David Rosenberg, Founder of Rosenberg Research, issues a bold warning about an impending market bubble burst, citing “stupid expensive” valuations as markets buy in the impact of Trump’s policy agenda. He joins Anthony Scaramucci in this exclusive post-election interview to explain why inflation, political polarization, and soaring debt levels could destabilize the economy, leaving investors exposed to serious risk. Rosenberg advises shifting to safe-haven assets like gold and bonds to protect against the fallout he sees as inevitable. He also discusses how geopolitical conflicts, particularly with Iran and U.S.-China tensions, add further volatility to an already uncertain market. A must-watch Speak Up conversation!
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David Rosenberg 0:00
Gone from an egregious equity market price bubble to something that is more like flying Over the Cuckoo’s Nest. The market is way premature and expecting that we’re going to be seeing at least when it comes to fiscal policy, the tax cuts that were being promoted during the campaign, I think that that is probably not going to happen. This equity bubble is going to burst. I will say 100% certainly this equity bubble will burst.
Anthony Scaramucci 0:36
Hi and welcome to speak up on the wealthion network. I’m your host, Anthony Scaramucci, we have a return guest backed by popular demand, David Rosenberg. David Rosenberg is the founder of Rosenberg research. He and his team have as their top priority providing investors with analysis and insights to help them make well informed investment decisions. That’s sort of just like what we do here at wealthion. But in all seriousness, Rosenberg research is an incredible organization, which is why we invited you back on. You were once the chief North American economist at Merrill Lynch. During that time, you were consistently at the top of the rankings of institutional investor, David, I am old enough when we all sat there patiently awaiting the II rankings list and the cover of II, right? So we’re really dating ourselves now, but you were at you were at the top of that all star list. Thanks for coming back. And this is a post election analysis. I’m getting my ass kicked. David, about me getting wrong my prognostication about the election, but let me tell you one thing that it’s not getting kicked, and that’s my portfolio. We’ve had a rocket ship happen in the Dow and other in other parts of the market, including Bitcoin, the s, p, the US, small caps. Everything’s moved. So tell me why stocks went massively bullish. Tell me if you agree with the current market sentiment. Well,
David Rosenberg 2:09
Anthony, first, thanks for having me back on the call. I thought for sure you’re gonna say that I was back on unpopular demand.
Anthony Scaramucci 2:19
Unpopular demand. No, no, no, no. Ratings, ratings, right? Let me tell you something. We’ve already established that I’m a prostitute, David, we’re just negotiating price. Okay, so ratings, rate you’re, you’re, you’re back on the show for a reason, because people listen to you, they love you and they respect you. But let me ask you about the market, though, the market’s saying tilt up, bullish, bullish, bullish. That’s the when I hit the slot machine on the morning of November the sixth, that’s what I got. I got the rocket ship emoji. Is the market Correct? Well,
David Rosenberg 2:53
I would say that whatever the market has embedded in its valuation, whatever it’s pricing in is probably not going to come to fruition. But look, I was saying that before the election, I mean, before the election, you had like a 40 basis point equity risk premium, and now we’re down to, like 10 basis points. So we’ve gone from an egregious equity market price bubble to something that is more like flying Over the Cuckoo’s Nest. So firstly, congratulations on your portfolio. So your heart was telling you one thing and your wallet was telling you the other things. So I would say that you were obviously perfectly hedged. But the question is, you know, what is the market really pricing in here? And there’s no doubt that there’s a lot of things that Donald Trump can do on his own through executive order and more deregulation. Clearly positive. You could point to the financials were the one sector that was really ripping from the outset. But you know, if the market is pricing in massive tax cuts, and of course, we also have the visceral reaction in the bond market to, you know, visions of an $8 trillion incremental debt balloon over the next four years. I think both of those have question marks in front of them, and I think that what nobody’s talking about is the wide divide between what happened top ballot and what happened down ballot? And I’m not talking about the fact that the Senate flipped moderately towards the Republicans, but as you and I are sitting here talking right now, they’re still counting the votes for. House, and the chances are that the Republicans will reclaim their majority in the House. But we’re not going to know for sure earliest until probably the same time next week, and the one thing that we know is that when Trump won in November 2016 and even though he didn’t win the popular vote like he did this time, the Republicans