Pricing Oil In Gold Is "Inevitable" | Luke Gromen

oil for gold is an inevitability welcome to welltheon I'm wealthy I'm founder Adam Taggart thanks for joining us for part two of our interview with macro analyst Luke groman if you haven't yet watched part one of this discussion with Luke in which he explains why the fast rising cost to service the U.S federal debt along with a recent drop in tax receipts are causing the national deficit to balloon and may likely be the trigger that forces the Federal Reserve to Pivot its policy head over to our Channel at youtube.com wealthian and watch it there first it sets the context for the investment themes we discuss in this video Luke's also generously shares how he recommends allocating capital for the turbulent times he sees ahead so be sure to stick around to hear that okay let's get started watching part two of our interview with Luke groman let's trundle over into the Market Outlook side of things so if I take anything from what you've said so far it's lots of uncertainty going into next year and highly dependent upon if and when the FED pivots here so for the capital managers you know fund managers who are stewarding lots of capital as well as Just For The Individual investor the folks that are watching you know this program um it's a hard year to say man how do I how do I position myself going in here what is your General Market Outlook for for 2023 um does the bear Market that started this year does it continue do we see new lows next year or different ball game I think the first quarter to half of next year are going to be tough um and I think you'll see a resumption of that the regime that we saw um through you know February through college September of this year um where higher dollar higher rates everything else down yeah uh because again it's it's the tax receipt picture combined with the lagged impact of rates is going to force you have a balance of payments problem in the reserve currency issue of the world full stop and that if the if the U.S if the reserve currency has a balanced payment problem everybody has a balance payment so uh I think my Baseline View at this point is you get sort of markets down in the first three to four months of the year uh and at some point that force is something somewhere to break in a big enough way that the FED has to pause and then I think we sort of take off I think you see CPI continue to kind of come down I don't think it ever gets back to two or three I think it probably bottoms at four five six and the FED is going to have to re-accelerate into that and I think by the end of next year I think you could see stocks um recover what they lose in early in the year and maybe even get back to all-time Highs but I think it's going to be accompanied by inflation uh that is probably also a new 40-year highs High singles low double digits in the United States uh and I think within good stock market I think you've got a vicious sector rotation within that because if CPI is running you know eight to ten you don't need to pay 30 40 times earnings for some high growth name you can you know U.S steel is going to be growing earnings faster than that and trading for a much lower multiple uh oil companies uh industrial companies um you know but I I so I I think you'll see a vicious sector rotation to sort of the you know to borrow from early in my career new economy to Old economy markets overall higher inflation higher as we exit 2023 but that's my Baseline view is sort of week to start fed pivot you know something breaks fed pivot and then you know way a a a a Off to the Races kind of a thing with a vicious uh a vicious sector rotation that is already sort of underway really sort of being reinforced okay um I I'm I'm going to congratulate you for being in good company uh I'm going to presume you you hadn't have a chance to watch it yet but that Outlook to me sounds quite similar to what Felix zuloff uh shared right yeah I did not watch that so that is uh that was pretty flattering yeah that's uh it makes me feel you should go watch that and let me repeat a little bit of what you said and what Felix said to see exactly how much overlap there is um he agrees with you that that pretty much everything's gonna go down in q1 ish or so um so it'll be a replay of what we saw for much of 2022 like you said he then thinks there's going to be an event that will force a pivot um like you he sees inflation coming down in that initial period and then then really taking off over the next couple years and hitting new highs which I know is depressing for everybody to hear um he thinks that there's going to be uh you know some assets that perform very well sort of instantly upon the announcement of the pivot right so that'll be bonds um particularly you know Sovereign bonds will react very well especially the long-dated ones and so he thinks that there'll be a nice six to nine month period for bonds following the announcement of of the pivot news um and like Precious Metals you know those will those will respond really quickly too um he thinks that stocks will take longer to recover Which history shows when there's been a pivot and you know in a bear Market um it does usually take stocks a quarter or two to get their mojo back he imagines that you'll you'll see the first response in the high growth stocks the tech sector stocks one because they've been so beaten up into because that's sort of where hot money tends to flood initial actually but then like you he sees