recession that's not going away but if I
  • 00:53:26
    want to play Asia I certainly like Hong
  • 00:53:29
    Kong and we put out a buy recommendation
  • 00:53:30
    Hong Kong uh last spring it turned out
  • 00:53:33
    pretty well um so a lot of um emerging
  • 00:53:36
    Asia that we like uh ex China we like
  • 00:53:40
    Japan um Europe is cheap are probably
  • 00:53:43
    cheap for the right reason um and we're
  • 00:53:45
    telling a lot of investors in the United
  • 00:53:48
    States to start looking at Canada which
  • 00:53:50
    is trading at a historically massive
  • 00:53:52
    multiple discount to the US uh and it's
  • 00:53:55
    a different Market but if you want to
  • 00:53:57
    dip toes into the value trade uh come to
  • 00:53:59
    the
  • 00:54:00
    TSX um because you're also going to pick
  • 00:54:02
    up a currency that's your a cheap and in
  • 00:54:05
    Canada what's interesting is that
  • 00:54:06
    there's going to be an election this
  • 00:54:08
    year it's a matter of timing and we're
  • 00:54:10
    going to have a conservative government
  • 00:54:12
    uh that's going to usher in Pro business
  • 00:54:14
    pro market friendly uh policies uh I
  • 00:54:17
    don't think most people realize that
  • 00:54:18
    outside of Canada itself um so there's
  • 00:54:21
    areas to put money to work but I would
  • 00:54:23
    still say have a stash of cash uh
  • 00:54:26
    because uh I think that um there's going
  • 00:54:28
    to be some accidents that are going to
  • 00:54:30
    happen I think in a lot of the winners
  • 00:54:33
    uh in the past year I don't want to
  • 00:54:34
    compare this to the dotom crisis because
  • 00:54:36
    it's not exactly the same um but I I do
  • 00:54:40
    think that um there's going to be
  • 00:54:42
    opportunities to put that money to work
  • 00:54:44
    and you get paid for it uh so whether
  • 00:54:46
    it's 20 or 30% cash I'm not going to see
  • 00:54:49
    me 100% but you want to have put it this
  • 00:54:52
    way I don't think anybody will be be
  • 00:54:53
    hurt too badly mirroring what more
  • 00:54:56
    Buffet is already done uh 30% cash for
  • 00:54:58
    it right now and getting paid for it at
  • 00:55:00
    nominal on real terms perfectly
  • 00:55:03
    acceptable uh but there's other things
  • 00:55:05
    as well right and as I said before I do
  • 00:55:07
    believe that um we're seeing a spasm or
  • 00:55:10
    a hiccup in yields I'm not freaking old
  • 00:55:12
    over it uh again I have the L luxury of
  • 00:55:15
    pontificating I don't have to uh I I
  • 00:55:17
    don't I don't run money for a living I
  • 00:55:19
    don't have the temperament um but uh I
  • 00:55:22
    could I could see that this is again is
  • 00:55:24
    one of these hiccups and Bond yeld
  • 00:55:26
    spasms that will be a nice buying
  • 00:55:28
    opportunity I believe the global easing
  • 00:55:31
    cycle is going to continue Even If the
  • 00:55:34
    Fed pauses in in January this month
  • 00:55:37
    which is which is likely um but I think
  • 00:55:40
    as rates come down we'll become scarce
  • 00:55:42
    as yield so when I say preservation of
  • 00:55:44
    cash flows where can you grab yield and
  • 00:55:48
    so uh there's different sectors uh we're
  • 00:55:50
    still bullish on utilities for example
  • 00:55:52
    uh specifically because of the fact that
  • 00:55:54
    dividend growth dividend yield is an
  • 00:55:56
    area of the stock market you want to
  • 00:55:57
    you'll want to participate in fantastic
  • 00:56:00
    stuff David it is always such a pleasure
  • 00:56:02
    to catch up with you thank you so much
  • 00:56:04
    it was great being back on Maggie and
  • 00:56:05
    great seeing you again
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