Debt overhangs & runaway fiscal deficits are likely to drag down economic growth and stocks & bonds over the coming decade, even though in the immediate terms, a brief bounce in the markets is likely.
So warns the lead partners of New Harbor Financial, who join Wealthion host Adam Taggart in today’s discussion.
Transcript
John Llodra 0:00
You know, we do think there is a very high likelihood that we’re getting near a bottom in in longer term bonds and that rates will likely pull off. But that’s more of a bounce than than we think, a structural bull market. Because we do think there’s this this big picture situation with debt and fiscal issues that that will will provide a headwind probably for decade or two to come.
Adam Taggart 0:31
Welcome to Wealthion. I’m Wealthion founder Adam Taggart, welcoming you back here. At the end of the week, we’re going to do a little bit of a wrap up of the market action this week, joined as usual by my good friends, John loader and Mike Preston, the two senior lead partners from new harbor financial one of the financial advisory firms, endorsed by Wealthion. They prepared a fair amount of charts for us to dig into here really quickly, though, before we do. I’ll talk more about this at the end. But I just want to remind folks, this today, this interview is releasing is Friday, October 20. Well, the next day Friday, sorry, Saturday, October 21, is Wealthion online fall conference. So if you’re watching this video, when it gets released, you have less than 24 hours left to register for the conference. If you haven’t already to go do that. Go to wealthion.com/conference. And hope to see you there tomorrow. Fantastic lineup. Again, I’ll talk about them in more detail at the end of today’s discussion. But best faculty we’ve ever had probably couldn’t be more timely than any other previous conference we’ve ever had. So hope to see you there. John. And Mike, thanks for joining us, guys a fair amount going on this week. John, I know you’re prepared some charts. How do you want to start? You want to start walking through the market action? Do you guys want to react to the interview with Lynn Alden the other day? Because I know that she had some points that resonated with you guys, how’d you like to begin here? Well, we
John Llodra 1:51
didn’t really discuss this beforehand, too much, Mike and I but you know, why don’t we Why don’t we touch right in. And I think it’s always nice to finish on on kind of the market action, and bringing it home to what we’re doing and seeing and doing for clients. The headlines have been and remain even today, kind of the moves and interest rates. Many folks are well aware of this, even in their daily lives, folks, anybody looking for home knows that, for example, mortgage rates have shot up dramatically. But this is all driven by what’s been happening to Treasury bond yields on the longer end of the curve. You know, we’ve known for a better part of a year that the Fed has been aggressively hiking short term interest rates on Treasury bills and things like that. But the longer end of the curve longer, you know, 1020 30 year treasury bonds is where we’ve seen the most action lately. And the action has been a very pronounced spike in interest rates. And therefore the prices of those bonds have dropped rather pursuit precipitously. And we count ourselves among the many folks in markets and investment management that had been humbled, you know, we waited quite quite a while before even toe dipping into the space, I’ll just share a chart here of a an ETF that holds longer term Treasury treasury bonds, this is TLT, which is 20 plus year treasury bonds. And basically, you know, it peaked at about 180. In early 2020, that was in the sell off of COVID. You see a rather I mean, massive drop here, this, this drop peak to trough, these are monthly monthly bars, by the way, this drop peak to trough exceeds what the stock market dropped in the housing crisis. So that’s a very profound drop, you know, we started buying somewhere in this range, really, for shorter term tactical trade, because we did and continue to see structural issues in the as a hangover of over a decade of, you know, massive distortions by you know, quantitative easing and things like that. But here, we’ve had a dramatic further sell off. And that’s because yields have risen. We got to we got to balance earlier in the last week or so. Maybe a flight to safety trade, a little oversold bounce. But here we are today, testing new lows on that 10 year treasury bonds have spiked above 4.9, at least briefly. So so our discipline, of course is, you know, we do acknowledge in here to, you know, buying things when they’re oversold or considering them to be bought. And we had a very oversold nature here. And these are, you know, two standard deviations, this purple line, two standard deviations around a daily moving average. So you know, anytime you get something punching below that there’s a probability that you get a quick snap back. And we did, in fact, see that here, but it’s rolled over. You know, but I think just to tie tie this bigger picture, there has been, you know, again, I think the real thing we need to focus on is not the spike, recent spike, but really the distortion that we’ve seen over the last decade. And you know, I think Sharon, a couple and Lynne Alden spoke about this tremendously, I think in the interview you did with her this week. You know, we have a kind of inflection point here, there is a tipping point perhaps in terms of total debt outstanding at what are now much higher interest rates than than even a year ago. And and you’re looking at foreign governments buying less of our debt defending their own currency. Now there is a bit of a tectonic shift in the landscape here. And I’ll bring a couple of charges to bring that home. And we’ll kind of pause and I’m sure we’ve got plenty to talk about there. But let me just pull a couple of charts in to drive that point home. So this