it relatively quickly rotating it in the more sort of a cyclical the Industrials um and and like you expect that they're going to do pretty well in another in and of themselves he thinks probably more than anything else Commodities are going to fare best um and from his perspective and his Outlook might go a little further in the years he thinks that the the bull market run in stocks will probably go through the end of 2024 and he thinks it's going to be pretty big like almost like a doubling from whatever low the pivot happens from um so he's he says that doubling to get people's attention like this is not going to be a little recovery it's going to be a big one he thinks Commodities could run into 2025 then he thinks that the wheels just come off everything and we go into like a big depression that's caused by this High inflation 2025 and Beyond and I'm not going to ask you to opine that far in the future we'll have you back on this program many times long before um but but how much does that Outlook agree with kind of your your crystal ball at this point I think it makes a lot of sense I mean I could see bonds rallying I mean they have rallied a little bit I could see them rallying uh mechanically with the weaker dollar I mean you can see as the dollar has strengthened FX hedged treasury yields have been very negative for European and Japanese investors so to the extent you weaken the dollar you're going to improve mechanically uh foreign buying of treasuries um I think it's I think it's a sub-optimal way to play the pivot I think you'll make money but I you know I don't think the 10 years going from whatever three six to you know one again or two right I think it you know goes from three six to three and a quarter to three there's money to be made there but I think things like gold Bitcoin Commodities will be a much more optimal expression of that pivot trade um you know in other words yeah I think bonds probably go up but I think gold over TLT keeps Rising I think copper over TLT Rises I think silver over TLT Rises I think you know oil over TLT Rises um so I think it's just all all relative but a lot of what he says I think I think makes a lot of sense uh I would I would tend to agree and and certainly defer to someone with the with his experience yeah he's not a guy who went a bet against office no no um but that being said you know nobody has a guaranteed lock on what's going to happen in the future and I value your opinions just as much um all right so you mentioned a few things that I got to ask you about as we begin to wrap up here um one is gold so uh you think gold will do well from the pivot news alone um there's been some interesting articles written recently about talk about oil potentially being priced in Gold um Sultan Posner has recently proposed this and you've done some writing about this how it it it could even be done even if there isn't a direct pricing of oil and gold that you know sort of using the Shanghai exchanges you could basically affect this exchange anyways right so can you just talk about the likelihood of of gold becoming a real primary currency for something like oil it's I think it's already begun on some level I mean if you look since 3Q 14 foreign central banks have sold 370 billion dollars of Treasury Bonds on net and they've bought about 300 billion in Gold uh on net in that same time so it's been one of the most quiet Trends in in sort of macro in my view and continues to be I I to me oil for gold is an inevitability for a number of reasons um number one if you are an oil exporter um and Putin gave us a detailed speech about this in Aug in June and of course it was ignored in the western media because it was Putin and whatever um if you were an oil exporter you are seeing Peak cheap energy all over you're seeing depleting oil well as you are seeing and the cost to re to replace oil reserves is rising inexorably everywhere so if you're an oil exporter you sell oil you run a surplus where do you put those surpluses do you put them in sovereign debt which we just discussed cannot be kept money good on a nominal basis unless real rates are negative you would have to be an idiot to take negative real interest rates on your sovereign debt particularly when your primary export oil has to rise in terms of those bonds just to keep production flat so at some point oil exporters get motivated to shift into a reserve asset that can rise in price and keep them you know on par and if you look over the since 1870 in 1870 uh an ounce of gold is 24 barrels an ounce today it's 22 barrels an ounce right so there's gold holds its value in oil period yeah by in contrast U.S treasuries in 1946 a thousand dollar face value as treasury bought you 100 barrels of oil give or take and now it buys you 16. sovereign debt collapses against oil give or take that's just since 1970 or 75. um so the exporters are motivated to store Surplus in something that preserves the real value the oil real value of their of their wealth of their surpluses same time your energy short oil importers um uh your your energy short creditor oil importers right so you're China's your Japan's your Europe's your indias they're looking at this going we can see what happens when oil goes up we saw it this year what happens Japan goes into into not just from a current account Surplus they go into a current account deficit what happens to the end it crashes Europe goes from being current account Surplus into current account deficit because oil