BCA Research chief strategist Marko Papic says it’s time to halve your U.S. exposure! America’s post-pandemic out-performance, he argues, was “fueled by drunken-sailor spending”, and that fiscal sugar rush is ending. A Trump 2.0, Big Beautiful Budget deal that cuts entitlements could push bond yields lower, the dollar weaker, and global markets higher.
In this fast-moving macro and geopolitcal tour with Maggie Lake, Papic lays out:
Why Europe, Japan, and emerging markets are set to lead
How a lower dollar reshapes every asset class
Why tariffs are mostly negotiation theater
Using gold and crypto to defend your cash, not replace equities
Why Middle-East fireworks won’t jolt oil, and how U.S. taxpayers quietly secure China’s crude
Stay for the second half, where Rocklinc’s Jonathan Wellum drills into tangible-asset plays and portfolio tactics.
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Get To Know: Rocklinc’s Jonathan Wellum https://youtu.be/ezMiX0FtZ7g
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Marko Papic 0:00
I think that you should take whatever allocation you have to US assets in half. That’s who the winner is. The winner is the rest of the world.
Maggie Lake 0:11
Hello and welcome to wealthion. I’m Maggie Lake, and joining me today is Marco papich, chief strategist at BCA research. Hey, Marco, it’s great to see
Marko Papic 0:18
you. Great to see you, Maggie. Thank you for having me on
Maggie Lake 0:21
so as always, there’s a ton to discuss with you, and I think front and center, at least for a lot of us sitting in the US, is the US budget bill, also known as the big, beautiful bill, was which passed a key vote in the Senate, is headed back to the house. Of course, there are going to be last minute negotiations, but this thing seems to be moving with more momentum than a lot of people with a handicap just a few months ago. What is your take on it? What kind of market impacts are you expecting?
Marko Papic 0:51
Well, I think that first of all, it has to pass, and the reason it has to pass is what Treasury Secretary Scott Besson said during his confirmation, not passing the extension to the 2017 tax cuts would basically lead to the largest tax increase in US history. So that’s that’s something that was always going to pass. Even if vice president Harris had won the election, she would have had to sit down with Republicans and make sure that taxes don’t go up. The issue is that the majority of the deficit inducing component of that bill goes towards keeping taxes the same. So let me say that again, $4.5 trillion over the next 10 years goes towards nothing, right? It costs four and a half trillion dollars to do nothing to keep taxes of everyone watching this the same which is doing nothing, and that’s because the 2017 tax cuts were not paid for. They expired in January 2026 as such, when you ask, you know, what’s the market impact? I would say, well, majority of the bill goes towards nothing, therefore the market impact will be nothing, and that includes bond yields. You know, there’s this view, very negative bond view, that the deficit will expand over the next 10 years thanks to this big, beautiful bill. It’s actually not named appropriately. I would call it a modestly sized bill, because it actually only increases the deficit from current six and a half percent to maybe seven and a half maybe. And then we have to add to that, the fact that tariffs are likely to decrease the deficit. Some level of tariffs is clearly going to stay. So the impact of this on the deficit is also nothing, and I don’t think the bond market will riot as a result. So actually, I see, even though I’m the guy who coined the term human steepener to describe President Trump, you know, he steeped the yield curve, and he did September, October, November, December, bond markets did riot, but that Riot itself has produced the kind of a nothing burger of a build that we have now
Maggie Lake 3:01
that’s so interesting, because you do get this narrative that you know, even though they preached, you know, fiscal conservative and the Republicans traditionally are worried about that. Once again, everyone’s spending like a drunken sailor. But does it matter that the expectation was that maybe, you know, the fiscal deficit hawks and maybe stronger hands were coming in, and maybe just maybe, that President Trump and Scott Besant were the guys that were going to be able to get the deficit under control and not just do nothing or increase it slightly, but actually start to lower it. Does it matter that there was that expectation? Well,
Marko Papic 3:42
I would actually take the completely opposite view of what you just said. When President Trump campaigned June 2024, there was absolutely no mention of fiscal conservatism. In fact, he defeated an opponent in the primary in the Republican in the Republican primary, Nikki Haley, who was talking about cutting entitlements and who was talking about the deficit, that was the main platform that she had, and she won, like 12 delegates. I’m joking, but she won very little. I don’t even know what number, because nobody cared. She had no chance. Why? Because fiscal populism was still popular. So I would take completely different view. In fact, we can chart this. We can show data, the expectation of fiscal spending in 2024 the expectation of how much the government was going to contribute to growth, went through the roof as President Trump ascended to the presidency and then has collapsed. So the bill you see before you, I think the media narrative is completely wrong. The bill you see before you is not profligate, really at all. As I said, deficits are just going to be flat for the next 10 years, which is a huge change from deficits that are increasing massively over the last five years of the Joe Biden presidency. And, of course, the very interesting pairing in 2020 what I call the Nancy Pelosi. Donald Trump administration, because the two of them were lockstep in blowing out the deficit. So you’ve got 2017 pro cyclical tax cuts that President Trump did not pay for. That’s your first huge bout of spending. Then you’ve got the Nancy Pelosi Donald Trump administration in 2020 basically spending like jargon sailors. Then you have Joe Biden, which just takes on the mantle and then does more, and now you’ve got a bill that keeps deficits flat. That’s not That’s not a disappointment towards more profligacy, it’s actually less, and that’s why bond yields have come down. They went from 3.5 to 4.8 like this when President Trump got elected, and then the House of Representatives started talking about something that Trump did not talk during his campaign, which is cuts, and we are going to have somewhere between one and a half to $3 trillion worth of entitlement cuts, which, again, was not part of any conversation at all in 2024 so that’s where I take the other side of this, and that’s why I think that the bond market will not react the way that you know a lot of people on Twitter and a lot of people you’re reading in newspapers are saying bonds already did that. They already rioted against Trump’s campaign platform, and this bill is far different from his campaign platform, so expecting more upside in yields at this point is highly unlikely, especially with the economy in the US clearly slowing down as well.
Maggie Lake 6:18
If you have any questions about how to navigate the current environment, wealthion can help connect you with a vetted advisor to get a free portfolio review, just click the link in the description below or head to wealthion.com/free there’s no obligation, and it will just take a few minutes of your time. Again. That’s wealthion.com/free thanks so much for joining us. Yeah, is there is this bill enough to stimulate the economy.