chart, hopefully you can see is just basically stating what everybody probably knows. But it’s it’s always eye popping for me to look at in a picture. Basically, it just shows the the pace at which our debt total debt has outpaced GDP. This is actually a little stale, because it’s quarterly, we’re over 33 trillion now and over total outstanding debt. So that that’s like a household really spending recklessly and there’s no end in sight from our eyes. In fact, the projections for budget deficits and debt issuance over are pretty stark, I want to kind of go and look at a couple of the charts to tie this in. So this is a chart right from the Federal Reserve’s website. And it basically shows two things. First of all, this this blue line, and this is measured on this left axis, this shows the percentage of total US public debt as a percentage of GDP, I’m sorry, the red line is on the left this total percentage of debt, percent of GDP, here we are plotting around about 40%, got as high as you know, above 60%, in the 90s. And then boom, we had a step change here in the wake of the housing crisis, and then boom, in the wake of the COVID crisis. So we are now firmly over 100% debt to GDP, that is not good. And the the end does not look like it’s in sight in terms of how high that can go in the near term, the blue line is actually measured on on the right scale. And that basically is the interest expense on that debt incurred by our government as a percentage of GDP. And that, again, is on the right scale. So in the seventh in the 70s, and 80s, when interest rates were really high, that was 3% GDP higher than today, we’re not quite 2%. But the big difference here is the total amount of debt outstanding was a fraction, about half of what it got to here. So so I’m going to tie that all together with one final chart chart that our you know, one of our heroes, John husband put out in his weekly commentary this week. And this basically shows, you know, in looking at the total situation, interest rate plus total debt, he kind of, you know, presents this in a kind of a hypothetical, but very helpful construct and basically shows the burden as if this were a mortgage, and what would the mortgage payment look like, as a percent of GDP. So you combined, you know, a spike in yields with an absolute massive spike in total debt outstanding. And you see the you know, whether you’ve amortize that over 10 years, or 30 years, there’s a massive spike in the total debt burden plus interest rate as interest expense as a percent of GDP. So I think that is, it ties into a lot of what Lynn Alden had talked about, you know, basically, we have a situation where, you know, probably similar to the 40s, were coming off a decade now, we just had, you know, monetary policy dominance, all these experimental policies, driving monetary rates down to zero. And suddenly, we’re in a situation where we’re seemingly seeing a period of fiscal dominance, where spending and debt and all that stuff overwhelms what the central bank can and maybe wants to do. And that is very similar to in Lynn aldens example, the 40s, maybe even more so than the 70s. So, you know, all the say is, you know, we do think there is a very high likelihood that we’re getting near a bottom in in longer term bonds, and that rates will likely pull off. But that’s more of a bounce than than we think, a structural bull market, because we do think there’s this this big picture situation with debt and fiscal issues that that will, will provide a headwind probably for decade or two to come, unlike the last four decades, which is a bit of massive tailwind for stocks. So I mean, for bonds, so I’ll pause there as a long winded diatribe there but appreciate the patience.
Adam Taggart 9:30
No, no, very useful in that. That chart by husband did a really good job of showing how, you know, things are really starting to kind of get out of control. Right. You know, the, the the 2023 part of that chart was in record territory, and the trajectory was steeply, still going higher. Right. And one important thing to know about government debt, just like corporate debt right now, is that a lot of what’s still outstanding is that low interest rates And so as those mature, they’re going to rewrite at much higher rates, as long as rates continue to stay high, right? So that spike that we’re seeing there at the end of 2023, should start leaping even higher in magnitude as more and more government debt comes up from maturity here. It’ll be a different story if and when, you know, rates start coming down again. But there’s there’s no daylight on the horizon yet for that. So big issue. Yeah. And as Lynn said, to your point there about shifting from an era of sort of monetary dominance to fiscal dominance, as that debt, the cost of that debt, the debt pile grows, and it’s growing by leaps and bounds, as you said, as the cost of that debt becomes more expensive, which it’s become tremendously more expensive, you know, interest rate wise over the past year. That leaves a bigger and bigger hole in the federal budget, right? Because the interest expense on the federal debt gets bigger and bigger starts crowding everything out. And so the only response that, well, the only response that that politicians are going to pursue, right, there’s they’ve got two choices, right, which is basically do less, right? Or they’ve got to just basically spend the difference. And that’s what we’re doing right now. Right. That’s why we have these massive fiscal deficits. And when I asked Lynn about this kind of battle, we’re seeing right now between the monetary side trying to pump the brakes and the fiscal side trying to hit the accelerator, she was very confident in saying that she thinks the the fiscal side is going to win that battle, which just means more in greater deficits, you know, for the for the greater future. That’s how they’re going to deal with this growing debt pile. You’re nodding as I’m saying all this, John.
