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Join James Connor and esteemed guest Nicholas Colas of DataTrek Research as they delve into the complexities of today’s economic landscape. From the bullish future of gold amidst inflation fears to understanding the intricate dance between cryptocurrency and traditional investment vehicles, Colas offers unparalleled insights. Discover the critical importance of adopting a disciplined trading approach and learn why gold and crypto might just be your portfolio’s best allies in these uncertain times. Whether you’re navigating inflation, investing in gold, or curious about the future of crypto, this episode is packed with invaluable advice for protecting and growing your wealth.


James Connor 0:05
Hi, and welcome to Wealthion. I’m James Connor. And today my guest is Nick Colas. Nick is the co founder of DataTrek Research which provides data driven analysis on the markets. And we’re going to get Nick’s views on the economy and the markets. And what have you learned from working with the infamous Steve Cohen? Nick, thank you very much for joining us today. How are things in New York?

Nick Colas 0:25
Things are good. We just had a huge rainstorm come through, but things are clearing up and hopefully the sun comes out later today.

James Connor 0:30
Well, that’s good. Well, I guess rain is better than snow. It is absolutely. Nick, before we get your views on the economy and the markets, I want to ask you about the time you spent with Steve Cohen, he’s had a very successful trading career, that might be an understatement. But nonetheless, I’m glad that you learned a lot from him. Maybe you can just share your experiences.

Nick Colas 0:52
Sure I mean, I went into that into that company with no prior trading experience. And they’ve been successful for a bunch of years, very well known on the street. And I thought it’d be a great opportunity to learn a lot from what you said, you know, correctly is fantastic. Probably one of the best traders of the last 100 years here in the States. And I learned two things. The first I actually learned from the in house psychologist, a guy named Ari Kyiv, who wrote several books based on his experience at SAIC, most of them called trading to win. And we had to spend time with with Ari every single week in the first year of working at SAIC every new trader did. And when he would always try to get us to focus on is to go through every trade, understand our rationale. But then he would ask us questions like, How did you feel going into this trade? What were your emotions? Were you confident, were you nervous? Were you comfortable, you’re relaxed, were you in the groove. And Ari has spent a lot of time at training Olympic athletes before coming to work for Steve. And that was the same approach he used with them. That’s what Steve likes so much about it. Because trading is a lot like those other athletic endeavors, you have to feel comfortable, you have to feel ready, you have to feel prepared, and are a goddess to understand that our intuitions how your body feels, is actually a really important part of being a successful trader. So if you’re done the work and have put together your trade, and you feel good about it, and it starts to work, you should use that as reinforcement to add to the position. If it’s not working, and you felt confident, you still feel okay, and cutting that back and cutting your losses. And so feeling that level of confidence, knowing that intuition that you’re on the right track, was a really important part of the feedback loop that I tried to teach all of us. It’s not just your brain, but it’s literally your body telling you what’s a good trade, what’s a bad trade, and how to go through a position and make money on it. Or, as with most traders know, not lose very much because your winners really don’t remember your losers by all that much, maybe 5545. But it’s pressing that 55 That’s working, that actually makes you all the money as a trader. The second thing I learned was directly from Steve, and he would tell us this all the time, particularly if a trader is having a bad day or a bad week and walk over midday or the afternoon, sit down with that trader and say, Look, you’re making this a lot harder than it has to be. Don’t do that. Go back to basics, go back to your process, focus on what you know. And stop overthinking over me thinking making things way too complex. Trading is ultimately a pretty simple game, right? You know, you’re there to make money. But a lot of people get caught up in emotions or in politics sometimes or what they think they know whether the markets wrong and all those things really just make it more complex. And it has to be so the central thing I learned from Steve was just don’t make this game harder than it has to be focused on the fundamentals, focus on the basics and stick to that. And chances are with enough hard work, you’ll be successful. So it was a tremendous experience working for Steve saw a lot learned a lot. And those are the two things I really took away that really still affect me to this day and inform what I do at DataTrek.