absolutely smoked the Democrats in the House of Representatives, where the GOP had a 47 seat majority this time around, no matter what, if they take control once again of the house, it’s going to be razor thin. So the question is, how do you explain that? How do you explain a president that beat his rival by three percentage points in the national poll, but yet there was not a similar landslide, or even something close to that in the House of Representatives. And what it’s telling me is that this was not really as much a pro Trump vote as it was an anti Harris vote, like I’m stunned Anthony by the fact that Harris got less of a share of the national vote than Hillary Clinton did. And we know what America mostly thought about Hillary Clinton. It was obvious a very negative vote against her, and I would say also a negative vote against the ongoing leftward leaning movement within the Democratic Party. So I think that’s a big part of it. This was not as much pro Trump as people think, and I’m not even convinced it’s actually a vote for Trump’s policies. So what happened is that the market believes is going to be one party rule, ruled by this pro business party called the Republicans. And so what everybody did at the outset was take out the 2016 to 2018 playbook, where equities ripped and bonds sold off until we got the split government in the midterms in 2018 Interestingly enough, the peak in Treasury yields in 2018 happened in the November midterms that very same day. So I don’t think a lot of people really expected there was going to be a clean sweep. Now, we don’t know if there’s going to be a clean sweep, but chances are that that’s what it’s going to be. But the house is not the Senate. The house is a fractious group, and it’s replete with fiscal conservatives on both sides of the aisle, including 38 Freedom Caucus members and the Republicans. So people that think she asked me, Do I think the market is wrong? I think the market is way premature and expecting that we’re going to be seeing at least when it comes to fiscal policy, the tax cuts that were being promoted during the campaign, I think that that is probably not going to happen.
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Anthony Scaramucci 8:56
So there’s a lot there. Okay, and I want to start with the bond market, if you don’t mind. So we’ve seen yields go you know, obviously the Fed cut rates this week. You and I expected at least a 25 basis point cut when we talked last time, but rates the 10 year treasury was got to a high of 4.47 it’s back down around four, three ish, if you will. But there’s an expectation that there might be higher yield under Trump, because even though he’s promising to balance the budget and cut $2 trillion from the federal budget, which is obviously impossible, that we’re going to have more deficit spending. What’s your reaction to that?
David Rosenberg 9:42
Well, I mean, we’re going to have more deficit spending. There’s no question about that. The big question is, you know, what’s, what’s the amount going to be, and what’s the overall impact on the economy and inflation going to be? You know, this is basically, as I said. But investors, broadly speaking, you know, took out the 2016 to 2018 playbook, and the playbook was dump your bonds and buy stocks, and that was the initial reaction. I mean, when you’re taking a look at the massive run up in yields, and it wasn’t just coming on the day of the election and the day after the election, this was starting once the market betting polls started showing Trump in the lead in early October, that’s when bond yields really started to ratchet up. And of course, the run up in yields just accelerated in the immediate aftermath of the election, but the bond market did in a matter of a month what it took five months to do coming off the November 2016 election and the stock market, I mean, 2000 points in the Dow in a two day span, just his head spinning. I mean, even that took, you know, about three months to accomplish coming off the 2016 election. You priced in a whole lot in a short period of time because of people. Did? You know, it’s always a classic case, Anthony the market, shoot first and ask questions later. So Trump flation, I guess, is the operative word. Reflation sells. You know, buy stocks, sell bonds, and that was the initial knee jerk reaction. I think that what unnerved the bond market is concerns that Trump’s policies are going to lead to higher inflation. And I would push back hard on that, because the one thing we do know with a four year sample size from 2016 to 2020 and even if you end that sample size to January 2020 before COVID, bond yields didn’t really go up during his tenure, and inflation actually was stable to lower during his tenure. And that was with building an immigrant mall around labor. That was with tariffs being imposed. I mean, nothing like he’s talking about now, but I don’t think that’s going to happen anyway. To me, that’s a negotiating tactic. And you know him personally, so you know that even better than I would. I
Anthony Scaramucci 12:14