John Llodra 11:45
Yeah, that’s, I mean, no one knows for sure. But there’s a lot of signs that that’s kind of what’s playing out here.
Adam Taggart 11:51
Okay. So John, you said that, you know, given that that outlook, which is it’s a present outlook, but it’s really kind of a longer term trend that we’re talking about, I think that’s what you’re referring to when you’re talking about, you know, an era of headwinds in front of us. But it does sound like, you know, in a secular trend, you can have lots of different cycles, right. And it sounds like you were saying in the bond market, you guys think that we are at a peak in terms of pricing and rates here, cycle wise, and that you expect, you know, some relief coming forward? And that’s why you’re continuing to remain in the longer bond trade here, the TLT trade? Am I getting all that? Right? Yeah, absolutely.
John Llodra 12:35
We think there’s probably going to be many tradable movements in the bond market over the coming years versus the last 40 years, you basically just bought and held bonds and bonds and interest rates basically steadily declined and was, you know, probably a once in a generation bull market in bonds. We think a total total different picture lies ahead. And yeah, we think the near term yields are probably close to peaking, if not have already a few weeks ago, we said maybe the 10 year gets to five, five and a quarter and an extreme scenario. We’re close to five right now. So we think we’re in the vicinity of a near term, peak in interest rates, and therefore, you know, pretty decent Bible area here for bonds. There are enough vagaries hear that we wouldn’t say load up on 50 60% bonds right now, we’d have a 15 to seven and a half percent to 15% position of which we have half hedged for the folks that have a larger position. So we’re very comfortable with the position for where we are right now. But, you know, there’s enough vagaries hear that we don’t think, you know, moving to a save 50 or 60% Bond position makes makes a lot of sense right now.
Adam Taggart 13:43
Okay. All right. Mike, come on over to you now. I guess first, do you have any anything to add to the live discussion above and beyond John’s comments?
Mike Preston 13:52
Yeah, I guess just as a quick, maybe outline of what I’d like to chat about here. Adam, I’d like to make a few comments about Lynn’s Lynn aldens Talk and her talk was great. Then share a chart on Treasury bill or in Treasury bond rates. Just take a quick look at the yield curve, who we get a lot of questions specifically about where exactly should you know, I’m Where should I put my cash? You know, what type of bonds should I buy? I can, I can answer that in this in this video. And then just take a quick look at the charts of both the s&p and of gold, gold has been making what I think is a stealth move lately. So those are the things I’d like to talk about and start with Linode and if I can go for it. So the things that I liked that Lynn said and I like everything that Lynn says I really like the fact that she’s so analytical and technically based yet she sees the big picture in an abstract away like a thing that we talked about here a lot of times,
Adam Taggart 14:51
yeah, and I know you guys like her because Lynn has an engineering background. And yeah, John are were engineers before you became financial advisors, correct?
Mike Preston 14:58
Yeah, I think that’s probably why we resonate with with her, because we’ve got the same type of mind. She’s very intelligent. You know, and I’m just looking at my notes here, the things that I that I wrote down that I really liked that she said, she talked about the fourth turning, we’re in the middle of the fourth turning, frankly, we’re probably past the 50% point of a fourth turning, we have five or 10 years left, in this fourth turning, and these are climactic times times of maximum risk and change. And she says that major debt cycle inflate and inflection points have coincided in history with fourth turning climax is it? Obviously, it makes sense. You know, the Fed and every other central bank in the world is throwing everything in, that they can, including the kitchen sink with no other plan. And so we’re all kind of marching towards this climax, we don’t exactly know what it is. But she said, when you’re vulnerable, you’re more likely to have bad things happen to you, you know, the things that you just showed the chart that John showed showing the, the debt going absolutely vertical post 2013 is not sustainable. And it makes us more vulnerable, you know, protect, particularly as we start to, you know, get, as you said, Bond maturities. reinvesting those are those bonds at higher rates, the cost of the total debt goes up and up and up. All of this is kind of coming together in what is likely to be a climax of the fourth turning, we don’t know exactly when, or where. But we do know the basic math that things are not sustainable. And so therefore, particularly in a time when there isn’t alternative, there’s other things to invest in, besides taking a lot of risk. So, you know, Lynne talked about the bond market. She’s less bearish now than she was a year ago, probably because of the collapse, or maybe even less bearish since she was six months ago. We are not raging bulls on the bond market. But we think that we’ve seen an absolute capitulation in the bond market the last couple of weeks, I don’t know exactly where the bottom is going to be, or where the highest in yields are going to be. We’re almost at 510. I’m sorry, 5%. On the 10 year bond, maybe we touch it, maybe we don’t. But, you know, we like bonds up to about 15%, maybe 20% Max, if somebody really has a high risk tolerance in longer term bonds. And treasury inflation protected securities are looking better. Lynn says this as well, we were looking in our investment committee meeting over the last week or so we were noticing that five, six year tips are up to I think two in 2.5 or two and change percent real return over five years. This is substantial. So nibbling on those could be a decent idea. We tend to agree with her on that.