James Connor 3:54
Ugh, fascinating comments. I’m curious is Ari still working with Steve?

Nick Colas 4:00
No Ari they passed away a couple of years ago, very sadly. But you know, his books live on they’re available on eBay, they go for a lot of money because they’re really gold are illegal to chronicle the first couple of years of working for Steve, and put together profiles of different traders all of whom, who I knew in the room at the time, and explains, you know, what their different foibles were, what they did, right what they did wrong and how they got through. But ultimately, it’s a mental process and mental discipline to become better traders over time.

James Connor 4:29
Yes, it’s so true, isn’t it? Like how many times have we everybody’s made this mistake but we’ve put a trade on because we think we’re right the markets wrong, where we put on a trade and it becomes a losing trade and a $10,000 dollar loss can quickly turn into $100,000 loss and that can even grow bigger. And once again, it’s all based on this I guess ego

Nick Colas 4:51
It is and that’s you know, it’s funny because traders are known for having big egos but when you watch them trade they don’t you know the great traders say okay, I got that one wrong. No problem, cut it down, get it off the sheet. Let’s focus on things that are going right. This, as I said, the win rate of a great trader is 55, maybe 60% in an awesome month, and you make all your money really on a handful of positions in any given day, week, month, year, you know, that’s what I always found us with the room usually showed me was that the game is to stay in the game, and let those winning positions run, make that money and don’t let the other stuff get too much in the way.

James Connor 5:28
Yeah, I guess a lot of it really comes down to discipline, right? It’s no different than any other endeavor, including sports. Right? Exactly.

Nick Colas 5:35
And that’s how our a trader tweeted it. That’s how Steve treated, it’s really just a matter of staying in the game every day focusing on a little bit of improvement every day. You know, skills are like the stock market, you want to be in long enough to compound. You know, if you get 1% better every day, you’re going to double how good you are just a couple of months, but you have to focus on getting 1% better every single day.

James Connor 5:56
Well, interesting comments. Thank you for sharing that. Cut those comments with us? Well, I want to move on get your thoughts on the economy and, and also the markets and and before we really do that I want to provide a framework for our viewers and I want to have a discussion on economic cycles and how these cycles drive the markets. Can you maybe you can just take us through the cycles and what cycle you think we’re in right now.

Nick Colas 6:18
Sure. So just you know, at a very basic level to start the conversation, the average economic cycle in the US lasts roughly 60 to 65 months, that’s the average back loop through the 1800s. Some cycles are shorter, some cycles are longer, but that’s the average. And a cycle is defined as basically recession to recession. So when the last recession ended, when the next recession begins, everything else in between is, you know what I call a mid cycle economy, a mid cycle markets, late cycle is when you know you’re going through a recession, you know, oil prices have spiked or a financial crisis has hit. And you know, companies are gonna be laying off people, the economy’s gonna contract that’s late cycle. Early cycle is when the economy’s in a recession. We know that job losses are pretty steep. We know academic growth has gone negative. And that’s the the early part of a cycle. You know, typically speaking, the best returns are not in the early part of a cycle and US stocks, which people often misunderstand. The best returns are in the middle of the cycle when the economy is chugging along well, when companies are growing. And ideally, when we have a new technology like we have with Gen AI now it’s going to get people excited about about owning stocks. So there’s early and mid and late cycle, I think we’re in the mid part of a cycle.

James Connor 7:31
Okay, so I want to get your thoughts now on interest rates and inflation because this takes up the narrative every day, when we listen to CNBC or any other YouTube channel, everybody’s talking about interest rates and inflation. And in July of 2021, Powell suggested that inflation was transitory. That seems like a century ago, but that was just in July of 21. And then by January of 22, he still said inflation would continue to decline. But then by March of 22, he realized, okay, inflation is out of control, we got to do something. And the Fed lifted interest rates 11 times since then. And as we went into 2020, for everybody expecting aggressive cuts, and I think we were looking for six cuts. And then as we got into 2024, we said it’s only going to be three cuts. And here we are. Now we’ve just entered q2. And I want to get your views on where you think interest rates are going and what the Feds going to do. And if and well, they cut this year.

