Top Three Videos – August 23, 2023

This is our latest monthly live Q&A with Wealthion’s endorsed financial advisors — John Llodra & Mike Preston from Harbor, Michael Lebowitz from RIA,, and Jonathan Wellum from Canadian firm Rocklic Financial

Quick Summary Bullets:

Economic Trends and Market Outlook

• “I don’t think so quite yet… signs that a recession’s coming on and I’m a firm believer there’s a recession coming.”
• Active management and focusing on individual companies may become more important in the current market, rather than relying on sectors or ETFs.
• “It’s our view that as this bear Market progresses it’s going to be moving a lot lower and probably staying there for an extended period of time.”
• The fiscal stimulus in 2020 and 2021, with checks being given out and money being printed, has led to a different relationship between the fiscal side and the Fed, potentially resulting in high inflation and public backlash.
• “I don’t see any reason to suspect that the long-term economic trends in this country, the productivity trends, the inflation trends have changed. They’ve temporarily changed because of everything that’s happened, but I don’t see any reason when we’re looking at 2026-2029 that those trends will still not be in place.”
• “I think Michael if you’re a bit of a longer term investor you’re looking at this thing for the next couple of years. Then boy. We are really I think at the higher end and the returns could be quite substantial if you’re patient and uh you’re willing to to wait through some of the difficulties.”
• The housing market in the US and Canada has experienced an unprecedented bubble, with prices increasing by 20 to 30% annually and doubling in the last five or six years.

Investment Strategies and Opportunities

• The speaker believes that being positioned in bonds before a policy shift by the FED is crucial to not miss out on appreciation in the bond market.
• Gold mining stocks are undervalued relative to the price of gold itself, making them a potentially profitable investment even if the price of gold doesn’t increase.
• Gold is relatively inexpensive compared to other periods of time, indicating substantial upside potential and making it an attractive option for protecting purchasing power and wealth.
• The exposure to copper and nickel in some of the royalty companies’ portfolios aligns with the growing demand for these base metals in the electric vehicle (EV) industry, indicating a long-term investment strategy.

Global Economy and Geopolitical Risks

•  The impact of China’s economic struggles extends beyond its borders, affecting financial markets worldwide and highlighting the interconnectedness of the global economy.
• The meeting in Johannesburg is discussing the creation of an alternative Trade Currency, which could potentially be a major shift in direction and a turning point away from the dominance of the US dollar.
•  The Wealthion conference lineup includes Lacy Hunt as the keynote speaker, indicating the high quality of the event.
• Kyle Bass will discuss the biggest geopolitical risks to the global economy, highlighting the potential impact on financial markets.

Transcript Summary:

• 00:00 The financial advisors discuss whether the stock market rally is over, with one advisor predicting a recession, and emphasize the importance of monitoring employment as a key indicator, caution in the market, and focusing on businesses with better valuations and sustainability.
  
  • The financial advisors discuss whether the rally in the stock market is over and express differing opinions, with one advisor believing that a recession is coming.
  • The stimulus and behavioral patterns have had a longer-lasting effect on the economy than expected, and rate hikes take time to impact the economy, so the stock market will likely peak when signs of a recession become more evident, with employment being the key indicator to watch.
  • Michael will be discussing the latest data on the Hope framework at a conference, specifically focusing on the employment side, and there is a question of whether the rally is over or if there will be another resurgence.
  • Most companies are expensive and caution is needed in the market as interest rates are impacting spending, there are slowdowns in the economy, and companies are experiencing little growth, so it will be a tough battle for higher valuations, with only a limited number of companies driving the market up, and it is important to focus on businesses with better valuations, high free cash flow yields, and sustainability in order to weather a tougher environment and increased cost of capital.
  • The speaker discusses the likelihood of recession and the importance of active management in the current market, emphasizing that the employment picture is a lagging indicator.
  • The speaker apologizes for a technical issue and proceeds to show a chart.
• 09:34 The US employment rate dropping and the S&P breaking through the 50-day moving average suggest a potential recession and market decline, with a near-term target of 4200-4100 and emphasis on picking individual stocks due to sector dislocations.
  