goes up what happens to the euro crashes um you get into this Dynamic where they have the same motivation from the other side as and and oh by the way this isn't just Europe and Japan and India and China this is Ghana and this is turkey and this is uh all these emerging markets around the world they are running current account surpluses when energy pushes them into a deficit into a current account deficit they have they they go into the the currencies collapse they have to sell dollars to buy energy or they have to cut energy burp purchases they go into a a currency crisis so how do they prevent this from happening uh it's the same dynamic they need to buy energy in their own currency except they don't want to issue debt they don't want to run the same model as the U.S which is buy energy in our currency and then just take our bonds because that means you have to Offshore all of your manufacturing and none of them want to do that so what they have to settle in something though some of them will settle in Goods but there will still be net left over what are you settling well nobody trusts anybody else so everybody wants gold so you're you're coming at it from sort of the same way in both directions and I think what Zoltan wrote that you know it's it's fascinating you see a number of commentators who love everything he has to say about money markets and and he's brilliant and then he says this and it really is a money market balance of payments issue and they completely dismiss it because it you know the word Gold's in it so they just it you know their heads explode I think gold for oil is an inevitability I think it's already underway on some level now where it gets really interesting is is if you are you know you can use it to manage your balance of payments right if you're gonna like Morgana just came out and said we're gonna barter oil for gold last uh two weeks ago well implied in all of this is that the price of paper gold is manipulated right that's it's overstated there's a huge pile of unallocated gold claims centered in London relatively available underlying physical that's how we manage the gold price and that's that's not particular some quarters that's controversial but I don't think it's particularly controversial throughout just to be clear you meant the supply is overstated by the paper Market not the price sorry yes Excuse me yes yes yes exactly so if you're gonna right you're in one of two things you're you have two issues you know you have got you know the dollar has gone up so your dollar debt has gone up the cost of service your dollar debt and your dollar oil cost has gone up so how do you manage your dollar availability you're having a dollar crisis you're a liquidity crisis the more the dollar goes up the more they're going to be incentive to do this which is if they can barter gold for oil they can go to Russia and say listen we'll see you know we'll we'll we'll do the deal with you uh except We're Not Gonna let's let's not do it at you know the comex you know gold to oil ratio right gold on comex oil on nimex the comex nymex gold to oil ratios wherever it is today 20 20 22 says 22 barrels per ounce they can Ghana can go to Russia and go listen we'll give you 25 barrels per ounce right let us buy it 25 barrels an ounce let's value the gold up so now gonna can in theory go you know and short oil at the 22 barrels an ounce and and on nymex buy gold take the gold take it the rush I get 25 barrels of oil bring the 25 barrels back recover the short of the 22 have three barrels left over and now all of a sudden their dollar drain from their energy Imports can be managed by the ratio of gold to oil and the more the dollar goes up the more this is going to incent not just Ghana but everybody to do some version of this trade because it's in everybody's National Security interest not to economically collapse because bad things happen to the politicians so I think he is on I think Zoltan is on to something uh I don't think a former fed and treasury official writes something like this lightly um and I I think it is in the world we are in where you have the combination of cheap energy and a global sovereign debt bubble I think oil for gold is an inevitability because no one's going to want to take the paper that can't it has to be in negative real rates uh just to prevent Sovereign default and Peak Jeep energy in the meantime means the cost of energy keeps going up so the real value of that paper in energy terms keeps falling over time so those those two factors Peak Jeep energy plus global sovereign debt bubble it to me makes oil for gold inevitable and I think we're just in a very very early Innings of seeing that happen and I think as that gains momentum I think it's really really good for gold over time it's not to say oh it's going to go up X by six months or no I don't know but we we know I don't have to speculate we know what central banks are doing with their gold Holdings they're selling treasuries they're buying gold they've been doing so for eight to nine years right but I just that's so fascinating and you know I guess put simply if if the Petro dollar regime gets replaced with the gold for oil regime um I mean that that would just be a massive long-term Tailwind at the back of gold amongst all the other reasons to own it oh my gosh and and again it has to because if you are an oil importing if you're China and you store your money in treasuries and the price of or you know your interest rate is negative