Nick Colas 8:30
Yeah, you’re right. We came into the year thinking we’re gonna get a lot of cuts two years reflected that Fed Funds Futures reflected that. And thankfully, the equity market didn’t really believe it, because rates have gone up. And the expectation now is we might get three I think Fed Funds Futures are still the modal expectations roughly a 330 5% Odds give or take. But there’s a pretty even distribution that says two might be the answer, and now much less of a guest that for me the answer, I think we’ve taken four safely off the table. The issue we face right now is pretty straightforward. And it’s a mixed thing for equities. Because on the one hand, the economy seems to be doing still pretty well. It’s not great, but we’re getting 2% growth more or less. We’re getting reasonable job numbers, even after revisions come through, we’re getting pretty sticky wage growth, which means that consumers are getting paid a little bit more than inflation. But it’s not coming down very quickly. There’s still a labor shortage in this country, in a lot of different sectors. And that’s driving wages to be much stickier than they otherwise would be the blue. The reason inflation declines after a recession is because wage growth slows down to basically zero. We haven’t had a recession, anything but really, so we’ve had wage growth continue to be pretty high. And so inflation has stayed high. And this is the central problem for the Fed. Powell talks about talking about it last Friday, talked about it yesterday. We’re not seeing that kind of slowdown and wage inflation that will allow overall price inflation to keep coming down and so inflation is proving very sticky. My perspective is I think we get two rate cuts this year. Not Three, the Fed is usually wrong. Like we just saw the Feds latest projections last month for rate cuts over this year, they still said three. But on average, most of those March projections they gave are wrong by at least one cut or one increase. And so I’m thinking they’re wrong by one. And we get to probably in July, and then not until December, the Fed does have to deliver on its promise or risk losing credibility yet again, and you pointed out that they’ve rightly lost credibility before. And in the recent past, they really can’t afford to make that mistake. Again, they can afford one or two rate cuts, but they have to go slow. So I see the pace of rate cuts is very slow this year. And I don’t think two’s you know, two year yields come down very quickly, and tense might actually build up over the near term. So pretty tough situation for bond traders. But I think still okay for stocks, because we do have the backstop of decent wage growth, a decent economic picture, and enough to create some corporate earnings growth.

James Connor 10:55
So let’s talk about inflation a little bit more. And this whole move in in interest rates has to do with this move that we saw on inflation and went up to as high as 9%. Now the government’s saying it’s somewhere around 3%, give or take, providing you believe them, but for the record, I don’t. And from what I see, I live in Toronto, and the prices here, it doesn’t matter what I look at, everything just keeps going up. I used to shop at Walmart and Costco to save money. And I go there and I just spend more money and even, I used to buy a lot of my meats at Whole Foods, you know, and I love beef tenderloin, you know how much I’m paying for a pound of beef tenderloin in Toronto, you’re never gonna get so I’m going to tell you it’s $45 a pound. Wow. So I can’t even buy now I just go to Whole Foods, the window shop. But what’s your take on inflation? I know, you just said that. There’s an issue with wages. But from my perspective, just being the average guy on the street, when I go to the grocery stores, or when I go to buy gas or whatever. I see prices just continuing to go up. And I think they’re going up by a lot more than 3% annually.