Marko Papic 6:41
Well, that’s the flip side. You know, if yields are not going to rise because of this bill, it means that, no, it is not. And I would argue that we’re in a upside down world, where if you want to stimulate the economy, you need to become fiscally conservative. You need austerity to stimulate the economy. And let me explain why. From 2010 to 2017 austerity was was stupid. The Tea Party did the exact opposite of what should have done. They shot America in the foot. Why? Because the private sector needed to deleverage. The private sector was overly indebted due to the real estate bubble. And so it did not help that the government became obsessed with cutting the deficit from 2010 to 2017 That was stupid, and it increased the pain for households, and it led to secular stagnation today. However, households are not indebted. In fact, US households have the healthiest balance sheets they’ve had in 50 years. So what they need is lower interest rates, but not the Fed. You know, people obsess about short term interest rates, which is the Fed. What fed controls? That’s nonsense and irrelevant. Like from September to November of last year, borrowing rates went up, even though the Fed was cutting. What needs to happen is long term borrowing rates have to come down, which is what human beings in America actually borrow it. Nobody borrows at the Fed money. But how do you do that? Well, you do that through prudent fiscal policy in part and through productivity increases, things that will lower inflation, not tariffs and not more profligacy. And I think the administration understands this, which is why they’ve flipped on a lot of their aggressive trade policy, and it’s why this bill, it’s why President Trump is not pushing against Congress when they start cutting entitlements, which he did not campaign on, because fundamentally what what is needed to stimulate the economy is not more fiscal spending, it’s less so that borrowing rates on the government come down, and as they do so, do the borrowing rates for you know, people who are watching this, your mortgage rate is going to come down because the Fed cuts interest rates. The Fed could cut interest rates 400% it may not do anything to your borrowing rates on the mortgage. I mean, unlikely, but it’s really about that 10 year yield coming down, and so what what will be required over the next five years if policy makers wants to stimulate, uh, private demand is to bring the borrowing rates for the government down as well.
Maggie Lake 9:09
So why do you think that, given that Trump repeatedly goes after the Fed chair, calling him too late pal, and putting so much pressure on him to lower interest rates, if, in the end, it’s, this is not a monetary policy issue, it’s a fiscal issue.
Marko Papic 9:25
Well, I would say that, you know, we I’m being hyperbolic for effect, but I do think that it will, on the margin, help if the short end also comes down. So it’s unlikely that the curve would steepen so dramatically, unless President Trump is pursuing truly extreme, unorthodox policies on trade, inflation and so on. So it does help if Jay Powell plays along. But it can’t just be Jay Powell. So President Trump is not wrong to say, hey, interest rates are too high. I actually think that the Fed has been too late. You saw the jobs. This report come in. You know, we’ve lost private sector jobs. So yeah, like Jay Powell was clearly late. Curiously he wasn’t late before the election. Curiously he was he’s been late after the election. But regardless, fed, cutting rates can help bring long end, but the long end is currently mostly dominated by inflation expectations. It’s dominated by the term premium, and that has to do with fiscal policy, trade policy, things that could impact inflation. And it’s really up to President Trump and Congress to kind of lower that themselves.
Maggie Lake 10:34
Yeah. So what does this mean? So we’re not going to get the sort of bond vigilante blowout in bond yields, which I think is going to be a great relief to, you know, so many people who who have some sort of borrowing, as you pointed out, what does this mean for equities?
Marko Papic 10:51
Well, I think equities, first of all, if a recession is starting in the US, equities will be in trouble. You know, naturally we’re almost, uh, you know, like Magnificent Seven is struggling to reach all time highs, but it’s kind of there US equities have had a great run since the correction in April. However, if there’s a true recession coming in, equities are not going to do well. I’m not into recession camp, and I actually think that three things are working in favor of US equities. First, the dollar has collapsed. Equities are priced at the end of the day in the dollar. So if the dollar goes down, equities should go up. I mean, it’s a simplistic way to think about it, but not wrong. They’re a nominal asset, and so it does matter what they’re priced in. I think dollar has more downside for a number of different reasons. The second issue is that bond yields, as you pointed out, have likely arrested their upside trajectory. That’s good because bonds and equities have flirted with positive correlation on and off for the last five years. However, of course, you don’t want yields to go down too far, because that reflects a recession. So let’s, you know, let’s keep that in mind. And then the final issue is that the Fed does have 450, basis points worth of cuts to go with. And I think Jay Powell is in a very difficult position. I mean, President Trump is pressed, pressing him, but now President Trump looks really correct, with the labor market starting to show signs of cracks, and Jay Powell does look like he’s late, and he’s going to start being pressured by perhaps a new shadow Fed chair, which could also impact equities as well. Why? Because that Fed chair will be more important than the dot plots, more important than what Jay Powell says. The expectation will be that that person will then come in from next year onwards and set monetary policy. So I think that those three things are something that will keep equities well bid for the rest of this year. I don’t think we’re going to have a severe downturn, but yes, you know, you should probably plan on seeing a five to 10% correction at some point over the next six months. Why? Because there could be a growth scare coming in right now with the employment looking iffy. And then finally, there could be also more agita coming from the tariff negotiations as well.
Maggie Lake 13:07
Yeah, what do you what do you see happening with tariffs? This whole taco Trump always chickens out. There’s been this narrative that, if that’s the case, maybe what country wants to do a deal when they know that you’ll eventually acquiesce. How do you see this working?
Marko Papic 13:24
I think that it’s a it’s a very pejorative term that he chickens out, because that is empirically incorrect. He he doesn’t chicken out, chickening out with me, like, Hey, I was just kidding. Like, let’s not do anything. President Trump always, in every situation produces a deal. Now you can criticize that deal as being only marginally positive, but he’s never produced like a negative deal for the US. No, the US never loses. Usmca is a great example. Usmca, I mean, he came in promising all sorts of reforms to NAFTA. He ended up doing NAFTA 2.0 with a digital chapter like me. You know, Hillary Clinton would have been proud of usmca, like, it was a very devotion deal. So he didn’t get anything that he promised, but it was a good deal. I think you could objectively say Canada probably won that deal. But like, hey, you know, it’s not like the US lost. It was a win, win. So the chickening out is a problem because, you know, I think a lot of the media that doesn’t like Trump, like takes, interprets the eventual outcome of a negotiation as a loss, or him stepping back. But this is just the style of negotiations he has. He He promises the moon and then he delivers the roof of his house. Like we didn’t get to the moon, but hey, look at the view from the house, you know,
Maggie Lake 14:41
or we got it, we fixed the roof, you know, media, but didn’t taco kind of come from, from x and from all of the sort of commentators out there. I mean, it’s wider than that. The people who want to, sort of like, make a meme out of some of this Trump stuff. I
Marko Papic 14:56
mean, I think it’s both, definitely. I think there’s an. Trump bias in the media, which is fine. I mean, it’s like, it’s not, it’s not a problem, but I’m just saying that it’s not chickening out. That’s the important point, right? It’s, it’s just empirically not true. Like, there’s, he never, ever just quits on the negotiations. It says, and cries uncle. You know, it’s always like, Oh, look at the great deal. And then people look at it and say, like, Yeah, but you promised x and you got x minus 10. You know, it’s still positive, but it’s not what it looks like. So don’t
Maggie Lake 15:24
look at the promise. Look at the starting point and see where the needles moved, if you’re going to judge the deals that come through.