  • The US employment rate typically drops right before recessions, so it’s not surprising that there is talk of a recession despite the current positive employment picture.
  • The S&P has experienced a pullback, breaking through the 50-day moving average, and it is crucial to see if it can convincingly break through that level to determine the future direction of the market.
  • The speaker believes that the market may falter and suggests a near-term target of 4200-4100, emphasizing the importance of picking individual stocks due to dislocations in sectors, while acknowledging that the overall market is overvalued.
  • The market rally likely ended a long time ago and as the bear market progresses, prices are expected to move lower and stay there for an extended period of time.
• 13:55 The speaker discusses the impact of interest rates on bonds, the possibility of another bubble and inflation cycle, and the downward trend in GDP and inflation, ultimately concluding that long-term economic trends will lead to lower interest rates and bond yields in the future.
  
  • Vigilance remains key in considering interest rates and their impact on bonds.
  • The speaker discusses the possibility of the Federal Reserve continuing to manipulate interest rates in the future, regardless of public awareness or potential economic cycles.
  • The speaker discusses the potential for another bubble and inflation cycle due to the fiscal response to a recession, but currently, there is a positive effect on stock prices from QE and the public backlash against the Fed seems minimal.
  • The speaker discusses the downward sloping trend lines of GDP and inflation over the past 40 years, attributing it to unproductive debt in the system and a shrinking growth rate, and questions whether anything has changed in recent years with the addition of stimulus and debt, ultimately concluding that the trends are worse off today due to an increase in nonproductive debt and worsening demographics.
  • Long-term economic trends, including productivity and inflation, are expected to remain unchanged, leading to lower interest rates and bond yields in the future.
  • Interest rates could potentially go back to sub 1%, which would result in a significant gain, but even if they don’t, a 4.25% coupon for the next 10 years would still outperform stocks, and if rates continue to rise, it could further break the economy and push rates lower in the short run.
• 23:36 The speaker believes that while there may be temporary volatility in the stock market, central banks will eventually ease up on monetary policy due to global pressures, cautioning against unsustainable government spending and potential currency devaluation.
  
  • Raise your finger if you have something to add, and Michael and Jonathan will respond to a comment about the stock market trading lower before the financial crisis.
  • The speaker believes that while there may be a temporary surge in the supply of bonds, the government will do what it takes to keep interest rates low and manage the debt, and that the current trend of increasing interest rates may not continue indefinitely due to historical patterns and the high level of indebtedness.
  • Investors should be patient and selective in their investments, as the speaker believes that central banks will make mistakes, causing volatility in the stock market, and that global pressures, such as Europe’s lack of growth and China’s command economy, will eventually lead to the need for the FED to ease up on monetary policy, while also cautioning against the unsustainable government spending and the potential devaluation of currencies.
  • The speaker emphasizes the importance of recognizing the lag effect in the market and warns against complacency, stating that at some point there will be a breaking point and central banks will have to react by lowering rates, which could lead to significant changes in the market.
  • The speaker discusses the impact of the FED’s policy change on bond prices and advises being in a bond position before the shift to avoid missing out on appreciation, while also mentioning the potential for interest rates to rise in the short term.
  • Long-term bonds are likely to experience a bounce in the near term, but the speaker believes that the bond market will face challenges in the coming years, and suggests that 10-year treasury bonds may outperform the S&P 500 over the next decade, while also noting that the tech sector could be impacted by interest rate increases.
• 34:18 China’s struggling economy and real estate market could have a significant impact on the global financial system, with concerns about contagion and spillover effects, making it important to be cautious when investing.
  