Nick Colas 12:04
Yes, I mean, there’s always been a lot of debate about how accurately CPI or PCE or any of the other common measures of inflation really measure actual felt inflation. And I’d say most of the academic work on this topic reflects exactly that. Everything you just described, people look at inflation, that’s primarily the cost of food and energy. And everything else kind of falls to the wayside. And so people’s impressions of inflation are always higher than the actual reported number. This goes back decades, literally. So it’s a very, it’s an important problem. Because it ultimately people anchor their inflation expectations on what they see and what they feel every day and every week when they go to the store go to the gas pump. And that’s the reason inflation does feel a lot higher. And we also have to remember that inflation compounds. So if we go up 10% In one year, and 5%, the next year or 3%, the year after that just a rough approximation, but I think we all felt inflation has been like over the last couple of years, you still see higher prices, and they just never gets better. And you all you have to hope is that ultimately your wages catch up to the inflation that you’re feeling. Unfortunately, for a lot of households, it doesn’t. And so there’s that persistent feeling that inflation is going to be higher. Now, that’s a real problem for the Fed. And I’ve written about this. And it’s an important issue, because the Feds credibility is ultimately tied to how successfully deals with inflation in this part of the cycle. And right now, they don’t get a very good grade, as you very rightly pointed out. And all we can hope for is that ultimately, things catch up. But the current situation is definitely tough. And definitely, we all feel it’s I mean, my analog in New York is I have a favorite diner that I go to for breakfast, some mornings, and I had a cup of coffee and an egg sandwich. And that used to be $7. And now it’s $13.54 every day. And so unfortunately, I have to pay it. But I do look at that bill every day and say, crap, that’s just a lot more money than it used to be. And

James Connor 13:56
so you mentioned gas and the price of gas. And this is another so when we look at CPI, we’re looking at shelter, we’re looking at food, and we’re looking at energy prices, right? Those are the three major components representing about 75% of CPI. And so oil, the price of oil is just rip from $75 a barrel up to 85. Give or take. And who knows, maybe it moves to 100 bucks. And of course the Biden administration is trying to keep the oil prices down as we head into an election. And then you got the Saudis who want a higher oil price. Of course, they want to make more money. But are you concerned about this move that we’ve seen in the oil price and the impact that it might have on the economy and also CPI?

Nick Colas 14:36
Absolutely, absolutely. Yeah, you’re right. I mean, oil prices have been one of the surprise surprise moves of the year gold’s been the other one, we can discuss gold as well. And it’s a fascinating story on top of that, you know, the geopolitical situation is not getting any better in the Middle East. We didn’t know that. And so gas prices, oil prices are going to keep climbing. I think I wouldn’t rule out $100 A barrel at all. And it’s a very logical kind of mid summer kind of price because as we know, there’s some seasonality oil prices. The thing that I have focused on in looking at how oil prices affect the economy is that you basically need oil prices to go up 80% In a year to assure a recession. So if you go back to 1990, and the oil shock around the Iraq invasion of Kuwait, or if you go to even 2007, we have a commodity super spike in oil prices went to 140. Every time oil prices go up 80% or more in a year, we got a recession. So the good news is we have some leeway with oil prices before they actually definitely cause a recession. In western economies. We’re pretty far away from that. I think we’re up 20% year on year, 30% year on year. But if we get to 121 30 a barrel, that’s for sure that are creating a recession. And I do worry about that. As far as energy’s effect on inflation. You know, I just actually was doing this math a couple of days ago, there’s actually not much of a linkage between oil prices and CPI, PCE core headline no matter how you want to cut it, in terms of when oil prices spike, does that affect inflation. And the reason is, because when oil prices spike, you get a recession. And so you get this kind of countervailing effect. It’s not a very welcomed effect, obviously. But if oil prices spike, you don’t get a spike in inflation, you actually get a down downdraft because the economy slows so quickly that prices have to come down. So we don’t want that kind of recession. We don’t want that kind of outcome. But oil prices don’t generally create inflation. In most parts of the cycle, what they do is they create a recession that brings inflation down again, not what we want. But that dynamic is somewhat offset one against the other.

James Connor 16:34
And you mentioned that oil is up 20% on the year, give or take. And and let’s just say if it continues to move up to the $100 level, do you think this is indicative of a stronger economy than we are anticipating and that may be the threat? There’s a threat that we don’t cut rates at all this year?