Marko Papic 15:31
Yes. So for example, you know, if the deal with India includes lowering tariff barriers for American companies on a sort of an ad hoc sectorial basis, like, is that really a trade deal? Like, no, it’s not a trade deal. It’s more like a trade agreement, like addendum to the relationship. It’s like, not profound, but it’s better than nothing, so it’s better than the status quo. So that’s why I think that the tariff negotiations first of all, are going to continue the way that every single thing Trump has ever done continues, which is promises, the movement delivers the roof of the house. And the reason for this is twofold. First, we talked about bond yields. You know, there’s this really kind of a strange relationship between bonds and trade negotiations. Why? Because if you set tariffs at like 50% you’re not going to collect any revenue, because no one’s going to buy goods from that country. So all you’ve done is increase inflation because we now have to buy bicycles made in the US, and you will not collect any revenue. And so why would the bond market like that? Bond market is saying, number one, you’re not contributing any revenue to deal with your fiscal problems. And number two, we’re going to have, you know, people in like Illinois assembling bicycles, which is not efficient, and it’s, quite frankly, mathematically stupid, so prices are going to go up. And so bond yields during the After the Liberation Day, you increased recession risk, but you also increased inflation risk, and you lowered the probability of collecting any revenue. So those tariffs are nonsense, like we’re not going to put tariffs on penguins using chatgpt to set your tariff levels by country is clearly either an act of stupidity or it’s a tool of negotiations, just to scare the other countries into like, sitting down and actually talking. So in order to actually collect revenue from tariffs, you have to be pro globalization. I mean, at like, a devotion level. What I mean by that is like you have to be like a Davos man, pro trade. Let’s go, No, we’re not going to make any bicycles in America. Why? Because we need to tariff the consumption of foreign bicycles to deal with the budget deficit issue. And so this is where the Republican Party has got to kind of choose which seat it wants to sit on. It’s, it’s a complete logical fallacy that you can both, like, move manufacturing back to the US and deal with the deficit. It’s just not going to happen that
Maggie Lake 17:54
way. Okay, wait, this is really important, because this is, this is completely not what we hear coming out of Washington. This is Make America Great Again. Reassure it’s a national security issue, but we want bond yields lower.
Marko Papic 18:06
Yeah. So, you know what comes out of Washington? I couldn’t care less for you know, just like, one big, beautiful bill is not profligate, you know, it’s and it’s not how it’s being interpreted. A lot of things that come out of Washington just don’t make any sense. We obviously all know that. So one of the things that doesn’t make sense is, no, you’re not going to reassure bicycles. You know, like you had Howard lucknick talking about, like, bottled water should be made in America. It’s like, okay, bro, look what’s going to happen is this, yes, some critical industries will be reshored, fine. That’s okay. You know, America will pay a higher price for, like, you know, steel, all right. It’s not the end of the world. It’s fine. There are certain national security implications in certain sectors, in certain industries that are going to be effectively reshored, as you point point out. But it can’t be broad based, because if it is broad based, inflation will go through the roof. Yes, because we are not really, we’re not set up to build bicycles in toaster ovens in the United States of America, and it’s not a national security benefit for us to build bicycles and toaster ovens in the US. That’s not like gonna help anyone with anything. And because of that, if we were to reassure that nonsense, we would also not raise any revenue from tariffing it, because it would be reassured. So this kind of Neo McKinley is Howard ludnick position that we need to reassure everything was stupid from the beginning, and I don’t think President Trump ever seriously contemplating it, which is why, you know, members of the administration, like Peter Navarro have been sort of locked away in some room with padded walls so that they don’t actually open their mouth and, you know, rattled the market the real sort of direction where we’re going to head is a direction where President Trump effectively taxes consumption in this country. So this goes back to my point about one big, beautiful bill not being as populist as people think, because what it’s doing is it’s cutting entitlements. So we are getting some cuts. Nikki Haley campaigned on at the same time President Trump is raising taxes. That’s 10% across the board tariff. That tariff is something the rest of the world is clearly going to concede to, but that will tax consumption at an appropriate level where it doesn’t snuff out demand for foreign goods. It keeps that demand going. It just raises revenue off of it, and that’s why, I mean, if you want to use tariffs to fix the budget deficit, you need to embrace globalization like the Davos man. You know, you got to have, like Hillary Clinton, level of support for trade and globalization if you want to raise any money off of trade, and they do that is a priority. Reshoring bicycles and toaster ovens is not
Maggie Lake 20:44
so you, you feel like this is going to happen, and I understand why you say, Don’t pay any attention to what comes out of Washington. But the interesting thing is, this is the bill of goods that was sold to voters. And so I’m wondering how you, how you so he’ll get he’ll get to that through the trade deals. So it’ll flip from we’re bringing everything back, we’re going to make sort of the heartland manufacturing sector great again, to like, Oh, we got these great trade deals, and we’re getting the money we need and but we’ve re embraced globalization. Is that the mechanism through which that that is going to happen? I mean, I’m
Marko Papic 21:20
pretty sure that no one to Trump administration is going to say, like, we’ve re embraced globalization. I think they’re going to say something like, we fixed it, right? We made it more fair. But where I would again disagree with you, Maggie, is that I don’t think anybody walked into a walking booth hoping that Americans build bicycles, and I’ve got a cornucopia of charts, a cornucopia of charts to show you since 2018 absolutely every chart that I can show you of polling in this country shows that nobody cares about trade and globalization, nobody. It’s not a priority for anyone out of 20 issues that were polled on November 17, so after President Trump was elected, when the voters in this country were asked, What is your priority? What would you like President Trump’s priority to be in the next 100 Days, trade and tariffs were the last priority. Number one is, what? What do you think it’s? Inflation. Number two, immigration. Number three, jobs. You know, economy, like the health of the economy, and so if you cause a recession because of tariffs, yeah, that’s not going to work any of those. So the point is that it’s a false assumption that there’s some sort of like cohort of voters that want to end globalization. In fact, support for globalization in America has doubled since 2014 the period between 2014 and 2018 saw Americans who agree with the statement that trade creates jobs. It went from 30% for Republicans to 70% between 2014 18, then it dipped a little bit, and it’s still very high. Why? Why did this happen? It happened because Donald Trump won the 2016 election. It happened because he started a trade war with China. It’s that was something that people wanted. Then why? Because a lot of Americans were very sick of that low growth, low inflation world. A lot of them bought the narrative that was China’s fault, which in some ways, you can empirically say there were some ways in which it was and so they wanted fairer trade. Americans want fair trade. They’re not anti trade. And so President Trump kind of delivered that, and then Joe Biden, and the Biden administration did not really end that trade war with China. So Americans are satiated with the appropriate level of adjustment to globalization. They don’t want any more of it. So absolutely, everything that President Trump has done this term when it comes to trade and globalization is going against the desire of the median voter. And I don’t think the President Trump, you know, I don’t think the President Trump makes mistakes when it comes to median voters. I think he has a cute skill set of sniffing out where the median voter is, and I think he knows that he over indexed on the issue that absolutely nobody in this country actually cares about, and that he’s overshot his mark, which is why you will see these trade deals come in. It’s not just the bond market discipline President Trump. It’s not the equity market only. It’s also the fact that voters really don’t want 10% tariffs on the master race of penguins on Heard Island. Like no, Americans don’t want to tariff penguins. They don’t want 50, 60% tariffs on Lesotho so that we can what make jeans in this country. Okay? Cool story. No, they don’t want any of that there was an appropriate reaction to China’s role in the global economy in 2016, 17 and 18, that was popular. The current level of tariffs is not and so, yes, you should expect, as an investor, for all of this to go away. My question is, to what extent is that already priced in that, you know, I think it’s very much priced. Stand. Obviously, we’ve had a vicious rally. May, May 2025 was the best may for equities since 1990 25 years, I think there will be some agita as President Trump invariably negotiates very difficult, pulls out of negotiations with certain countries. We saw with Canada. Maybe he’ll do the same with Japan. You know, picks winners and losers. India is favorite. Japan isn’t. Whatever the case is, there’ll still be more churn in volatility. But at the end of the day, I think what’s going to happen in this country is there will be 25% tariffs, and steel and aluminum, 10% tariff across the board, and that’s it.