relative to oil you're going you this your ability to buy oil in dollars deteriorates over time which means your potential growth of your economy deteriorates over time well you've got all that debt to service you can't afford that Russians have the same problem the Europeans have the same problem the Japanese are they all have the same problem the flip side you know like I said the the the producer side if you're the Russians listen you produced a bunch of oil today but in 10 years 15 years your oil depletes and now once Russia's oil depletes we know what happens to oil prices if we came out tomorrow we came tomorrow and said Russia can't produce any more oil what happens to the price of oil the triples probably overnight doubles overnight well if Russia has exchanged prior oil supplies for treasuries and then the price of oil doubles so now Russia's got to go buy back that oil that they sold before that now cost twice the money that's not a good trade for them they need if oil is depleting at all they need to hold their wealth and something that's going to preserve purchasing power in oil terms if we came out tomorrow and Russia's out of oil like oil is going to double and Gold's going to double you know oil is going to go up a bunch but treasuries aren't going to treasuries aren't going to you know double from here like that's they have to they they have to As a matter of National Security store reserves in something that's preserve purchasing power and oil terms or they need to find a new energy source right so that's where the fusion stuff that we just got right right yeah right that changes things potentially but presuming that's not commercialized in the next few years cheap oil and the global sovereign debt bubble make oil for gold and inevitability in my future yeah and and just to that point of the presumption I mean I think so we're referring to the headlines that just came out literally yesterday about at a potentially important milestone in nuclear fusion research but under the rosiest of scenarios uh you know if everything goes perfectly well we're still many decades away from commercialization of this so Peak Jeep oil is going to have its day sadly whether we like it or not before Fusion rides to the rescue um so this is an overly simplified comment but um what I'm taken away from what you're saying Luke um I I know you and Brent Johnson spent a lot of time going back and forth on Twitter to a certain extent you can almost look at gold is the pressure release to the dollar milkshake problem that the rest of the world faces right that as it gets uh more and more injured by a rising dollar um you know in in the secular grind gold becomes the escape hatch where it says well the more I can actually settle in Gold it solves a lot of these problems it's very it's very paradoxical or ironic yeah that the stronger the dollar goes the more the more you're going to push people into gold and away from treasuries one interesting little mental exercise I'll just encourage folks to do because I know we have a lot of precious metal holders that watch this this program is uh there are 31 a little over 31 grams and a troy ounce uh of gold so if you if you have a gold coin and pull it out I could hold it easily in my hand here um that would be worth uh if we're talking a gram uh for a barrel of oil um I assume oil was traded in 55 gallon drum more or less is that the size I think that's right yeah I think it's 55 gallon yeah so in my my office here that I shoot this stuff in there's no way I could fit 55 gallon oil drums in here and I can imagine what I could do with all that oil in terms of how that would power My Lifestyle for a good long time all packed into you know the storage unit of this little gold coin right so to you know you you were sort of saying all the benefits of this on a national basis but I think it it's useful to even think about it that way in our lives right you know would you like to have the stored value and energetic potential of 55 you know oil drums a lot of people like yeah great and you can store it in a very easy fungible you know easy to sell easy to store unit like a like a coin absolutely right so um I just found out every useful mental exercise to go through okay right before we wrap up here because you mentioned it you did mention Bitcoin earlier I know that Bitcoin and Gold Have Been assets that you have both encouraged people to have some ownership in I'm just curious if your investment thesis in Bitcoin has been impacted materially in any way by both its poor performance in 2022 when we had high inflation right because my read of the Bitcoin Market is they've kind of given up mostly on it's going to be a currency that's going to be a competing currency with a dollar so don't worry about the currency part of it but the store of value is really the big part of it and it has not performed very well as a store of value this year so that's development number one development number two obviously has been the recent FTX Scandal which isn't Bitcoin specific but it uh you know has shaken some people's confidence in the whole crypto burst so I'm curious as either of those impacted your your outlook on bitcoin the short answer is no um for me Bitcoin is trading like gold did in in Weimar Germany um there were four or five separate instances between 1918 and 1923 when the reichsmark hyperinflated to zero against gold that uh people were selling gold to buy German reichs marks because hey they implemented