Nick Colas 16:52
That’s a great, that’s a great point. The short answer is no. I think this move is being driven mostly by geopolitical concerns and entirely fair geopolitical concerns and worries about oil availability, will, you know, the amount of that can be pumped out in the Middle East and get out to the rest of the world? So it feels like it’s more geopolitical. That is growth? I’d say, US growth is okay. Europe is probably at a kind of zero growth environment. China is only growing very slowly. Japan’s not growing very quickly. So I don’t see a demand picture that supports higher oil prices. But I do see traders rightly worried about what happens if we get a hotter war in the Middle East that constrains supply. And one thing I always tell clients is never be underweight energy ever. Because it’s the only hedge in a geopolitical shock that drives up prices higher, it’s going to be your only thing that’s going up and everything else is going down. I personally own PSC E, which is the US small cap energy ETF as my hedge, and I own just enough. So if we get an oil spike, the rest of the portfolio gets something of an offset.

James Connor 17:56
Okay, so let’s move on and discuss the stock market now and how the economy is impacting the market. And as we said earlier, the market this whole move that we’ve seen in the economy, we’re expecting three interest rate cuts, give or take, and move that we’re seeing in the s&p and the NASDAQ. It’s all predicated on lower interest rates. And the s&p is already up 10% of the Year, NASDAQ’s up 10%, after a massive year in 2023. But what’s your take on the stock market here? Do we continue to grind higher or deseeding risk?

Nick Colas 18:29
There’s always risks. But I do think we continue to grind higher for a couple of reasons. First, I think companies are getting more realistic about their cost structures. They weigh over hired over the last couple of years because they had to now they’re beginning to right size their workforces that’s going to create On the plus side some better earnings and margin improvement in the back half of the year. On the downside, we’re certainly going to have a recession scare at some points, maybe between now and December, you know, it’s like clockwork, we always get whenever you’re in the middle part of a cycle. And so that will On the plus side probably bring the yields down, but on the downside probably hit stocks. So I think we are still in a constructive part of the market. And you know, let’s look at what leadership has been this year. So far. It’s not been tech right. It’s been industrials, it’s been in Financials has been energy has been the kind of things that you want to see rallying in the middle part of a cycle to confirm that there’s further growth ahead. So that’s a positive. On the NASDAQ. What’s interesting is the NASDAQ from the rally the rally off the December 22. Lows is actually the worst rally off the lows since 1990. Since basically the end of the of Gulf War One. And that tells you that as much as the NASDAQ has been working, it’s not working the way it typically does coming off of a major bottom the way we had December 22. And the reason for that primarily is rates because in prior instances, you know, two year rates were either flat or down a lot 10 year rates were down and interest rates were giving a push to the NASDAQ all those high valuation stocks. It’s not happening this time rates are actually going up. And so it’s putting a real cap on The NASDAQ rally. So I think there’s still room for stocks to go up. Not saying we’d go up in a straight line. But at the same time, we just had a very strong year and strong years tend to indicate you’re going to have another reasonable year. And the average of strong years, basically back to 1928, of the hype we had last year gives you another 17% Move on average, and next year, we’re up 10. So far, so we can look for another 7% or so between now and the rest of the year. But I take your point, it’s not gonna be an easy easy as the first quarter of the year was we’re gonna have some chop, I think it comes probably over the summer, as oil prices continue to get momentum, as worries about the braking, number of free cuts we get is going to keep growing. So it’s not going to be a straight shot. But I do see more room for upside here.

James Connor 20:45
Very interesting. Now, you did say something I want to ask you about and you said the move from the move on the NASDAQ from its lows in 2022. It’s the worst that we’ve seen. What do you mean by that exactly? When you say it’s the worst that we’ve seen.

Nick Colas 21:00
So if you go back and look at all the NASDAQ lows, so go back to I think it was October of 1990, or October of 2002, or the move off the march lows in 2009. Or the pandemic, you know, very flat, the flash bear market after the pandemic. And the rally after that, you take the average of all those moves, what you’ll find is that we’re lacking the average. And we’re actually lagging the worst of all of those rallies, which was the Oh 2203 rally off the lows for the NASDAQ. And so we’re just not getting the same kind of bounce in tech stocks, NASDAQ stocks that we usually do off a major market low. And there’s really good reasons for that the rate picture, as I said, is quite cloudy versus much simpler during all those prior rallies. But it also tells you that the NASDAQ is not so overextended relative to what we’ve seen historically has been the case the NASDAQ tends to do better than the s&p, which it has. But it tends to do better than it has done since the December 22. lows.