mean, I mean, I mean, not to interrupt you, but Wall Street seems to be betting that a lot of the things that Donald Trump is saying he’s just not going to do you know, he’s talking about wildly aggressive tariffs. He’s talking about a deportation policy that would drop GDP by one and a quarter percent and cost us $88 billion at the federal budget level. So you think he’s going to
David Rosenberg 12:39
do any of these things? I don’t think that he will. I’m not so sure that that’s what the stock market’s looking at. The stock market’s looking at, you know, a renewed deregulation wave, and that’s probably going to happen. I have no beef about that, but where the rubber meets the road is the view that he’s going to once again slice top marginal corporate tax rates, and I don’t think that’s going to happen either. So, you know, we went into this, the difference this time around, you’re looking at the stock market, is that nobody expected Trump to win in November 2016 Trump himself didn’t think he was going to win, which is why it took him so long to fill his cabinet positions. Even he was surprised. And the market was sort of in the doldrums. I mean, we came off of Brexit, and then we came into a situation where Hillary Clinton was well up in the polls, which we know now that we can’t trust that much. But the Trump victory in 2016 and the Clean Sweep came as a big surprise this time around. It shouldn’t have been that big of a surprise. I had Neil Ferguson on my webcast just a couple of weeks before the election, and he said there was a 5050, chance, in his view, that there was going to be a clean sweep, and people were talking about that. And less of a surprise this time, yet more of a market reaction than even what we had coming out of November 2016 but once again, it’s basically a market that is being fueled by speculation, all sorts of speculation. There’s speculation about what the total available market is going to be, ultimately, with AI, all sorts of speculation now about about Trump policies, and you’re right. I guess you could say that the stock market is priced in the most pro growth parts of his policies, and us some of the other ones, like his tariffs and his deportation, that much is true. They’re just looking at, you know, if he slices the top marginal rate to 15% from 21 well, what’s that going to do to the earnings profile? And, well, you got to buy stock. And that’s the initial reaction. You know. The other part of this is. When we went into the November 2016 election, where was the forward PE multiple? It was, it was 17. It’s, it’s 22 today. Where was the equity risk premium when he got elected in 2016 it was 400 basis points. It’s like 30 or 40 right now. So it’s a totally different ball game. The level of the excessive valuation the stock market is in a completely different orbit now than it was back then. So in answer to your question, no, I think that the market was really expensive going into the election, and now a couple of days later, it’s stupid expensive.
Anthony Scaramucci 15:44
So let me give you another Trump doozy. I’ll just throw this out you. You know Trump is calling for either ending the Fed, ending the Fed, or taking control of the Fed, meaning that the independence of the Fed and its Board of Governors in terms of setting the interest rates would be controlled by the president united states. Take it out of the hands of the Federal Reserve Chairman. He’s going to do that.
David Rosenberg 16:13
Well, I don’t think that he really can. As powerful a man as he is, I think that he would definitely need to have congressional approval. I mean, the Fed the Federal Reserve Act is a congressional act. The President like how he appoints judges. Does appoint or nominate the Fed chairman, but the Senate has to confirm it, and so I think that there’s a lot of lot of bluster here. I don’t think that he’s going to be able to replace Powell, and Powell made that very clear at his press conference. I think that what Donald Trump will probably end up doing is using the bully pulp pulpit and his ex account to try and pressure the Fed. We saw him do that in the past, but actually interfering, directly, creating the shadow fed, or having his own personal, you know, Fed chairman, rivaling the actual Fed Chairman. I think that’s just pure fantasy, and I think it was, it’s going to the reason he won’t do it is because it’s going to work against his goals of maintaining financial market stability. That would be a policy prescription of triggering instability. And when we know about financial market instability is that’s, that’s what leads to recessions. So I’m going to assume that there’s a certain degree of rationality and that all the bluster during the campaign is not going to lift to fruition, and that includes what he wants to do about the Federal Reserve. All
Anthony Scaramucci 18:12
right, so, again, a lot of talk, but a lot of people not taking that talk seriously by the new president elect. Let’s go to geopolitics. Okay, then we’ll ask, we’ll take questions from the audience. We have a couple of wars going on. We have the Ukrainian war. We have a war between Israel and Hamas. Donald Trump pledges he’s gonna end that war in 24 hours. What do you think happened? Let’s start with the Ukraine war. And then the third piece of this thing, I want to talk about US China, but let’s go Ukraine war, Hamas, Israel, and then US China relations.