Maggie Lake 25:33
So who do you think in this it’s a very I don’t want to say Goldilocks, but it sounds like some of the concerns, the extreme concerns that were out there, you don’t, you don’t see that playing out. You think that’s exaggerated. So who do you think wins the most from this spending bill, or this sort of, maybe the Trump agenda from now until the end of the year? Who comes out are the best as the best
Marko Papic 25:59
winners? You know what’s what’s interesting about this is that, I mean, I am not a fan of The Magnificent Seven in the long term, but I can see how over the next six months, they could do very well. First of all, currency has collapsed. They do have a lot of sales abroad. And also, you’re seeing a lot of countries that were going to impose some digital taxes on them, like reverse that due to President Trump’s, President Trump’s lobbying and, of course, tariff threats. So Canada just did that as part of its negotiations. So if you’re a US domiciled investor, and you’re just looking for something simple, and if I’m right that the bear market is not starting that invariably, I think Magnificent Seven can go higher from here, but that’s kind of a petty way to think about it. I think the much more profound way is that for those of you who don’t want to day trade, who want to think about this from a longer term perspective, I think you should look at the last six months and expect that to be the truth. And what I mean is that I think that the markets told us the truth of the next five years, which is Europe has outperformed the US massively. Japan and emerging markets have done the same. China’s done extremely well as well, and the US dollar has collapsed. And I think that will continue for the next five years. So if you’re setting asset allocation for yourself as an individual, which is very similar to what a family office would do to what a pension fund would do. I mean, most it’s funny. Most people who are watching this show, they probably think they’re a hedge fund CIO. They shouldn’t. They should think of themselves as a pension fund CIO. So it’s not about day trading. It’s not about what’s going to do well next six months. It’s about what’s going to do next five years, and setting that asset allocation right now and then, not really budging from it. And I think that you should take whatever allocation you have to US assets in half it. Wow, that’s, that’s, that’s who the winner is. The winner is the rest of the world, and not because Donald Trump is bad for America. If vice president Harris got elected, I would have the exact same view, and most of your viewers would probably be agreeing with me, because it would be a simpler story. Oh, look, we have a Democratic president a Republican held house. Well, they’re not going to like each other, you know, and the Republicans in Congress are going to suddenly magically become fiscal conservatives, as they do when a Democrat is in the White House. So it would have been a much simpler story to sell to you and your viewers like, Oh, we’re no longer in a world of fiscal profligacy or populism. The Republicans have become now Tea Party Republicans. They’re pushing against the Democratic President, as they did during Obama’s term. Growth is going to slow down in the US, the expectation of us, growth relative to the rest of the world are going to shrink. The dollar is going to go down. Simple story. My argument is that the same thing is happening right now, because it’s not about President Trump or President Harris. It’s about bond yields, not letting America spend anymore. It’s about us voters, not really wanting any more populism. That’s they’ve seen the downside of that in 2022 with inflation, and it’s about, you know, the US dollar and US assets really having been priced for perfection in 2024 relative to the rest of the world. As a small example of this, investors were paying two times for the same unit of earnings in the US as in Europe, two times. You know, what does that mean? US is a magical land of unicorns and gumdrops and like rainbows, whereas Europe is a museum. That’s effectively what was being priced in, and what was what investors were missing, including professional investors running hedge funds and and pension funds, is that they were missing how important the fiscal story was to that outperformance of America and that gravy train is ending, no matter who’s in charge.
Maggie Lake 29:42
And so Europe has been, as you point out, an out performer. But there are lots of people who like to lean into the museum idea of declining populations, of a lack of energy, alternatives, of bureaucracy, of, I mean, you pick it. And so. Yes, it’s coming from a low base. But in terms of outperformance over a number of years, maybe Europe doesn’t look like the healthiest horse, especially since we’ve seen some of these. You know, from rock bottom, gains of 30% What’s your view on Europe? Well, five years is
Marko Papic 30:16
not 50 years, you know, let’s just, let’s just keep that in mind so demographics is not going to matter over the next five years, in particular, because the United States of America is undercutting its own labor advantage by exactly so you know, like, that’s this and Europe actually isn’t, because Western Europe has access to free movement of people from Eastern Europe through the EU labor market. And so I think too many people over index on specific birth rates in Europe. You have to understand that Western Europe is draining Eastern Europe of its humans. Um. And no, these are not, not third national, third country nationals from the Middle East, highly educated, highly skilled? Yeah. I mean, they don’t even have to be highly educated. They’re just highly skilled, motivated, hardworking people from Poland, Romania, Bulgaria and so on, the Balkans and so the demographics of Europe is not as disastrous as people think, and the demographics of us are not as positive as people think. The labor so labor force growth is what you really care about, by the way, not births. If you can import people, you can replace birth rates. And the US has been doing that through, effectively, illegal immigration. President Trump is going after that. That’s something that people have wanted. It’s actually one of the very few policies where he still has approval rating about 50% you know, it’s that and cutting the government, by the way, the two things that there seems to be a little bit of a consensus amongst the population. Are those two things, very interestingly, so he’s going to continue doing that. And, you know, I don’t want to make a normative moral judgment. That’s not what I’m here here to do. But I can say mathematically, with with a mathematical certainty, that cutting off the flow of humans into the US will hurt GDP growth. That’s the demographic issue. The second issue is energy. European energy crisis has created this dislocation in valuation, particularly for its industrials. And the reality that nobody’s really paying attention to is that over the next 18 to 24 months, Europe will be absolutely drowned by a tsunami. Wave of LNG supply. The world has overbuilt LNG supply. United States, British Columbia, where I am here in a mountain hut, far from civilization,
Maggie Lake 32:35
not unplugged so
Marko Papic 32:37
British Columbia, United States of America, Mozambique, Qatar, Russia, are bringing way too much supply online, but no continent, no major economy, has really kept the pace in building LNG receiving terminals other than Europe. So Europe is the only place in the world that can accept all the supply, and that’s going to lower their electricity and energy costs considerably. And then the final issue is bureaucracy, regulation and all that stuff. Look, that’s always been the problem in Europe. I’m actually seeing a lot of different ways in which they’re improving that. But all I would say about that is that Europe outperformed the US in the early 2000s too, and it’s not like they were un bureaucratic then, yeah. Meanwhile, America absolutely crushed Europe over the last five years. But your viewers would then have to accept that Joe Biden was apparently the most pro capitalism, pro business, pro deregulation president in the world, in US history. So you can’t have it both ways. You know, you can’t both say, Well, Joe Biden wasn’t really pro business and say that Europe has a business regulation problem. In other words, it’s non diagnostic variable. It’s just non diagnostic Europe performs. It outperforms. It underperforms America, but it always has a bureaucratic burden that can’t explain the last five years of American outperformance, especially not during the Joe Biden presidency. What explains that on performance is clearly the fiscal profligacy in the US, which is not a Joe Biden problem. It was a Trump problem. It was a Pelosi problem. It was a Joe Biden it was everybody. It was a truly bipartisan effort to blow out the Bucha deficit and create a perception of American exceptionalism. Effectively, I’ll give you this anecdote just to kind of put a kind of bow on it. Sorry to go for so long, Maggie, but I think