James Connor 22:00
And what about a name like Nvidia, we can’t talk about the NASDAQ without talking about Nvidia. It’s all over the news every day, but it’s up I think it’s up 80% on the year, which means that it like another trillion dollars in market cap. But when you see this, that doesn’t concern you at all?

Nick Colas 22:17
Individual stocks going up, don’t concern me that much. I mean, this, that stock may be way over extended, and then that’s fine. But you look at say, you know, the fact that Apple is down, but 10% this year, tells you that markets are being selective and not just buying everything. So there are some NASDAQ stocks that are working others that are not somewhere in the middle, like Google’s kind of in the middle. So I’m not seeing a kind of euphoria around the entire space, just one select name, you know, and that’s fine. That’s the way markets work. You know, as we were talking about the top of top of the conversation, one or two stocks tend to drive you know, a given index, and in this case has been in video, and that’s fine this way things usually work. If Nvidia pulls back in, as it probably should. And that’s like my favorite glow with a hippo one stock rally doesn’t worry that me that much.

James Connor 23:06
And of course, we have to talk about Bitcoin. That’s the SEC approved Bitcoin ETFs in January of this year, and as a result, we’ve seen hundreds of billions of dollars flowing into these into these products. Once again, you’re not concerned about this level of speculation.

Nick Colas 23:26
I actually have covered Bitcoin for a long time, I was actually the first Wall Street analyst to put pen to paper and write for clients, Sushil clients about it back in 2012, and 2013. So far, the space a long time, and what I think we’re seeing is, you know, what was was started as a science project basically has become is becoming an asset class, people believe in this space. And it’s not like gold in that gold, you know, half of gold demand is jewelry and physical use demand real demand and half of gold is for investments. Central banks are things. Bitcoin only has the speculative investment part of the equation. So it’s always gonna be more volatile than gold. But there are a class of people. And that class is growing that view digital assets, digital currencies as a aspiring asset class. And that’s, I think, whether you think it’s valid or not, it’s just a fact. That’s the way the markets heading. And so do I worry about Bitcoin being a sign of speculation, not not especially speculation to me, I worry when it has big moves, and then begins to fall apart. And Bitcoin has done that several times. But it’s still around. And so I think it’s for some people, they want to consider an asset class, and that’s fine. I personally think it’s interesting. It’s not yet an asset class by any means, but there’s enough people who think that way and the ETF approvals kind of show that even the SEC says that’s an okay thing to try that I’m not super worried about bitcoins mood being indicative of some major market top or excessive investor enthusiasm across asset classes. It’s kind of particular to those digital currencies.

James Connor 25:00
So quite often bitcoin is referred to as digital gold or the new gold. What are your thoughts on that? Do you see any similarities? And do you have a preference for one asset over the other,