David Rosenberg 18:48
Well, the easy one is that I do believe that he will be able to get a resolution to Russia, Ukraine. And of course, maybe this is an instance where his relationship with Putin might help foster that. And I don’t think any of the two parties are going to be very happy with the resolution, but probably Zelensky is going to be a lot less happy. So there will be territorial concessions, but I do believe that that is a strong possibility. It’s not, you know, when you’re talking about Israel, it’s not just Hamas, but it’s Hezbollah. You can argue the hooties and all lines go back to Tehran. So it’s really more about Iran than it is necessarily about Hezbollah and Hamas, which are proxies of Iran. So my comment there is, I do believe, compared to Harris, that he’s going to give Netanyahu a longer lifeline. I don’t think that he’s going. Expect that the conflict with Hamas, for example, is going to end that quickly until Hamas surrenders, which maybe that never happens, but I think he’s going to give BB a longer lifeline. I think he’ll first settle what’s easier, which is Ukraine, Russia and in terms of China, I don’t think that. I don’t think Z is going to be doing anything to get Trump rattled. You know, that’s the thing about Trump, is he’s not a pacifist and but he’s not from the military industrial complex. He’s not really a warmonger, but people are scared of him. Nixon was not a warmonger. People were scared of him. He ended the Vietnam War, and the next thing you know, establishes relations with China. And people were scared. In 1980 the big knock against Ronald Reagan running against Carter was that he’s going to start world war three. You certainly remember that, and he’s labeling the Soviet Union the evil empire. And the next thing you know, several years later, we have pestroreka, and then under George HW Bush, the Berlin wall comes down. We couldn’t have predicted that in 1980 but people were scared of Nixon, and people were scared of Reagan. And I think it’s probably a good thing for the rest of the world to be scared of the president United States. And so I think that there’s a reason why, even though his White House was chaotic, as you full well would know, but who cares about that when in those four years, the world was relatively more trouble free, that’s for sure, than it’s been over the course of the past four years. To me, what’s most important is how he deals with Iran. Iran is the greatest threat China. You could argue? Could you argue China’s an economic threat any longer, as they continuously deal with their property sector deflation, they’re in a structural growth slowdown. This is not the China of 10 or 20 years ago, so I see that as less of a threat, and China is not going to do anything with Taiwan, certainly not with Donald Trump in power. To me, the most important geopolitical risk is what happens with Iran. And the one thing we know about Trump is that he was a lot harder on Iran and the sanctions and so on and so forth. And my hope is that he realizes that this war in the Middle East is just broader than just Gaza and the West Bank and Hezbollah and Lebanon, but it’s really about Iran and Islamic Jihad and extreme fundamentalism. So to me, that’s going to be the most important geopolitical hot potato that he’s going to have to handle all roads lead to Tehran in the next four years from that’s a geopolitical aspect. So
Anthony Scaramucci 23:22
let’s go to the questions from the outside audience, because they’re always great questions, and you’re very quick on your feet. So let’s go to those. How do you manage risk in volatile markets like could happen again with Trump? Which asset classes do you see a safe havens? This is Douglas from Canada.