austerity they were you know the the reichs bank was raising rates the the the they're going to defend the currency and in the end the fiscal situation governs uh and I look at the you know I've said multiple times Bitcoin is a last functioning smoke detector and I think I think it's still functioning in that way um Bitcoin crashed and if we remember early December last year right around this time um like 15 000 bucks in a day and I remember looking and going hmm and then you started seeing problems in the euro dollar market right around that same time uh in implying dollar tightness and and so to me uh you know I as I told clients back in June like at the time I had sold my in June of 21 I sold most of my Bitcoin um and paid off my house that was a pretty good inflation hitch thank you fed uh you know at around fifty thousand dollars now unfortunately uh I bought uh I've been I've been buying it all the way down uh since um and that's been sub-optimal but uh in terms of its read I don't think there's any change to that of um I think what bitcoin's telling us by being where it is is first half of next year is probably not gonna be good because it's just a it's just a liquidity metric I think it's probably being weighed onto a certain degree by liquidation Etc associated with the various uh crypto stuff um and for me I wouldn't really do anything with the other stuff I would focus on bitcoin and I would focus on custodying it yourself I think that you know I think what the FTX we've what we've seen with FTX should be telling people custody your own Bitcoin number one but it should be telling people custody you're on gold um it should you know it should be telling um uh you know broadly speaking if you don't hold it you don't own it um so I think there's some pretty broad lessons there overall but no it has not changed my view in in one bit I think Bitcoin will do really well when when the FED is forced by the fiscal situation uh to resume uh financing U.S deficits okay great all right so you would I imagine you would advise um buying at these prices here um and then uh obviously holding a cold storage solution not an exchange um and then expecting that if the FED does pivot then that should Revitalize uh I think it I think it will I think it will I mean it's like I said I've I've I've been I've been buying it back too soon uh after selling it in mid mid 21 um you know it is what it is but uh um to me I think it's it's uh it it remains is and remains sort of the last functioning smoke detector okay good and that is a sign of your conviction the fact that you've been buying it okay great um well Luke this has been yet another wonderful conversation I love having you on the program I would love to have you back on again at some point in q1 to give us an update on where things are and make any audible adjustments based upon uh what we're seeing on the playing field then for folks that have really enjoyed this conversation would like to follow you and your work where should they go uh you can check us out on our website fftt llc.com and then they can find us on Twitter at Luke groman l-u-k-e-g-r-o-m-e-n all right awesome and when we edit this Luke I will put up those URLs on the screen too so it's really easy for folks to know where to go um all right well Luke it's been a pleasure really hope to have you on again soon but thanks so much again absolutely thanks so much for your time Adam it's great talking well all right well now is the time of the program where we bring in the lead Partners from new Harbor Financial one of the endorsed Financial advisory firms by wealthyon to react to What Luke and I talked about and also talk about what the markets have been up to in the past week I'm joined as usual by John lodera and Mike Preston hey guys John why don't we start with you um I know a lot of what Luke mentioned there must be pretty consistent with your guys's Outlook as I know it at new Harbor but what were your key takeaways yeah thank you Adam and great to be back with you I'll try to give a quick fly by and I'm sure Mike and I can along with you go deeper into some of the big picture themes um yeah uh Luke talked about uh he kind of framed where we likely are and his assessment of the the economic and market cycle of being in the sixth inning of privately continued uh playing out of the trends and and Dynamics we've seen in 2022 um which has basically been higher rates uh persistently High though maybe declining inflation as we uh are on the heels of yesterday's slightly slightly and I'll emphasize slightly better than expected consensus uh um inflation forecast um he he thinks we're probably going to see a continuation of that Dynamic into the first quarter first half of 2023 um and perhaps that's met with uh more uh pronounced market sell-off and economic slowing uh to bring us closer to the ninth inning to use his baseball analogy he did highlight um some of the fiscal um situations going on um particularly in the U.S with you know tax receipts um uh falling um increasingly short of of spending obligations and commitments uh I think he projected that on the current uh path we're likely to see um tax receipts at only 60 of of needs uh and that that was up that would be up from about 30 percent of this year so a growing shortfall from a fiscal standpoint in the U.S um and um you know the implications that would have for maybe a forced fed hand or letting the market have to price in some of some of the borrowing uh pressures that