Maggie Lake 34:27
we’ll appreciate this. I do you should
Marko Papic 34:31
think of Europe and America like two long lost friends. You know, they were huge friends, kind of for enemies. In high school, they competed with one another. Then they haven’t seen each other for 25 years. They’re in their 40s, and during the same town suddenly, you know, and they get together for a dinner. Frank is Europe, John is America. They sit down for dinner, and Frank is sitting waiting for John. John comes in, and Frank is like, shocked. You know, John looks better than ever. You. Good looking, you know, dude just shredded. Walks in they have dinner. Frank goes back home to his wife and says, Oh my God, you know, I love John, I mean, but we were kind of frenemies in high school. And, I mean, I’ve let myself go. He’s fit. He looks great, you know. So Frank downloads the Mario Draghi diet, the Enrico Letta workout plan. He really sets out to change his life, and, you know, get better. What Frank doesn’t know is that John’s been just popping his epic and that’s the reality. There’s no magical, odd performance over the last five years that you can assign to demographics or technological innovation or some sort of deregulation in America under a Joe Biden presidency. No, none of that us just spent like a drunken sailor, and that’s it. It spent 400% more on fighting the pandemic that lasted like 18 months. It spent more on fighting the pandemic than it did on World War Two. So of course, the R star the neutral rate expectations of growth in America were bid up to the heavens, and it stretched the valuations of the US relative to Europe. So I can give you individualistic stories that are bullish Europe, like energy, this, that deregulation. But the truth is, it’s much simpler to that US growth and performance was based on, you know, ozempic steroids, whatever you want to call it, and that’s going to go
Maggie Lake 36:26
way up. Oh boy, we know what happens when that’s the case. I think, I think that anecdote, by the way, thank you for that mark. I was going to hit home to a lot of people who are going out and seeing some people look shredded and fantastic and feeling and a little less great about themselves. So talk to me a little bit about since we were just talking just talking about energy, talk to me a little bit about the Middle East and and how you see this happening. There’s a whole obviously very complicated geopolitical story. The markets seem to have moved on for now. How are you thinking about what’s happening between between Israel and Iran and impact on the region?
Marko Papic 36:58
Well, you know, I wrote a report for my clients on October 8, so one day after the horrific terrorist attack by Hamas in Israel. And I said, this will have no implications for the markets like ever. And every subsequent moment of sort of Israeli assertiveness and aggression towards somebody in the region has had absolutely no effect on the markets. So including this extraordinary increase in tensions with Iran, which actually started last year. I mean, even last year, what happened in the spring between Israel and Iran was extraordinary. They’ve never actually launched missiles directly to one another. And of course, then we had the 12 day war. So why? You know, it’s easy for us to just sit here and say, well, there’ll be a disruption that will come at some point, but we have to first study why for a year and a half there hasn’t been any disruption to energy markets. And the answer for that is that Iran and Saudi Arabia have a detente, not a peace deal, not an alliance. They just have a detente that was concluded in 2022 that nobody in the West really pays any attention to, because it wasn’t negotiated by America. It was a sui generis de taunt between two countries. They basically decided that they didn’t really want to fight anymore. And that really started with Saudi Arabia and the socio economic reforms that are being undertaken by Mohammed bin Salman and the regime in Saudi Arabia. Saudi Arabia has basically decided that its top 20 priorities are all the same in its modernization of the economy. So Saudi Arabia no longer cares about Sunni Shia nonsense and sectarian conflict and all that stuff. They’re like whatever. You know, we don’t care. And so what they gave Iran is free reign across the swath of the Middle East. Now Iran has lost some of that free reign in Lebanon with Hezbollah’s defeat by Israel in Syria, where Assad fell, but Iran still controls Iraq, essentially through Shia groups that are aligned with Iran, and then Yemen as well, where Saudi Arabia ended the conflict in 2022 So Saudi Arabia withdrew funding or direct military operations in Yemen, funding of various groups in Iraq, and that’s what’s kept the Peace between those two, and that’s what matters to 99.9% of your viewers, from an investment perspective, normatively, morally, emotionally, they might really care. I’m not here for that. I’m here purely for how geopolitics impacts the markets. That’s what I do for a living. So that’s why I’m not going to talk about the tragedy in Gaza or Israel’s threats or that’s that’s an interesting story. Someone else can talk about it. I don’t talk about that. I about that. I talk about how Middle East is going to impact your portfolio, and my assessment from October 8 has held up. It hasn’t impacted your portfolio at all. Because ultimately, I’ll say something very hyperbolic here in glib but Iran and Israel could nuke each other like mutually. Certain destruction, and it wouldn’t impact global markets, because the only way that they can impact global markets is that an oil barrel that transits through the Strait of Hormuz has to be impacted. And for that to happen, Iran would have to attack Saudi Arabian energy facilities or their production and refining. They haven’t done that, and there’s a reason for that. They in Saudi Arabia are in an equilibrium, and I think that will sustain itself and continue, especially with President Trump effectively announcing that the United States will act as an offshore balancer in the region. And what that means is that the United States will come in and use extraordinarily punitive force against anyone that tries to upset that equilibrium. And that’s important, because what the US signaled with that attack on Fordow it signaled a level of callousness, in other words, like, No, we don’t want regime change. You can run perfectly inefficient and idiotic regime. If you if that’s what you choose, go ahead. God bless you. Literally, President Trump said, God bless Iran, but I will just bomb you on occasion when you deviate from a line of accepted behavior. And that means the threshold for the US to show up and just bomb you is very low, and that’s a very scary position to be in, so you better not upset the one thing the US does still care about, which is the flow of oil out of the region. And that’s why I don’t think that what’s what happened in the Middle East is bearish. In fact, I think the region is showing a certain level of maturity in some ways. The fact that Iran and Israel, Iran and Saudi Arabia can have this detente is very beneficial for Saudi Arabia, for the United Arab Emirates, Qatar, Kuwait, these other countries in the GCC, I think that they’re going to actually be a source of considerable growth, innovation and capital inflows over the next five years, because here they are in the middle of this crossfire between Israel and Iran, and They didn’t get harmed at all. And I think,
Maggie Lake 42:03
yeah, really, really interesting point, and we are seeing a lot of capital flow that way. Just want to get your thoughts on China, because it’s always the sort of threat out there that people want to drag into any of these scenarios we talk about, whether it’s trade or whether it’s what’s happening in the Middle East. You said the markets have done well, how are you feeling about the continued performance of the economy and any geopolitical risk around that? You know, the threat of Taiwan that just comes up every single time.