David Rosenberg 23:43
Well, I think that the safe havens will be gold. I think your Bitcoin probably does. Well, I’m not a big advocate of Bitcoin because I don’t have ice in my veins. I look at Bitcoin as you know, gold with 20 times the volatility. So yeah, you do have to have ice in your veins. But I do think that hard assets, you can argue commodities in general, they’re screening very well, by the way, in our research work. So commodities, gold, I think that, you know, the elephant in the room was what I talked about before, and I was writing about this, Anthony, that I felt sorry for whoever won the White House. And I’ll tell you why, because Donald Trump is walking into a real land mine here with the equity market, that nobody’s talking about, the complacency, the view that we’re in a perennial no landing, soft landing in the economy, that there will never be a bear market again, that sends shivers down my spine. I mean, I cannot believe. Everybody is all in on the same trade, and the amount of risk on household balance sheets in the United States has never been this acute before. So I would say one of your safe havens is going to be treasuries. I know people will say, Well, I don’t want to touch treasuries. And of course, right now, who wants to touch long duration after being whacked around over the course of the past two months? And I understand that, but this equity bubble is going to burst. This equity bubble is going to burst. I will say 100% certainty this equity bubble will burst, and I don’t know when it’s going to happen or what the catalyst is going to be, this equity bubble is going to burst. And then what happens, as always happens, is that the analysts and the strategists and the economists then apply a narrative to the price action. We don’t know the catalyst. Usually the catalyst is just that the bubble becomes exhausted. And you know, we know that bull markets or escalators going up and bear markets or elevators going down, but you see, everybody is all in at the same time, and that has me really worried. I mean, over half the market is now passive index investing. When John Bogle unveiled the Vanguard ETF in 1976 he said this market will never get above 20% of the market cap. It’s now over 50% people don’t even know what they own, so I’m very nervous. And so at these multiples, at these multiples, whether you look at price to earnings, price to sales, price to book, the cape multiple, the Buffett indicator, the fact that portfolio managers are below 2% cash ratio, households, 70% exposure to equities, 9% exposure on the balance sheet to bonds. But who cares about bonds? You know you’re going to go to the cocktail party your choice. Can talk about Nvidia’s latest orders numbers, or you go to the cocktail party and you talk about what a great tenure auction there was today. That’s not very sexy, but I’d say that I like bonds at these levels. So I’d say bonds, gold, commodities, and I don’t think you have to do much more than that for your quote, safe haven.
Anthony Scaramucci 27:18
Let’s go to another question. I love it. Besides gold, are there other important commodities that you think are worth watching and maybe investing in? Javier from New Mexico?
David Rosenberg 27:32
Well, you know, we actually created in house, a green commodity index, which, of course, have been doing well. But you know, the one thing that’s going to come to come under the knife. You talked about $2 trillion of spending cuts from Elon Musk, well, good luck with that, because it means discretion. You know, discretionary spending is going to have to go to zero, and that’s hardly likely to happen, but a lot of the green energy support from the Democrats is going to fall by the wayside. So those sorts of commodities you don’t want to touch. You talked about, you know, we talked about gold. I like precious metals in general. I think that two things, if China can finally embark on a fiscal package that puts a floor under its economy, you will find base metals and iron ore, copper, aluminum, zinc, nickel, lead, tin will probably do quite well. That’s an assumption, but that’s something to keep your eye on. So the traditional base metal, you can just buy the CRB or the Goldman Sachs base metal commodity index. And that would be even though I’m not bullish on the global economy, that will be perfectly appropriate. I find that I’m a contrarian. Keep in mind, I am a contrarian, and everybody has turned very bearish on oil. Why? Because they went to the Trump playbook, drill, baby, drill, and they found that oil did not go up, and his presidency spent more time going down than going up. Energy stocks were one of the worst places to be in that Trump bull market. And everybody’s saying the same thing. And actually, if you’re taking a look at what happened after he got elected, all prices went down. But I think that no withstanding drill, baby drill, if he puts the sanctions back on Iran. And of course, a lot will depend on how the Saudis respond, you may find that oil prices surprise more to the upside that the downside. So that’s basically a contrarian bullish signpost for me, for oil, adding that into your bucket of commodities that you want to own in this environment. All right, let’s
Anthony Scaramucci 29:55
keep moving. Let’s keep moving. I. Yeah, with crypto surging and gold and silver dropping after the Republican sweep, do you see this as a smart move of money or just crypto exuberance? This is Chris from New Jersey.