the US will likely face um uh you know he did talk about um you know the FED remittances uh not surprisingly suddenly being vastly below um the the history you know typically the FED is uh as a first and foremost uh well they they pay a dividend to bank shareholders that's their first obligation but any surpluses that the FED runs uh need to get rid get remitted to the U.S treasury and for the longest time in history the FED would would have positive remittances to the to the treasury uh the last several months to a year or so that is absolutely fallen off a cliff so there's been a very massive shortfall not a surprise given all the stimulus and whatnot but right and to be clear it's not a shortfall in remittances it's actually now taken money out of the treasury right well yeah basically the you know and and to to add a little color to that which perhaps will incite some ire on the folks of listeners is this is all in a backdrop where the FED is paying very substantial amounts billions every month to to banks in the form of what's called interest and access reserves now these are literally payments made by the FED to park basically depositors deposits at the fed and the banks get a windfall essentially interest on excess reserves and most banks aren't sharing um that in the form of higher deposit interest rates so at the very least we would encourage folks to you know be a little angry but also um vote with your feet put your money in things like treasury bills we're going to get a a decent yield not a bank account where you're getting 20 or 30 basis points 0.2 or 0.3 percent if you're lucky um six basis points at my savings account yeah I mean it's really uh it's it's unconscionable and and thankfully uh investors can vote with their feet very easily open a treasury direct account work with an advisor who can buy treasury bills for you for at least your cash Holdings like like we do all the time for clients in this environment um and you know I'll touch upon a couple other things um you know he he did talk about um and you prompted this um the the likelihood of a dollar you know kind of pinning of of things like resources gold oil into things like real assets and gold and you know we'll talk about uh those I think in much more detail but that was kind of the big picture that I'd like to reiterate from what I took away from Luke's comments all right and Mike I'm coming to you in a sec but um real quick John one thing that Luke mentioned that I think is just important we all be aware of is uh yeah you were talking about tax receipts coming down and it's increasing basically the deficit that we have to to make up for He also mentioned that a third of the current federal debt is set to reprice within the year right so what's the federal debt right now it's over 31 trillion I know that right and so you know that's over 10 trillion that is going to go I don't have the exact numbers in front of me but I'm going to guess from somewhere down close to one-ish or two you know that's going to reprice somewhere around four uh three and a half four um that's just a tremendous amount of additional interest expense that's going to be making that deficit even worse with the following tax receipts yeah the math is pretty simple when you look at it at a macro level and if you looked at a household balance sheet in the same manner you'd say wow this household's in in big trouble of course the FED through its money creation can stay solvent uh even though it's bleeding um uh and that has consequences in terms of devaluation of of the currency um spurring inflation or or maybe maybe making inflation more intractable thing than yesterday's you know again very modest surprise to the positive side um you know you're not going to have inflation um kind of go back down to two percent or zero uh if you if you start to to monetize the debt like the FED has done over the last uh the last decade or so all right um all right so Mike coming to you um uh anything else you want to add to what John said maybe I'll seed your answer a little bit and and just re-emphasize the similarities I heard between Luke's Outlook and Felix zuloff's Outlook who we had on this channel relatively recently but what else did you take away yeah I mean we there was just some talk there um about tax receipts declining rapidly really the reason tax receipts exploded over the last bunch of years is because the FED blew the biggest bubble we've really ever seen in modern times probably the biggest bubble in our lifetimes and now all of that is reversing and Luke talked about the fact that the Federal Reserve is down about 1 trillion to 1.2 trillion on their balance sheet which is over 10 trillion in terms of treasuries they hold so they've lost on paper one to 1.2 trillion dollars in in U.S citizens money and they don't really have to report that they don't have to mark that to Market they carry it forward as Luke said as a deferred asset and and really we're just in this game where everybody is game theorizing the fed and everything we continue to talk about as the FED because that's all that matters so far and it's mattered it's only mattered that way for a long time but I should mention here we're recording this on Wednesday uh December 14th and uh in like 15 minutes the fed's going to release its latest statement in terms of its policy measures for December and then Powell's going to talk after that unfortunately we're not going to know all the reaction to that by the time time we're