Adam Taggart 17:43
Yeah, and sorry to interrupt there, Mike. But I’ve had a number of people on this channel, recently talk about the relative attractiveness of tips. And then Victor Ghani, the guy who actually used to work for long term capital management, said that they’re one of the best things that he sees on the horizon right now.
Mike Preston 18:00
It’s hard to it’s hard to deny, right? You’re you got a real yield approaching 3% over five years, it’s a whole lot different than what we were looking at just a couple of years ago, you know, with with flat and negative real returns across the board. You know, and don’t forget that with these valuations the s&p 500 or the Dow or the NASDAQ whatever index you want to pick, almost certainly will return negative returns annually from here over the next decade. You know, we often show charts from John Hussman. I think John has some some others that he may may show later in the video but and there’s a lot of other sources to besides just husband’s work that pretty much proves in our view that from these levels there’s no real there’s no positive return there’s no nominal return either over the next 10 years so when you see real returns that are rock solid guarantee they start to look attractive. Lynne also says you know she’s she’s bullish on gold and Bitcoin negative on equities, I just said that we are to and said, you know, treasury bills as well you know, treasury bills, our model is about half and treasury bills. Right now, I’d like to is probably a good segue into this particular chart I’d like to show you just give me a minute to get it up here. So you know, there is an alternative This is the Treasury yield curve, it’s still inverted. If you look down here it’s this is the maturity so the one month Treasury is 5.5 and change and there’s actually slightly increasing here between one month and about four to six months. The sweet spot in the short end right now is right about four months. We actually just bought the four month bill today in our we have a a model which is treasury bill only that’s for people that want to park cash we can just roll treasury bills for them. And you know, we when we look at buying new ones, we don’t automatically buy ones that are one month out right now. We we Grab the four months, so anyone out there that’s rolling T bills on their own, I know it’s not a big difference. But you know, right now the four, the four month is the sweet spot. And you can see that the yield goes down as you go out from there. Not a lot, the two year, if you look here is still at 5.2, almost 5.2. So we’re still above 5% on the two year. And so really, if you if you don’t need the money in the next couple of years, you could really just pick anywhere in here, but I would probably be buying, you know, some four month and maybe a bigger chunk in two year, just if you don’t need the money soon, just because, you know, short rates could come down quickly at any moment.
Adam Taggart 20:42
Sorry for interrupting your mind. But I just feel compelled to repeat myself. What I said last week, which is I just remember, during 2022, right when the markets were correcting both stocks and bonds, were I lost count of the amount of people that came to me and said, I just want a place where I can get a 4% return on my money a dependable 4% return if I could get that for the rest of time, I would be thrilled. Right. And they were, you know, looking around nervously because almost all assets were coming down at that point in time. And they were kind of just begging me, you know, can you just point me to some sort of instrument where I could get a 4% return, you know, for the rest of time. And I just want to point out right now that those prayers have been answered, you can get a long US Treasury now for you know, getting close to 5%. You know, up to you and your financial advisor, whether that’s the right move for you, and how much of your portfolio should be in that. But just want to point out that people were begging for this a year ago now here it is.
Mike Preston 21:46
Absolutely. And while there’s certainly risk going out further, take a look at the long end of this curve. Yes, it’s still inverted, in that the 30 year is yielding roughly, it looks like point six, five or point seven less than the front end of the curve. That’s what’s called an inverted yield curve. It’s a sign of a sick market slash economy that will probably unconverted someday, at some point, it certainly will and invert, it always does. We just don’t know when but on the long end, past 10 years, take a look at this little knee right here. You know this little hump right at the 20 year. So if you if you don’t have any longer term US Treasury exposure you can and you’re buying individual treasuries, you might consider the 20 year treasury, you know, or you can buy something like the ETF TLT, which has a whole bunch of individual bonds. I think it’s like 37 bonds last time I looked that has a maturity right around 20. But But here, yeah, there’s there’s a nice spot at the 20 year where you’re at about 5.12% or something. So yeah, absolutely. It’s very attractive. So I’ll stop there and pause. And I’d like to come back and maybe just talk about the stock market and the gold market later.