David Rosenberg 30:12
Well, the crypto move, I mean, crypto was basically just range trading for so long, everybody was waiting for it to go back to the March highs, and it does it in spectacular fashion when the day of the election. So we know that the look Trump is pro deregulation, and very much pro deregulation when it comes to cryptocurrency. And that’s a pretty big shift from the more regulatory posture that the Democrats had, so that unleashed a lot of exuberance. I have no reason to lean against that. I mean crypto. I mean, look, it surprised me the whole way through the past several years. And Anthony, congratulations on your long position on it to me, it’s a little too speculative for my liking. It’s a it’s a little too volatile for my liking. I’d rather just own gold, which has a longer track record. It has similar properties, but you know, gold will make you rich over time, but won’t make you rich in a matter of days, weeks or months, like Bitcoin. So there’s more optionality. So I think that there’s, there’s good reason for it. You know, if the President, through executive order, can end up increasing the demand for any asset, and here we’re talking about crypto assets, then it makes perfect sense to me. I don’t own Bitcoin, I don’t own crypto. I’m not involved in that space, but I am. Look, I’m not you, Anthony. I don’t have ice in my veins, and I tend to be a very conservative investor, and the byproduct of having been raised by depression or appearance, I suppose, so I like to narrow the bands. I don’t have ice in my veins, and I don’t swing for the fences. To Be Bitcoin, ether, the bunch of them, are really swinging for the fences, in my opinion. And look and you’ve hit a home run, but my investment philosophy has already been, you know, bunt for singles, and if you get a double, you know, you know, do a nice little dance by the pitchers mound. But that’s my philosophy.
Anthony Scaramucci 32:16
I love it. Let’s keep going with global debt and all time highs. Could we face a debt crisis? If so, how should investors repair prepare for that? That’s robber from Pennsylvania. Well, I
David Rosenberg 32:31
guess that comes down to what we talked about before. You’d want to probably own hard assets. You’d want to own gold. You probably want to own crypto. I mean, the reality is that the crypto space is viewed as a much like gold as a currency that’s no country’s liability. So to me, that would be the natural hedge, because we opened up the Pandora’s box after the Great Recession with quantitative easing and central banks opening up their balance sheet, there is a huge buyer of last resort for government bonds, and it’s global. So I think when people say, Well, what happens if you get some sort of like massive debt default, or you get a sharp run up in yields that goes over beyond the economic fundamentals. Well, guess what? The world central banks are going to step in and mop up those bonds that nobody else wants to buy. So I’m not overly concerned about it. That’s the reality that we’ve had our hands for many years now that there is a new player at the table when it comes to assets, and in some cases, you have central banks that buy equities. Yeah, situation after COVID, where the where the Fed opened up its kimono, it’s kimono to buy investment grade bonds and even high yield, although they never had to do that, but they opened up their balance sheet for it. So we have the template, you know, we have the precedence is already there. So if some accident happens, we just have to know the central bank’s going to be there to mop it up very quickly. Alright.
Anthony Scaramucci 34:24
Firing another question, global economic operation cooperation. Global Economic Cooperation seems to be weakening. What impact might this have on global growth and stability? That’s always my big worry. David,
David Rosenberg 34:41
well, you know, there’s things that happen glacially, like this partial de globalization that happened after COVID, and concerns about supply chains and and keeping them close to your own border or within your own border, and that’s why you talk about cooperation. And I mean, we talking here, and Anthony, we’re talking about tariffs from Trump. But what was the chips Act? The chips Act was a different sort of tariff. It was basically subsidizing global companies to set up shop in the US so that America could become a global competitor. And semiconductors, again, what sort of cooperation is that that’s a different that’s not really a classic tariff, but that is a form of trade protectionism. So we’ve had this partial de globalization, the onshoring, the French shoring. These are very nice words. Just talk about the fact that we’ve been in this trend towards partial de globalization from decades of rampant globalization. Yeah, the big risk when you’re talking about a breakdown on cooperation is Donald Trump living up to his election pledge of 60% tariff on China and 20% tariff on everybody else, which I think would risk a global Trade War. The tariffs that Trump is talking about would would be equivalent to what happened in the 1930s So just think about that for a second. So yes, I believe that it would lead to a massive global recession and financial market instability, and that’s why, and I think that Anthony would concur, you know, without putting words in his mouth, that that’s why, hard assets and gold, gold is basically gold doesn’t have there’s no dividend discount model or term premium, or any How do you value gold? Gold is valued by one divided by T, where T is trust. So that prospect of global instability, which is real, is why you want to have a higher proportion of your portfolio in gold, silver and in gold and silver mining stocks right now, would fully concur with that. That is your that’s your natural hedge against that prospect.