Marko Papic 42:35
Well, you know, I think that what happened between Israel and Iran is a great little window into China’s capabilities, and it’s not a it’s not a pretty window, and not just because China doesn’t have strategic, strategic bombing capacity to do what the US did in Iran like forget that for a second. Let me put it this way, very bluntly, for your viewers, those of you who are watching this and who are American, your tax dollars are going towards securing China’s energy security. Like that’s literally what the Fifth Fleet of the United States of America is doing. It’s not securing America’s energy security. It’s in Bahrain so that China can have gasoline. That’s a fact. China does not have power projection capabilities. It relies on the United States Navy to secure its flow of energy out of the Middle East. Now, yes, it has some pipelines with Russia, but not enough. It still imports majority of its crude through the Strait of Hormuz and then straight to Malacca, two choke points that are controlled by the United States of America. And so when Israel and Iran started the conflict, there was this fear that Iran would retaliate against Saudi Arabia, as I said, it was overstated, because they have a detente, but the Chinese officials were effectively saying, like, Oh, please don’t do that, you know, like, let’s have peace. And so they needed the US to secure that reality. So why is this important? Well, because invading Taiwan would require a diesel and gasoline and kerosene. That’s what it would require. We don’t have EV aircraft carriers or fighter jets. China still has a military that is oil based. And so China is deeply vulnerable to this insecurity, the insecurity that what happens in the Middle East is still in America’s backyard, effectively, not theirs. Um, and so I do think that that’s a that’s an interesting reminder that China’s not there yet. It’s not there yet in terms of challenging the United States of America, it is an absolute empirical mathematical fact that US taxpayers are securing China’s, you know, energy security, and that’s, that’s a huge vulnerability. Now, in terms of the economy in the markets, look, markets have done well, but American markets did well too when we were experiencing secularistic. From 2008 to 2020 I mean, if you think about, sorry, 2008 Yeah, 2010 to 2019 growth was terrible in the US. Inflation was very low, so too low. We were in a disinflationary world, and stock market did extraordinarily well, because yields fell and pushed investors into risk assets to search for yield, right? We all remember Tina. There is no alternative. You got to be in stocks because yields, yields were very, very low and they kept getting lower. That’s a similar dynamic in China. Chinese bonds are going in a different direction from that of the rest of the developed world. So US bonds and some European bonds, yields are rising or elevated. Chinese have been going down over the last four years. In fact, they’re the lowest they’ve been in recorded history. So China is experiencing what America did from 2010 to 2020 and from 2010 to 2020 American economy did very poorly in relative terms, but it’s its assets did well. Similarly, I think China can be in that kind of secular stagnation. It is going to require policymakers, however, to do a little bit more, and they just haven’t done that. I think that China has been riding on America’s coattails. You said that Americans were spending like drunken sailors. I completely agree. I’ve been using that analogy too, for the last five years, that’s what’s been happening that’s allowed Europeans and Chinese to become kind of lazy, you know, not having to do any structural reforms, not having to boost growth. I don’t think that’s a reflection of some ideological commitments to austerity. I think it’s more a reflection of the reality that you can just simply ride on the back of fiscally induced American demand that seemed endless at one point, but I think it’s ending. And so I’m not there bearish in China, but at the same time, you know, I do think it’s going to take another 612, months of pain for them to get serious about stimulus.
Maggie Lake 46:57
Yeah, that’s a that’s a really, really interesting and smart way of thinking about it, Marco, just leave us what your thoughts on gold, if the dollar is got further to fall, how much and is gold the answer? Should you also think about diversifying into that along with the rest of the world? I think
Marko Papic 47:15
the gains that we’ve seen over the last two and a half years are unlikely to continue with gold, but I don’t think, but I’m still bullish. And so the reason I say that is because I don’t think this is about gold. This is about copper. This is about iron ore, this is about real estate. This is about everything that’s nailed down to the ground and you can touch with your hands. If you look at the long term trajectory of financial assets relative to real assets. Over the last two years, we’ve never been in a world where financial assets are more overvalued relative to real and I think that as the dollar loses value, yes, gold will do well, but so will other commodities and other other non US, dollar based assets. So that’s why, uh, yes, gold is a diversifier. But remember, gold is a diversifier for your cash. And so is crypto, by the way, so are digital assets, but you cannot sell American equities and buy gold unless you think the world is ending, which I don’t, despite the fact that I’m in a cabin in the woods far from television. Please don’t take that as a reflection of my bearishness, because clearly I’m not that bearish. But if you’re going to sell US equities, you know, you got to think about this from a portfolio management perspective, as if you’re a CIO of pension fund, you’ve got a cash allocation, you’ve got a bond allocation, you’ve got equity allocation, maybe some commodity. You would not sell American equities and buy gold. That would be weird. If you want to, if the dollar is going to decline, you want to. You want to diversify your cash. And sure, that’s where you can go into crypto and gold, and God bless you for that. Like that’s no problem. But if you’re trying to diversify away from US equities, you need to buy other equities, unless you have a view on the economy that is going to crash or something else, and you shouldn’t have that view on a five year trajectory, because that’s not how the world works. And trying to time a recession, good luck with that. People with PhDs in economics have been wrong for the last two and a half years calling for recessions. They haven’t happened. So it’s unlikely that you’ll be able to time that as well. So don’t confuse gold as an alternative to all us, dollar based assets. It is an alternative to us. Dollar as cash,
Maggie Lake 49:30
a great, great distinction there Marco, we covered a lot of ground. We so appreciate your time. Thank you for making it clear that you’re not hiding out from the world. You’re just just take you’re just joining us and giving us your time while you’re trying to get some time off. So we we appreciate it, because it’s a lot of important stuff going on. So thank you so much. Absolutely. It’s a pleasure. Maggie, thank you. Hi everyone. I hope you enjoyed that conversation with Marco papic Joining me to break down some of what we heard is Jonathan wellam, President and CEO of rocklink partners. Hey, Jonathan, you.
Jonathan Wellum 50:00
Good to be with you, man. I really enjoyed that conversation that you had with Marco. I haven’t followed him much in the past, but I’m going to in the future.