Nick Colas 25:09
I’m always an all the above kind of guy I own physical gold, I own gold in financial form and ETFs I think it’s an important part of portfolios. Always has been, I think always will be it’s non correlated to stocks it works on other things aren’t. So I think it’s an important thing for investors to consider owning. And as I said, I own it personally in every form, I can. I also own some bitcoin, because I see it as potentially an emerging asset class. And that’s fine. It’s a super small position for me. But it’s an interesting asset. And if it works great, and if it doesn’t, it’s not going to kill me. It’s an interesting spec trade for the long term. As far as the differences, as I said, gold has actual uses gold is used in jewelry. And that’s roughly half of all gold demand any given year. And so it has a more stable platform of demand. That doesn’t vary all that much, maybe up to 3%, in a good year down 4% in a recession, but it’s pretty stable. I’m bullish on gold, because I think central banks around the world are buying more gold and will be buying gold for a long time to come. The Russia Ukraine situation and the sanctions against Russia, I think proved to a lot of countries, a lot of central bankers, that you can’t just own treasuries, as your as in as in, in your central bank reserves, you have to own something else that dollars denominated, but can’t be confiscated or sanctioned. And the list of those options are pretty short, and it’s gold. And so you’re seeing central banks, China, Russia, Central Asian republics, some Eastern European republics, Turkey, all buy gold for their reserves, as basically a way to buy dollar exposure, without having to buy treasuries or financial assets can be sanctioned or confiscated are the kinds of things that happened with Russia back to 18 months ago. So I think that’s a persistent trend is going to grow for a long time. And so I’m bullish on gold for that single reason, I see a lot of incremental demand coming from Central Banks, that’s not going to go away. As a matter of fact, we’ve seen central banks pull back on purchases over the past couple of months, as I think I think a lot of gold, gold analysts know. And I think the reason for the spike in gold recently has been traders are front running what they know is going to be a lot of demand for central banks coming in the back half of the year. So I’m bullish on gold as well.

James Connor 27:14
Not very good points. Now, you brought up the central banks, and they did buy they were very aggressive buyers in the last two years, I believe they bought about 25% of total production in 2023, like amount in 2022. I guess my question to you is, do you see any risk to the downside? Let’s just say they stopped buying AI?

Nick Colas 27:35
Yes, that is a risk. But I don’t see a situation where they stopped buying. Because, you know, for better or worse, the US weaponize the dollar a little bit over the last two years with the whole situation with Russia. And I think central banks have very long memories and government leaders have very long memories. And so they see gold as one way to get around and having to buy treasuries and having to buy dollar based assets as part of their reserve structures. And gold answers that need. And it’s you know, people who don’t like gold tend to say, oh, it has no value, it has no cash flows, it has a 5000 year proven track record of holding value, that’s not going to change. And so central banks will keep buying gold. Yes, it’s a risk of this stuff. But I don’t see a situation where they rationally stop, I think, if anything, geopolitical tensions are rising, and the weaponization of the dollar makes gold and even more relevant asset to rest of world central banks.

James Connor 28:31
So central banks have been very aggressive buyers, but we really haven’t seen the retail market get involved yet. And when I say that, I’m looking at ETFs. And in fact, in 2023, there was outflows Do you think? What are your thoughts on that? And when do you see the retail investor getting involved? And do you think Bitcoin is kind of taking away a lot of that interest? In gold?

Nick Colas 28:54
So those are both very good points. I mean, you’re right. ETF flows into commodity fund flows have been pretty bad the last year, they turned positive for a couple of weeks, about a month ago, but they’ve been pretty slow ever since. And they were slow last week as well, we do a month we do a weekly update for our clients on that topic. And so you’re right, the thing that drives retail investor interest in anything is if it’s going up, you know, that’s, that’s the way that the retail flows tend to work. So if gold continues to rise, I think you’re gonna see ETF interest begin to improve. I don’t think Bitcoin ETFs are taking a lot of share away from gold or Bitcoin in virtual currency while after taking a lot of interest away. I think it’s two different kinds of buyer based on demographics. I think younger people look at Bitcoin as potentially what gold could be. But I think the the majority of people with large asset bases wealthier people there tend to be older and they’ll skew towards buying gold. So I think we do have another run in gold. I don’t really rely on retail flows for driving that I think it’s institutional flow central bank flows are really drive the big move. But if if retail comes along that that would obviously Be helpful.

James Connor 30:01
So let’s summarize everything you just said. First of all, the economy, you’re still very you think we’re in a mid cycle, the economy is going to grind higher. It’s going to climb this wall of worry. You’re still bullish on the s&p, it’s it was up. It’s already up 10% on the year. You think that could I believe you said another 7%? Was that right? That’s right. And that’s just based on a very strong 2023 think it’s going to continue. You’re very bullish on gold. And for the reasons that you just stayed it. What anything else? Am I missing anything?