Adam Taggart 23:01
Okay. Well, look, John will ping back back to ping pong. Back to you. I know, John. Sorry. Mike mentioned, some charts you may have from postman talking about expected future returns in the markets don’t know if you want to go there next or not. But we’ll ping pong back to you. Then we’ll go back to you, Mike. And then I’ll start wrapping up because we gotta get ready for tomorrow’s conference.
John Llodra 23:21
Yeah, sure. We, we might as well show these charts from from Hussman and we’re borrowing heavily he put out his monthly commentary this week. So it’s chock full of great, great perspective. It’s all data, not his opinion. It’s actually black and white data. So we’re very big fans of his work. And he got a great shout out about a week ago from Jeremy Grantham of GMO Jeremy Grantham put out a great podcast. It’s on Spotify. It was it was recorded. I think it broadcasts in the UK, I think where he is originally from. But But he had a great, great podcast, and he did give a great nod to in fact, he said Mr. Hussman puts out the best work out there in terms of the historical export, exploration of valuation levels and subsequent returns as a predictive, you know, variable for future returns. And this next chart speaks to this. I’ll share that and Hey,
Adam Taggart 24:17
John, just just for your bring it up. I just want to let folks know. So we are all fans of John Hussman. We actually all met John together years ago, out in my neck of the woods. For a conference that ended with us all sitting around the fire with John while he pulled out his guitar. He’s a great guitarist. But John and Jeremy Grantham are actually quite good friends. They have a lot of professional respect for each other, but I think they also have a pretty good relationship. I’m bringing this up because I’ve mentioned to John, that if he ever wanted to get in the same place with Jeremy either physically or virtually, to have a discussion that Wealthion would absolutely underwrite that meeting of the mind. ions and wood would love to film it and bring our whole audience along for the ride. So folks, if that would be of interest to you let me know in the comment section below. I keep pinging John about it from time to time, but I can I can go ping harder if there’s enough interest.
John Llodra 25:14
Oh, that would that’d be a fabulous. Get together if you get the two of them together, Adam. And yeah, we did have a quite an enjoyable song jam session around the fireplace with John, several years ago. So appreciate raising that. So let me share this chart. You know, basically this chart, and this is all actual data. It’s not anybody’s forecast or opinion. And it goes back to 1928. And it basically looks at, again, referring to grant them’s not to husband. You know, one of the valuation metrics that he’s done a lot of work on is this, this ratio called non financial market cap over gross value added. cutting to the chase, it’s a much more statistically reliable metric than almost any other valuation metric, in terms of its just statistical correlation with actual future returns, if you go back and look at history from 1928, to 23, about a 93% correlation, I think, which is about as good as you get and in the stats world. And that’s evidenced by this scatterplot when you see a scatterplot, that that is this tightly wrapped around a 45 degree line, that’s a pretty good statistical measure. So basically, it shows on this axis, the higher this valuation metric gets, the lower the actual subsequent 12 year returns in the s&p has been, and you know, so for example, if you look at where we are right now, this historical relationships, chips success suggests that we’d see nearly a negative 4% annual return from the these current levels held passively over the next 12 years. Now, John, is also very careful to point out, this isn’t a forecast. And in fact, you know, basically, if if we don’t get back to what you might call normal valuations, this, this, this, this forecast would be unduly harsh, but it also means the for projected returns shouldn’t be for example, 10% annual expectation, like many people are destined to believe they’re there, they’re going to achieve, in fact, you can use the same chart and say, Okay, if we if we assume 10% annual returns, History suggests that would be consistent with a valuation metric of about 1.0, which is, you know, I think about 60 plus percent below where we currently are. So that that’s a very tight historical
Adam Taggart 27:32
relationship. That’s an s&p with a to handle on it. Right? Exactly. It’s
John Llodra 27:37
around 2000. Give or take maybe a little below 2000.