Anthony Scaramucci 37:02
All right, let’s keep moving. Good stuff. Could political polarization increase with Trump, along with his shift in policies impact the economy and markets? James from New York,
David Rosenberg 37:17
well, you know, I think that I want to go back to what I talked about before. I mean, there’s bluster and there’s threats, but in the end, all bills get initiated in the House of Representatives, then it moves to the Senate, then they have all these committees, and they come to a compromise, and then it goes to the President’s desk to sign. But everything starts with the House of Representatives, and that’s what I talked about before, that you don’t have a house this time around that is going to be prone to massive deficit finance. That’s why, if there was a big overreaction in the markets the past couple of days, it was probably even more in the bond market than it was in the stock market. I can understand the stock market thinking, D, Reg, D, Reg, D, Reg, okay. You know that’s going to reduce business costs is bullish for the corporate community. I still think that the stock market is way overpriced, but the visceral reaction of the bond market was was way overdone. I don’t know if Trump is capable of increasing polarization. Who knows? Is he serious about going after his political opponents? I don’t buy into the rhetoric. I really don’t. He was going to, apparently, lock Hillary Clinton up. Did he ever do that? So I think we have to separate the rhetoric from reality. The US already has been polarized for decades. It was polarized for decades, and it started with the Clinton administration. The visceral hatred started in the 1990s and it really started with white water and Ken Starr and then the impeachment of Clinton, and then reinforced by the dimple Chads and gore versus bush in 2000 and then just accelerated into the Obama administration. And we were hoping with Barack Obama that there was going to be, I mean, there was a historic election in oh eight, but Barack Obama himself was extremely divisive. He didn’t, he didn’t invite one Republican official from Congress into the Oval Office once during his eight years. And so the the divide, the. Political divide. And then, of course, you get Donald Trump. And this was back in 2016 you know where there was a headline article The New York Times after Trump got elected, where families were not going to be together in Thanksgiving because of the political divide within families. Now that actually happens in Israel, but in Israel, politics is life or death, not life or death. In the United States, but this has been going on for some time, and then it was again reinforced in the 2020, election, and then in this past election. And I don’t know what. I don’t know what, what, what is gonna what’s gonna resolve it. I have no idea. I did read somewhere today. Forget it was in the New York Times or the Wall Street Journal. It might have been Real Clear Politics actually that. And this is the one glimmer of hope, is that the coalition of diverse groups that voted for Trump was very similar to Barack Obama’s coalition of diverse votes back in 2008 so you know, maybe that’s a good sign post the fact that he scored so well with minority groups like African American males and Hispanics, not just males, but also females and the youth Vote. So you know, maybe there’s an opportunity here, if we can look at the fact that the Trump vote was not just narrowly based amongst the quotes deplorables, as Hillary Clinton put it, it was actually much more diverse. The question is, how will the President read that? But the fact is that his support was a lot broader in terms of demography than it was back in 2016 but you know, the wide divide between and the visceral hatred between the two parties, that’s going to take, probably take a long time to narrow that in I would love to see the day Anthony that we Get back to what we used to call Reagan Democrats, right? You know Ronald Reagan? Right? You know that more House Democrats voted for the tax reform bill in 1986 than Republicans did. And the good old days when Tip O’Neill and Ronald Reagan would go for drinks together, it’d be great to get back to that era. But this political divisiveness, it’s gonna take a while to narrow, but maybe, as I’m looking at the constituents of the Trump win, it’s very significant, and maybe that’s maybe that’s a sign that we’ve hit peak divisiveness. To put a put a positive spin on it.