  • The speaker shifts gears to address questions about gold and asks for feedback on the live format.
  • China’s real estate sector is facing significant issues, with major companies like Evergrand bank and Country Garden entering default, which could have a significant impact on the global financial and banking system.
  • China’s struggling economy and real estate market, which has been a long-standing issue, is having a significant impact on the global economy and financial markets, as China was a major driver of economic growth for many developed nations.
  • China’s slowing economic growth and potential capital flight could have negative effects on the US and global economies, with concerns about contagion and spillover effects.
  • China’s exposure to global growth, interest rate increases, and attempts to slow down the economy, along with the misallocation of capital in the real estate market, are reasons to be cautious and watchful when investing.
  • Will there be a significant housing price correction in North America due to higher interest rates, or will we be able to avoid it?
• 44:06 Housing market bubble in the US and Canada, with potential 20-30% pullback predicted, as bidding wars end and higher interest rates impact prices, leading to a gradual decline followed by a sudden correction similar to a stampede.
  
  • A meeting is taking place in Johannesburg to discuss the creation of an alternative trade currency called “bricks currency,” with Saudi Arabia and other countries being applicants, and the outcome of the vote could potentially be a significant shift in the markets and the end of the US dollar’s dominance.
  • Housing prices in the US and Canada have been in a bubble, with significant increases in the past few years, but there hasn’t been much of a pullback yet, although bidding wars may be ending due to higher interest rates.
  • The speaker predicts a potential 20 to 30% pullback in the housing market and a larger one in stocks, with housing likely to follow the stock market’s decline by 3 to 6 months.
  • House prices are currently being kept up because people don’t want to sell their homes with low mortgage rates, but once the market fully opens up, prices are expected to fall.
  • Organic transactions, such as deaths, divorces, and job losses, will gradually lead to price discovery and erosion of home equity, prompting some homeowners to sell and potentially initiating a market cascade, especially for those without mortgages.
  • The housing market may experience a correction that starts slowly and then happens suddenly, similar to a stampede.
• 50:41 Gold and gold mining stocks have potential for growth due to monetary policies and concerns about purchasing power, but it’s important to have a diversified portfolio; investing in the gold sector and energy stocks, particularly Exxon, could be favorable opportunities.
  
  • Gold and gold mining stocks are an important part of the equation, but they could be affected by a massive selloff in various asset classes, although it may be short-lived.
  • Gold mining stocks are undervalued compared to the price of gold itself, and even if gold prices don’t increase, there is still potential for a rise in gold mining stocks due to monetary policies and the pressures on fiat currencies, but it’s important to have a properly diversified portfolio.
  • Gold is relatively inexpensive compared to other periods of time, and there is substantial upside potential due to concerns about purchasing power protection, the Fed’s need to print money, and central banks buying gold for currency stability.
  • The speaker discusses their investment strategy, which includes buying miners and predominantly royalty companies that generate substantial free cash flow and have exposure to silver, copper, and nickel, which are in high demand for the EV transition.
  • Investing in the gold sector is a good opportunity as some companies have been beaten down and the energy sector is also favorable, although it is tied to the economy and may be affected if the economy starts to decline, but in the long run, energy stocks are cheap and Exxon’s diversification into non-carbon energy makes them a sensible choice.
  • The speaker encourages viewers to seek the guidance of endorsed financial advisors and offers free consultations to help them make informed investment decisions.
• 01:00:12 The Wealthion conference is happening soon and will feature high-level presentations from Lacy Hunt and discussions on various topics including interest rates, the global economy, inflation, housing market, bond market, natural resource investing, commodity plays, and the energy sector; register now for a discounted price and provide feedback for improvement.
  
  • The Wealthion conference is coming up and will feature Lacy Hunt, who gives high-level presentations that are worth attending.
  • James Grant, Mike Cantrowitz, Kyle Bass, Stephanie Pomboy, Ivy Zelman, Nick Jerley, Amy Nixon, Michael Lieberwitz, and Rick Rule will discuss various topics including interest rates, the global economy, inflation, housing market, bond market, natural resource investing, commodity plays, and the energy sector.
  • The video discusses the opportunity and bright future of nuclear investing, with various advisors joining the lineup for a power-packed faculty.
  • Register for the Wealthion conference to get a discounted price, and if you’ve attended before, check your email for an additional discount code; feedback on the format and suggestions for improvement are welcome.