done recording here but to your point once again the world is sitting on pins and needles with baited breath waiting to see what one single entity is going to do and that is going to drive the price action from here it's all that matters It's the final decision from the FED comes out today in just a little while and by the time this video is released I think we'll all know the technicals of the market uh are such that we were we're very concerned about the progressing bear Market but it's been a very controlled and in slow descent we really haven't seen any trap doors open to the downside that's what we're concerned about whether or not this fed announcement will be a catalyst or something else could be a catalyst or maybe that move lower comes further down the road we don't know but surprises should be to the downside and what we think is a a structural bear Market a true bear market so going back to the FED balance sheet for a minute over one point uh one one to one point two trillion dollars in losses that's taxpayer money this constant fed intervention hopefully comes to an end at some point I don't think it's going to happen voluntarily because Luke said something in there about um well do you really want to be at the helm and and blow up the financialized U.S economy because it'll mean that just a horrible time for us it'll it'll be a recession depression even and nobody wants to be at the helm of that and be and be culpable for that type of of Crash but at the same time it's being used as an excuse to continue the same policies that have a lot of negative effects the negative effects being the FED gets to choose who gets the purchasing power and the wealth and who doesn't um and namely those are the people that own the asset so we'll see I think Luke's right I think the first half of 23 is going to be um is going to is going to be to the downside I think we are probably in the sixth inning if that and we see much lower markets in the first half of 23. so we'll see what happens all right uh John heading back to you to you know Luke's point about being in the sixth inning of the global sovereign debt crisis um right before we turn the cameras on here you were telling me about another notable veteran investor who feels like we're at a sea change moment um uh do you just want to give a little more color on that sure I want to Quick correct one thing I said earlier though I mentioned uh Luke threw out a stat of uh uh tax receipts only covering uh maybe 60 of spending what I meant what the actual stat was is uh 60 of GDP growth so it you know in a world where you can grow GDP more than the the the um fiscal spending that all is well but when you fall short um that that is a problem so I just want to correct that small detail and I'm sure folks maybe didn't even stand out but I wanted to correct the record but yeah um I think it's very notable to call out um Howard marks he came out power marks is a legendary uh value investor uh really on the credit side meaning um bonds not more Southern stocks but as has often times been the cliche Bond investors are in many ways historically the smartest guys and gals in the room because bonds really get to the essence of of the money system and it's a much bigger Market than Equity markets globally um now of course central banks have manipulated corrupted Bond markets but we're getting back to a a credit Market bond market that's a little bit more free functioning but anyways Howard Marx came out with he's been in the market since 1969 I think his career started so he's he's one of the Legends and perhaps a more modest Legend than some of the ones that are always headline grabbing very very humble guy um but he came out with a market comment I think yesterday or the day before basically saying that he thinks we're on the embarking on really the only third major sea change in his whole career as an investment strategist and just by context the first two that he he talked about was uh back in the 70s early in his career there was a sea change in which investors started to look at um you know prior to that people would avoid risky assets altogether there was no price that would be compelling enough to uh attempt investors to kind of take on risk so long as they were compensated in the early 70s into the 80s the concept of pricing risk became more prevalent and of course it's not a perfect pricing because we've seen major blow-ups but the idea that you can buy you know riskier Investments so long as the prices is attractive enough to get compensated for it and that's been our big beef here at new Harbor for many years is that in most assets these last several years the price has been utterly uh overvalued relative to the risks at least from a historical standpoint and um and this is where you might say valuations ultimately matter so that was the first sea change that he talked about the second was really what we have seen for the last 40 years a declining uh interest rate Market if you look at a a chart of 10-year treasury yields or even Federal fund Target rates and the last four years they essentially have been have done nothing but go down okay and here I forget the stat he he I think he said 60 or maybe even higher than that of all market gains over that that time can be attributable to the declining interest rate environment um and and that gets us to what he sees right now as us embarking on a new regime or new sea change where there is likely no way in heck we can expect the kind of