Maggie Lake 50:08
Oh, yeah, delightful. Yeah. He’s he has great insight. And for me, I love there’s so much happening in the headlines. And, you know, obviously we’re all trying to keep up with it, but Marco is so great about sort of cutting through the noise and making that connection to the markets and investment. And he said a couple of, I think, really interesting things. He’s not afraid to be a contrarian or thought provoking, which I love, but he said a couple of interesting things. And I just want to get your thoughts, because I always think we walk away and think, Okay, what do I do with this like, what should I do with this information? So one of the things we started out talking about is bonds. And he sort of thinks everyone’s reading this big, beautiful bill and the impact is going to have. They’ve kind of got the wrong narrative about it, that it’s just a continuation of, you know, spending and blowing out the deficit, and we certainly see a lot of that flying around on x and other places. But he thinks that bonds are going to be more stable here, and that this is actually, you know, something that is at least keeping things on a status quo. And it’s, it is a little bit showing a little bit of constraint that bonds will respond to. What, what are your thoughts on that? What do you see happening with bond yields here?
Jonathan Wellum 51:21
Yeah. I mean, I think he made a couple of good points. Good points. First of all, over the last number of years, as he pointed out, under the Biden administration, the the deficit as a percentage of GDP, it had been going up quite dramatically. And so it had reached six, six and a half percent type of thing. And under the big, beautiful bill, it’s actually going to stabilize. So yeah, might go up a tad in the short run, but not very much. And so what he’s arguing, and I think it’s a good argument, and I would, I would tend to agree with them, is that a lot of it’s priced into the bond market already, so the yield curve is reflecting, especially as you go further out the increased price of money, and it should not go up an awful lot. In fact, with the pressure on Powell now and maybe some slower growth in the short run, with the short end coming down, it might stabilize further the long end. And, in fact, you might see it just come down a little notch. So a lot of people, I think, just saying the big, beautiful bill is just going to spend, spend, spend, spend. That’s really not the reality of the bill. It’s probably a little bit more hawkish than that, although it’s still a lot of spending, no question, yeah,
Maggie Lake 52:25
and to do the real work to see bond yields move substantially lower, that is something that’s going to have to happen on the fiscal side. It’s out of the hands of the feds, if, at least in Marco’s view, to get that 10 year down substantially. So it sounds like we’re kind of stuck in a range trade. What does that mean for equities? It looks like once things stabilize on bonds, equities have been off to the races in the US. Does it feel like that can continue? Are both the US economy and maybe the US equity market a little bit vulnerable here?
Jonathan Wellum 52:58
Yeah. I mean, the points that Marco made is he got back to valuations, and he got back to the fact, the fact that prices in the US market have done exceptionally well over the last number of years, and that when you compare those to Europe, Japan, China, other places in the world, which he mentioned, that you can find better valuations outside of the US and that could make The US equities more vulnerable, although he did caution that the mag the mag seven, might not do too badly over the next couple of months. But so I think there’s some good observations there. We certainly again, following markets around the world, realize that the US market, you are paying more for cheery consensus, more for the, you know, economic growth that you’ve seen in the US versus other parts of the world, and that means that Europe, Japan, China, are cheaper. My caution would be, just be very careful going into those markets be business specific. Look for companies that are in those markets that have been overlooked by a lot of global money and are trading at lower valuations, but certainly have the similar qualities of a lot of the big American companies,
Maggie Lake 54:01
yeah. So, you know, sometimes things are cheaper for a reason, right? And so if you believe that narrative, then you have to think that there’s an enormous amount of upside happening. And so I wonder, does it feel like that when you’re looking at some of these other parts of the world, and what about the risks that come with that. Because, okay, you know, maybe in a developed region like Europe, you have you’re able to look at a company and make an assessment, but when you’re talking about spreading your money around to the rest of the world, there are sometimes things that you need to look at that the average investor might not be able to quantify the risk, whether it’s political or, you know, capital formation or some of the liquidity issues. You know, it gets a little bit more complicated internationally.
Jonathan Wellum 54:48
Yeah, there’s, there’s a number of factors. And let me just point out a couple of things. My observation is being in the money management business and actually looking for companies in all of these markets, there are companies. I mean, I use one example, like Snyder. Electric, which is a European company. If you compare that to Eaton, which is a large US based company, you actually will pay less for earnings and less for the growth of Snyder, because I think it’s in Europe, and there’s a bit of a European discount. So there’s a case where you can look at it, but even though Snyder does a lot of business in the United States, I mean, it’s a global company, so therefore, therefore you can, you can find companies in some of these overlooked markets and that are of equal quality of the US and global businesses. And you can buy them for rates. Then you can go into these markets, and you can go into China and Japan so forth, and just buy, you know, local companies that are trading at lower prices. I would be cautious about that. I think you have to have sophistication. You have to know those markets. You probably want to have people based in those markets. We’re a little more cautious about that, that there are social factors in Japan that make it a tough, tough ride over there, demographics, the debt levels in Japan make the US look like they’re, they’re, you know, they’re disciplined in terms of finances. When you look at the debt, the GDP there. And of course, China is still a communist country, and there’s lots of ups and downs. It’s, it’s controlled by the state. And so again, I’m not saying there isn’t values there. Marco is pointing out that our stocks trading at lower valuations, but be careful. Know what you’re buying. Make sure you keep the liquidity focus and be very you know. So keep those in balance. One of the things, I mean, I’m in Canada, so we’re in a, you know, looking into the US, and we are looking at faster economic growth in the States, a much broader, deep market. So if you don’t have to buy the mag seven, go down further, go into the Russell 2000 try to find smaller cap companies that are really well run businesses trading at lower valuations. I think, again, you can always find opportunities there too. So again, Marco’s looking at the bigger valuations, and I think he’s drawing some great conclusions. But just again, how you execute on that? Make sure you have the skill set to go into these markets and know what you’re
Maggie Lake 56:53
buying. That’s really, that’s really interesting from the valuation side. You know, if it’s a valuation play, then you might be, you might be able to find some that you could do more due diligence on one of the other parts of that. And I and it really struck, struck me when Marco was saying, what has happened in the first six months of this year is the truth. If you, if you X out the noise and the headlines and some of the bombastic comments you have seen the rest of the world out before him, and the dollar fall, and that dollar devaluation is going to continue, and your your portfolio over the next five years should reflect that new truth. That’s a change from where we were before that really struck me, and part of that is the dollar allocation, right? The dollar devaluation, if you have a lower dollar, should that if, if you, if you believe that that’s going to be the case, does that mean that you have to have more international exposure, and something like looking at the Russell won’t be enough to fully and sort of properly diversify your portfolio?