Anthony Scaramucci 42:59
Let me answer it. Was it a vote for Trump or a vote against her? I
David Rosenberg 43:03
think it was more a vote against her. I think it was more a vote against the past four years, and I think it was a vote against the leftward lurch that the Democrats have been making, I think ultimately what happened the most important thing was the inflation. And even though inflation peaked back in June of 2022 which is true, prices have still gone up 7% still then. So the rate of change has come down, but prices continue to go up, and inflation is a social disease. This is the one thing that I don’t think the Democrats realized when they were spending all that money, the oxymoronic inflation Reduction Act, the chips act, all the subsidies, all the the candy handed out to the proletariat that created the inflation. How do you like that the $2 trillion of stimulus checks to anybody with a pulse back in the winter of 2021 it’s the it’s cruel to think about how ironic it is that those giveaways shot the Democrats in the foot because it created the inflation alongside a whole bunch of other things. And the thing about inflation is that, or about prices, is that they’re hard to bring back down, like the inflation rate is down, but nobody feels it, because prices continue to go up from an already egregiously high level. So that, I think, is what did the Democrats in from a economic standpoint, because they can point to all the other things, right? GDP, growth, low, unemployment, they could have pointed so many things, and they did that were. Positive and 100% true. However, the inflation, inflation we inflation brings down democracies. Inflation has brought down empires. Inflation is a social disease and attacks on the most vulnerable parts of society, the poor and the elderly. And I can’t believe that the Democrats didn’t realize that the inflation killed them, and that’s why I’m bullish on bonds. People think I’m crazy. But look, the reality is that outside of the border and immigration, what was Trump’s critical plank, he stopped really talking about corporate tax cuts. He did talk about drill, baby drill, but he kept on going on and on about how he was going to kill inflation. He is going to kill inflation. Now, inflation has already come down a lot, but he’s going to kill it further. Now, the beautiful thing about what the founding fathers did is we don’t have elections every four years. We have elections every two years. And I’ll tell you, the midterms are around the corner. They’re two years away, and if he doesn’t get inflation down further, the Republicans are going to pay a price in November of 2026 so that’s the one thing I take him seriously on, is that he’s going to bring inflation down, which is why I think the tariffs were really just a campaign goodie to hand out to the industrial base. He doesn’t bring inflation down further. The Republicans are in deep trouble in two years time, and they know it. So I think inflation is going to come down. There is no the one thing we know from this election, the one thing we know is certainty in this bog of uncertainty, Anthony, is that there is no public appetite in this country for inflation. The memory of that miserable experience was almost what it was in the 1970s and there was no public appetite for inflation in the 1980s and inflation went down. Guess what? Bond yields came down too, and that was a big surprise to everybody. So we came off a miserable inflation experience. It wasn’t as bad or as long as the 1970s but it is seared in the memory bank of the American voter, which is what we saw happen on Tuesday, and the fact that Trump ran on a disinflation a disinflation platform, very vociferously. I will take him at his word on that, and if I’m right on that, at the current level of bond yields, after ratcheting up as much as they have since the middle of September, are going to be a very good place to be, and you’re not going to make a killing in the bond market. You don’t buy bonds to get rich. You buy bonds like gold as a ballast in the portfolio, as a stabilizer, and especially at a time when you got the top 5% expensive stock markets of all time, when the stock market goes down, and I do not subscribe to the theory that the business cycle or the market cycle has been repealed, you will never hear that from me, and you will never hear from me that we should be investing in a two standard deviation event, which is where the multiples are in the stock market right now. You will never hear me say, invest in a two SD event. But I’ll tell you this much, when the stock market does go through the bear phase, which it will, because the market cycle is not dead. You’re gonna you’re gonna wish those people, in aggregate that only have 9% 9% of their portfolio in bonds, are gonna wish it was three or four times that exposure as we sit here today talking about it. Well said,
Anthony Scaramucci 48:40
Well, you’ve been unbelievably generous with your time, as always. David, thank you very much. A legendary David Rosenberg, and where can we find you on Twitter, if you don’t mind, where we find you on Instagram. David, the founder of Rosenberg research, well,
David Rosenberg 48:55
my my handle is econ guy, econ guy, Rosie, or at econ guy, Rosie, and you can get in touch with me at D Rosenberg, at Rosenberg research, com. And I was brought up well, I said Depression era parents. So I get back to everybody same day I get the email, and if you want access to a free trial of my research, just either Google Rosenberg research and come on the website, or go to information at Rosenberg research.com and one of my client service representatives will look after you.
Anthony Scaramucci 49:40
Sounds great, brother. Thank you so much. I appreciate you joining Great weekend to everybody, and we both appreciate joining speak up on the wealthion network.
Andrew Brill 49:50
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