Nick Colas 30:34
No, that’s that pretty much covers the waterfront. The other thing I’d say is, we are perennially bearish on non US stocks relative to the US stocks. Our perspective is that the historical record is pretty clear. The s&p has compounded at 12% Over the last decade ephah, which is Europe and Japan is only compounded at seven emerging markets will uncompetitive three people view that as an anomaly. We do not think that structural, the US from a capitalism is just better at creating shareholder value than Europe or China or emerging markets. We create the kind of companies that generate a lot of earnings power. And that’s what drives stock prices, economic growth doesn’t drive stock prices, corporate earnings do. And so as much as E M and E for stocks are cheap, and they certainly are, we think that you have to go with the earnings growth, you have to go with a structural economies that create value for shareholders, and that’s really in the US and North America. It doesn’t exist as much in Europe, and it barely exists in emerging markets there could have economic growth, but they’re not making the kind of companies that investors want to buy over the long term. So the last thing I’d say is, you want to be still looking at US stocks. And don’t think that because ephah stocks or ETF stocks are cheaper than a P E ratio, they all of a sudden have a big catch up move coming. It’s just not the way markets work.

James Connor 31:49
Well, very good point. So before I let you go, Nick, I want to ask you one more question about Stevie Cohen. He was a very successful trader, as we all know, but he has not been a very successful baseball owner. The New York Mets have had a disastrous few years. What are your thoughts on that?

Nick Colas 32:06
Yes. Look, I think Steve, even though he’s a trader, he does understand the long term that was one of the fascinating things talking to him as an analyst and I came to him as an analyst, after a 10 years working at Credit Suisse First Boston covering the auto industry. And he understood the long term story behind companies behind sectors and he understood why things work the way they do over multi year timeframes. So I’d say he’s probably not all that surprised. It’s been a tough slog so far, I’m sure he’s disappointed. But I think he understands that any kind of big picture mission takes years and years and years. So I’m not a big sports fan. I don’t really follow anything. But I do understand his management style. And I don’t think he’s going to give up and try to sell the team. But I think he hopefully understands that this is more like turning around an industry or a company than it is just trading stocks.

James Connor 32:54
Fascinating comments, Nick, as we wrap up, if anyone would like to learn more about you or follow you on social media, where can they go?

Nick Colas 33:03
Sure, our website’s You can sign up for a two week free trial to our newsletter. And you’ll see in written form, the kind of things we’ll be talking about here today. We’re also on Twitter @DataTrekMB and on YouTube, as well. We got a bunch of videos, particularly the gold video I did a few months ago, I think is proving quite correct. So you can go on YouTube and check us out at data track and Nick Colas and Jessica Rave. And the really appreciate the time today. It’s been a great conversation.

James Connor 33:28
Yes. I’ve enjoyed it very much YouTube is the new CNBC isn’t it?

Nick Colas 33:32
It absolutely is. It’s a super productive way to get you know, high quality information on like your channel, like our channel, and you get to hear it in very long form and great discussions rather than three minutes sound bites.

James Connor 33:43
Yeah. Very good. All right. Well, listen, thank you very much for making time with us today. And I look forward to our next discussion.

Nick Colas 33:49
Thanks so much.

James Connor 33:51
Well, I hope you enjoyed that conversation with Nick Colas. And it provided you with some insights on what to expect in the economy and also the markets in the coming months. One of the things that resonated with me was how bullish Nick was on the price of gold and where he thinks it’s going in the coming months and how he uses it to fortify his portfolio. Gold has been in a long slumber for many years, but it looks like it’s starting to wake up and make a move. And if you would like to learn more about gold and how to buy it, please check out our website and you can learn the many benefits of owning gold and also how to purchase it and how to store it. If you also have any suggestions on who else you would like to see on our channel, please let us know in the comments section below. We would love to hear your thoughts. Once again. I want to thank you for spending time with us today and I look forward to seeing you again soon.


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