Jonathan Wellum 57:50
Yeah. I mean, a couple things, as he said, the last six months have pointed out the truth. I think part of what the truth we’ve seen is, don’t get caught up in the headlines as much as you, as much as people do, and the narratives, the tariff discussions, I mean, we’re in Canada, so we could easily get caught up with the tariff discussion you’ve heard. We’re going to be the 51st state and so forth. But you got to put that in perspective. Trump is, you know, speaks, you know, very loudly. But again, the changes are incremental. They’re not going to be dramatic. And I think Marco made some excellent points there in terms of keep things in perspective, be balanced, be more realistic. There’s lots of headlines, but the headlines will not ultimately be what comes through in terms of the actual impact in the economy. And so just be careful in terms of that. But no, I also do think that in terms of tangible assets, the US dollar has done well over the last number of years it is should be weaker. It’s got a lot of, you know, debt, spending, refunding of their of their deficits and debt and so forth. And so the US dollar thing is more vulnerable in the short run, and therefore we are buying more tangible, harder assets, real assets. He talked about, gold, copper, real estate, things that are much more tangible, I think that is something that should be a core part of everybody’s portfolio, and that’s because, I would argue, all fiat currencies around the world are going to be under pressure, because the debt levels on a global scale, not just in the US, but also in Canada, Europe and around the world, are just out of, out of all proportions and are not sustainable. And so it will put pressure, I think, on fiat currencies. And so make sure you are buying hard assets. Financial assets have done exceptionally well, and I think they will be weaker relative to tangible or real assets.
Maggie Lake 59:34
Yeah, that’s a great point. I loved when Marco was saying, and I’m sure you come across this all the time when you’re talking to clients, everybody thinks they’re running a hedge fund, but you really should think of yourself as a pension fund manager and just sort of make sure you understand what timeline you’re working on, because that’s so critical. You’re not necessarily looking for a three month trade, even though that’s how the information flow tends to make us feel. You really want to be strategic about this over a longer period of. Time so that you can grow your money that way. I thought that was a great comment, and it’s true, we all kind of get caught up in the moment, right?
Jonathan Wellum 1:00:06
It’s absolutely essential that you know your timeline and how long you’re going to be investing. The first thing we talk to when we talk to clients, is what’s your time horizon. And so if you have a longer term time horizon, then you’re going to allocate capital based upon longer term opportunities. And if it’s very short term, or you’re very close to the wire, and you can’t take any volatility that’s going to impact how you invest. So definitely know what your time horizon is, and that’s why you should be thinking, for most people, as a pension fund. Way of thinking is, again, asset allocation. Take longer term perspectives. Let the let the volatility of the market be your friend. Buy from pessimists and sell to optimists and take advantage of every opportunity you can.
Maggie Lake 1:00:49
Yeah. What is it? One thing that comes up a lot when people are thinking about because I think it’s fair to say people are probably listening to this and thinking as they should be. Am I diversified enough Am I truly diversified in a way that might reflect a reality where fiat currency is going to be under pressure. We’re dealing with debt, maybe where the rest of the world will catch up a little bit, there’ll be a rebalancing on performance and value. Is something that we should keep in mind. As you pointed out, where do you come down in terms of individual name ownership versus something like an ETF,
Jonathan Wellum 1:01:23
yeah, no, I’m biased, and I’ll put right up front. I’m a value investor. We’re focused investors, and therefore we like to own 20 to 25 stocks, maybe up to 30 stocks at the most. And then we will allocate between stocks, equities and fixed income, some, maybe some preferred, if they’re appropriate. And we have some private, a couple of private investments. So I’m of the camp of, if you do your research, really get into the companies, talk to the companies, run your models and and then focus and if we can find 25 really good companies, usually across six or seven different industries. So I think it’s important to be across a few different industries and some fixed income just to balance that out. Then I think you’re off to the races. But I’m a Buffett. I’m a much more like a Warren Buffet type of approach, and so I’ve not promoted indexes within our company. What I would say to investors, though, is, if you’re not doing the research, if you’re not getting into the companies and understanding them reasonably well, and you’re only buying a couple of companies, you’re putting out, you’re putting on a lot of risk. And so I think index investing is very prudent for people who aren’t, don’t have all the time in the day to study the market, or aren’t having outsourced their money to a value investor, and therefore it’s protection against ignorance is, as Warren Buffett likes to say, and so I do think again, they’re very powerful if you buy a good index, and you can again, target different indexes based upon valuation, how well they’ve done. But for us, I we just love getting into the companies and understanding the businesses and protecting people’s risk, because we’ve gone deep in the companies. Yeah,
Maggie Lake 1:03:00
and in this environment we’re in, it sounds like we all need to do more of that, or lean on on advisors like you to do that, because the easy push and let it sit in a you know, there is no alternative type of situation isn’t going to work. We’re in a much more sort of state of fluxion transition, where you’re going to have to really understand the business model to figure out who’s the winner. Let’s just close it out with, you know, in the against the backdrop that you know, Marco laid out, where there are all of these cross currents hitting and, you know, some major shifts going on. Is there an area that you like, that you think there’s opportunity, or something that’s really on your radar as you walk away from that kind of conversation, what are you thinking about?
Jonathan Wellum 1:03:41
I think what he emphasized, really near, close to the end of the conversation on tangible assets, real assets is important that financial assets have done well, we financialized the whole system, and we’re under a lot of pressure. I think the whole digitization, he didn’t talk about this, but financialization and AI data centers, I think is pushing in a large increase in energy demands, and that’s going to require a lot of mining, a lot of digging into the ground. So you can benefit both from protecting yourself from the debt and fiat currency erosion, and also the demand for much more energy. So I think investments that are going to be part of the building up the grids, providing more energy, like uranium, some of the, again, fossil fuels, some of the alternative energy sources this is, and then buying companies that are that are building the data centers and are part of all of that, I think is a great long term spot to be, because it plays off two things, a long term secular growth opportunity, and also the pressure on fiat currencies.
Maggie Lake 1:04:37
Fantastic stuff. Jonathan, thank you so much. So great to get some sort of tangible to think about, speaking of hard assets, but tangibles to think about, as we sort of come out of a conversation that’s spread across the globe. So thank you so much.
Jonathan Wellum 1:04:48
Well, thank you, Maggie. And as I say, I really love that conversation you had with Marco. Excellent.
Maggie Lake 1:04:53
If people want to find out more information from you or how to, you know, get some more of your thoughts. Where should they head?
Jonathan Wellum 1:04:59
Yeah. Our best. Probably the best, best place is our website. So that’s rock link.com, COM, dot r, O, C, K, L, I, N, C, so link with the C info@rocklink.com and send us a note. And we’d love to follow up with different Canadian investors that we provide investment services for. Yeah, we, we love having the people contact us, we’ll give you a free overview, and if you like to hear then you can certainly become a client. We’d love to do that. Fantastic,
Maggie Lake 1:05:26
and we’ll include all of that information in our links as well. Jonathan, thanks so much. Great. Thank you, Maggie. If you have any questions about how to navigate the current environment, wealthion can help connect you with a vetted advisor to get a free portfolio review. Just click the link in the description below or head to wealthion.com/free there’s no obligation, and it will just take a few minutes of your time again. That’s wealthion.com/free thanks so much for joining us. We’ll see you again next time.