Adam Taggart 27:42
So next year, right, it would be below 2,060%. Yeah, so
John Llodra 27:46
that’s all predicated us coming back to what you might consider normal valuations. It’s entirely possible that we don’t, but you also shouldn’t expect very good forward returns, you should expect very dismal returns if we don’t fall back to that. And I just want to tie it together with one other chart here, because this brings into the comparative of stocks and bonds. So this chart, again, a scatter chart scatterplot, which is pretty tightly scattered around this, this 45 degree line. This is shows the estimated tenure with excess return of the s&p 500 in excess of treasury bonds. In other words, how much do we predict does this model predict stocks will exceed treasury bond returns? And in fact, and this is the actual experience of 10 year versus treasury bonds. So right now, this is projecting that stocks will underperform treasury bonds by about six and a half percent over the next decade. That’s pretty stark, but it really just another way of saying how overvalued stock market is so the bond market has repriced in a very meaningful way for these higher interest rates. Our contention is that the stock market has has barely wakened up to that reality yet. And, you know, this is not so much a statement that you shouldn’t be gloating, loading up on bonds with reckless abandon. To us, it’s it’s a challenge to you know, if you think about the typical 6040 portfolio, we think both the stock and bond components of that should be significantly under weighted, but especially the stock part, so especially the stocks, bonds, you know, shoot the same breath, be very cautious about stocks because of this historical relationship.
Adam Taggart 29:30
Super important. So, John, do me a favor just for the non mathy oriented, just head back to the previous chart for a second, you’re. So this is just saying that prices have reached such high levels of valuation that, according to this model, which is built from all this historical data suggests that for the next 12 years, the market should return on average a negative 4% return. Right, so you know, more than a lost decade in the stock market now, of course, that’s probably not going to do that consistently, you’re probably gonna have some big up years, some big down years. But the net effect will be as if the market declined 4% a year, each year for the next 12 years.
John Llodra 30:13
And why is that is because valuations are on this metric. I’ve only been seeing this extreme twice in the very long history here. 1929. And the very top of the tech bubble peak, we’re even far eclipsing where we were in 2007, before the over 60% peak to trough decline in the stock market during the housing bust. So as absurd as this sounds, that’s exactly what happens historically, anyways, when you get tips or valuation levels.
Adam Taggart 30:39
Great. So this chart is just a huge blinking warning signal that says stocks are way too overvalued. And they may correct. The second chart you had there, it was basically saying that, to a certain extent, bonds have corrected. So from a risk return basis, they’re probably much more attractive right now, do they have further down to go? Maybe that’s a different discussion. But it’s definitely saying relative to bonds, stocks are super overvalued. And so if you begin have a blended portfolio, if you’re going to be lightening up on something, you really should be looking to lighten up on stocks first, given this high level of overvaluation. Okay, you’re nodding isn’t saying, well, that’s, that’s
John Llodra 31:20
exactly what that data would suggest until you
Adam Taggart 31:23
Okay, great. All right, Mike, I’m gonna bring it back to you to wrap things up before I give the details of the conference. And then we’ll start getting ready to spend something like 10 hours straight together on Zoom tomorrow for the live event.
Mike Preston 31:38
All right, great, Adam. I’m gonna keep it pretty, pretty short here. Because as you say, we’ve got a lot to do. And we’re gonna be talking all day on on Saturday, but which is tomorrow, by the time this comes out. But here’s the here’s a daily chart of the s&p. I just wanted to give people an idea of what we’re seeing right now, it is still very much a mixed bag. This is a daily chart of the s&p. And you know, if I back up just a little bit to the weekly chart, we had this relatively tame decline last year followed by really just a straight up 45 degree bounce from October of last year. But we are not above the high that we saw on January 4 2022 48 18.62. We came within about 78 or 80%, I think maybe a little bit more Fibonacci retracement. And then since then it’s been a few weeks down couple of weeks, up few weeks down a couple of weeks up. So this has been higher lows, I’m sorry, lower lows, lower highs since July. So July 24. And here we are October 28. I guess as a when this airs, I mean, basically three months later, and the market is down. I mean, everyone is still asleep, this market is not taken out the high almost two years ago. Now. It’s been a very thin market this whole year, only seven stocks. In fact, just let me change the symbol a little bit. Here’s the equal weighted, s&p 500 basically flat on the year. Here’s the Russell 2000. flat on the year, it’s really just the s&p, the s&p is up, you know 10 11%. And here, again, is the weekly bounce the last three weeks, you know, relatively weak bounce, but it’s hanging in there and move back to the daily. Here’s the head and shoulders top that we keep talking about on the daily, the left shoulder, the head to right shoulders, we broke through the neckline, which in my opinion is this line right here. You know, we went down for about two weeks, we recovered back to the line and here we are just sitting here between the 50, which is the red line and the 200 day moving average. And then our own indicators are a mixed bag, our shorter indicators are reversing to the upside, telling us that if we break out of this consolidation, we could be in for a bullish ride for a few weeks or a few months. But it’s really a mixed bag. If we break down here. You know, I think we’re coming right down to 4100. And then And then more that would be the short term target 4100. So, you know, be be cautious. We you know, we’re nibbling on a couple hedged ideas here and there. But by and large, our equity exposure is still quite low. And we’re very well hedged. And we have close to 50% cash equivalents. So that’s the s&p Let’s see what the rest of this week and next week brings. And then lastly, I’d like to just close with gold I’ll use GLD as a proxy of gold. This is a daily chart is up on the year a little bit looks to be up around almost $100 on the year, it had this disappointing breakdown on the daily chart, and then we just kind of went vertically here. The last couple of weeks, I don’t know if it’s because of the things that are going on in the Middle East. But it’s had this kind of stealth move, all while the dollar has been getting stronger, let me move out a little bit, move out to the weekly or actually even the monthly chart, let’s just talk about it in the big picture. Now, here’s gold on the monthly chart, big consolidation, over 11 years, sideways movement here 123 tops, we keep talking about it, we think that the triple top will be taken out. And look what happened here. Last month, we had a breakdown, but it was a fake out, we’ve immediately reversed at this next month. And I believe, if we go a little higher, you know, gold is spot gold is like higher than this right now close to 1950 or so this happens to be GLD. But we go a little bit higher here, we’re going to be knocking on the door of these triple tops. And if that happens, we will once we break through there, we should go right up to around 2500. If you take a look at what’s happening to the dollar, during that same time, you’ll take a look at the dollar on a monthly chart, we’re almost back to the old high. And for gold to be knocking on the door of the upside or the peak, or the roof of that triple top wealth a gold dollar has been getting stronger, I think is really really bullish. And, and not a lot of people are talking about it yet. So I think it’s a good sign. We’ll see where I
Adam Taggart 36:28
think I did note here, right, which is historically higher dollar. And higher yields generally tend to pull gold lower. And with gold performing, you’re hanging in there as much as it is. With those two very substantial headwinds. It begs the question, Well, gosh, if the dollar hits a period high and starts weakening, and obviously if yields start coming down, will that switch that headwind into a tailwind for gold? And if gold’s near its all time highs, when that tailwind, starts to kick in? Well, where does it take it from there, but arguably, likely, substantially higher?
Mike Preston 37:04
Exactly how we look at it? All right, and appropriately?
Adam Taggart 37:08
Well, look, I’m going to teach you guys here a little bit. So I just recorded Tom McClellan’s section for tomorrow’s conference, Tom McClellan, one of the most respected Technical Analysts alive today, family is the developer of the McClellan Oscillator. Tom is great. And I know you guys saw the previous interview that I did with Tom. So you know what a great explainer, he is. But he’s got a number of charts that are just spooky, in their level of correlation to one another. And basically what he likes to do as he likes to look at these highly correlated data series, where the correlation shows up when you timeshift them. So you’ll find you have these assets that lead other assets by months or quarters, or in some cases, years. And like I said, the correlation is super spooky. So you can see something that an asset did a year or two ago, that basically predicts how the the other asset is going to perform two years later, right. So he’s got some charts about the stock market itself. And let me, let me tease you all by saying this. He says that 2024, basically is the year that the wheels come off, right, and his charts tell them when in 2024, that’s going to happen. I’m not going to share that detail here, because I want folks to go and see that itself at the conference. But I will give a quick nod guys where you know, he is chart shows that the market’s probably not going to roll over this year, according to his indicators. Of course, anything’s possible. But he’s much more prepared for, for that, you know, rollover moment to happen in 2024. And again, like I said, he’s got a very strong sense of when it’s going to be if you’re curious to find out watch the conference tomorrow. All right, guys. Well, look. Thanks so much, John, And, Mike, for everybody else watching again, please, if you’re thinking about coming to the conference, register now because you literally only have hours to do so very quickly. Let me just summarize the faculty that we have there. It’s really the best we’ve ever had for one of these events. It’ll be kicked off by Lacey hunt with his keynote, just packed with Lacey’s famous charts. If you’ve watched one of our conferences before, you know that Lacey’s you know, opening remarks are worth the entire price of the conference in and of themselves. After he presents. He’s going to come on for live q&a. So you the audience will go to ask them whatever questions you want to. He’ll be followed by James Grant, who’s going to talk about where he sees interest rates headed from here. Michael Kantrowitz is going to come and present on his hope framework, you know, which tracks how we fall into recession. So he’ll be telling us where we are in that timeline. And you can bet we’re going to be doing a deep deep dive on the E part of that hope framework, which really is the last remaining Bulwark between us and recession, the employment market it. So we’ll go deep into Michael’s data around that. Kyle bass is going to talk about our top geopolitical trends that are likely to affect the global economy next year. And of course, that’s even more important of a topic now that we’ve had these recent tragic events in the Middle East. IV Zelman will be talking about the housing market. She is substantially more pessimistic on it than I’ve ever seen her before. Once she’s done, we’re going to have melody right housing analysts melody right and Amy Nixon Come on, and they’ll take all of your questions about housing will have Tom McClellan like I talked about giving his full technical analyst outlook about where he sees markets headed, we’ll have Stephanie Pomeroy, she’ll be talking about how the forces of inflation and deflation are likely to resolve next year, Mike Liebowitz is going to be ongoing gonna do it super deep dive into the bond market. He’ll then come back on answer any questions you guys have about bonds, then we’ll walk into energy. And we’ll have Doonbeg talk about kind of the global energy dynamics that are going on right now. And then we’ll hand the baton to Justin hewn, who will talk specifically about opportunities for investing in nuclear nuclear energy is a huge part of the mix is doomed berg is going to make in his presentation. But then Justin will actually tell you how to take actionable steps on it. We’ll also have famed natural resource investor Rick Rule there. And Rick just gives I can’t I’ve lost track of how many dozen specific companies that he names that are on his preferred list. So if you’re looking for individual companies to go out and consider Rick gives you probably more than you’re going to be able to take. And then obviously throughout the day, we’ll be joined by John and Mike the team there at new harbor. We will end the day, as we usually do with these conferences with live q&a an hour of just ask anything live q&a, where the audience can ask whatever they want of our endorsed financial advisors. So that’s John and Mike. That’s Lance from RIA. That’s Jonathan Whelan from Rocklin up there in Canada. And if there’s any time leftover, I’m gonna see if I can’t pull it in Craig Wisner managing, managing director of farmland LP to give us an update on farmland as an investment class. And I know that’s a topic a lot of people have been asking for. So it’s a jam packed schedule. But if we’re able to shoehorn it in we will. Lastly, everybody who registers whether your watch or not when you’ll get all the replay videos of everything I just mentioned. But you’ll also get a bonus video from Jeff Clark, where he’ll be detailing out his latest top picks for the precious metals mining companies that are burning most brightly in a positive way on his radar. So that’s a big mouthful. Everybody, it’s going to be an amazing day tomorrow. For those of you that already registered can’t wait to see you there. If you just are one of the procrastinators who haven’t taken action yet. Well, you’ve only got a couple more hours left to go do it to go get it go register and get your ticket go to wealthion.com/conference. All right, John, and Mike, thanks so much for hanging in there, buddies. I look forward to seeing you guys next week. Everybody else look forward to seeing you at the conference.
John Llodra 43:09
Thank you so much, Adam. Looking forward to Saturday, we always get a huge amount of learning even even us who are plugged in to this all day all day night in our in our daily life. So looking forward to seeing you.
Mike Preston 43:21
We look forward to seeing you tomorrow, Adam with both you and all your attendees and your special guests. So thank you very much.
Adam Taggart 43:27
Alright guys, take care. If you’d like to schedule a consultation with one of the financial advisors at new harbor financial simply go to wealthion.com. These consultations are completely free and there are no strings attached. The good folks at new harbor was simply answer any questions you have about your investment goals or your portfolio and give you their best advice given their latest market outlook. They’re willing to do this because they care about protecting people’s wealth. And because Wealthion has connected them with so many thoughtful investors just like you over the past decade. We started doing this because so many people have approached us in frustration looking for a solution because they’re feeling out of alignment, or downright ridiculed by the standard financial advisors who have been managing their money. You know, the type, the kind that just pushes all of your money into the market. scoffs at the idea of owning gold. And when you bring up concerns about the market sky high valuations, they say don’t worry, the market will always take care of you. For many of the reasons discussed in today’s video, we think this is one of the most challenging and treacherous times in history for investing. We strongly believe that today’s investors are best served working in partnership with a conscientious professional financial advisor who understands the risks in play. Now we’re agnostic which professional advisor you work with, as long as they’re good. If you’re already working with one that’s fantastic, stick with them. But if you don’t, or having trouble finding one you respect or trust, then consider talking to John And Mike and the team at new harbor. Now for those about to ask yes, there’s a business relationship between Wealthion and new harbor, which we’ve put in place to make sure everything is handled according to SEC regulations. All the details on this are clearly provided on the wealthion.com website. Also, it’s important to note that new harbor is able to work with US citizens, green card holders, and those with existing assets in the USA, but for regulatory reasons, they aren’t able to take on non US clients. All right, with all that said, if you’d like some insight and guidance on how to protect your wealth during this unprecedented time in the markets, go to wealthion.com to schedule your free consultation with the good folks at you harbor. Thanks for watching.