Tailwind of low and declining interest rates over the next 20 40 years that we saw over the last 40 years so he he projects uh uh that will likely see persistently higher interest rates maybe settling in the two to four percent range not he describes almost zero probability we go back down to a zero interest rate environment like we saw the last decade um but he also projects stubbornly High inflation so maybe to to in a word say the the fed's long two percent Target maybe is a pipe dream uh in his assessment all to say is he thinks to sum it up he thinks the strategies that have worked over the last decade two decades maybe even the last four decades are likely to be not the strategies that work over the next coming decades and this ties into if folks saw the the breakout video that Mike and I did with you last week Adam where we talked about and this is playing off of some of Felix Zoo lost comments that you know the passive strategies the 60 40 pie chart you know Buy and Hold um that have worked so well over the last 40 years generally um are likely to be utterly disappointing in in the coming decade or more and we did a you know we by way of example showed a chart of the S P 500 in the late 60s to early 80s where you you saw the index essentially go nowhere but there definitely were tradable uh rallies uh of nearly a doubling in a couple instances over that time frame but followed by Massive losses so very tactical Hands-On very selective investment approach is likely to be important picking sectors you know Luke's reference to a a massive sector education we couldn't agree more and we think it's going to go back to looking at things that are fair valuations things like some of the resource sectors things like precious metal mining which you know we think is a very low sector emerging market stocks low low valuations relative you know I can go on and on but I really encourage folks to to seek out that that investor letter by uh Howard marks there's some headline you know stories on on the media that give the the Snippets from that and Adam I would encourage you if you get Howard marks as a guest I think you would have a fabulous conversation he's a really insightful guy uh he's on the target list and I really appreciate you bringing him up here and summarizing his his thoughts here for folks if we can get a link to that investor letter folks I'll put it in the description to this video uh below um so thanks for bringing that up John it's it's just yet another highly seasoned voice that is joining the chorus of many that we've had on this program here underscoring the the switch from passive to active that you just mentioned there um folks if you want a deeper dive into that discussion as John referenced last week the guys from new Harbor here and I really dug into that topic deeply so I won't do it here but I will put up a link to the video right here for you um but uh but the the key takeaway from that folks is unless you already are a highly experienced uh active investor which most people haven't been because they haven't had to be over the past 10 to 15 years because of these these Tailwinds that we've had at the back of the market where it's just inexorably risen every year and you could basically close your eyes and pick an ETF and you've done fine um that does not seem to be the future that we're heading into here so unless you are yourself an experienced active investor you need to make sure sure that whomever you're working with from an advisory standpoint has that skill set and a lot of them don't we talked about this in depth last week but it's again because they haven't had to you know that understandably most of today's financial advisors have grown up in a market with that Tailwind at their back and all the musculature and experience that they've developed has been riding that Trend because that is what made them and their clients money now there's a you know a sea change to steal from Howard marks and these guys basically have the exact wrong experience set to navigate you through you know the new environment ahead so um look if if your advisor has those skills great stick with them they're a rarity they're very valuable if not you know consider talking with one of the advisors that that Wealthy on endorses I'll give you the link at the end of this video here but I just really want to underscore that point because we are basically entering an error that's going to require a very different Playbook than retail investors and professional financial advisors have been using um all right so you know ignore that see change at your peril Mike coming back to you as we just begin to wrap up here um I know that you guys are big on natural resources precious metals um are one of the biggest Holdings that you guys have precious metals and the mining companies um I'm assuming that you know Luke's comments about Golden General um you know probably rang true to your ears but I'm just curious if you have any commentary on his thoughts there about the potential which he says actually is inevitable um that eventually oil will be priced in gold and that could cause a dramatic revaluation uh for gold I think absolutely that's likely to happen he talks about oil for gold being in an inevitability um it makes a lot of sense I mean gold is one of the uh the assets that's been shown to hold purchasing power uh versus um you know many other things but certainly you know in in terms of the oil producing Nations they're looking for they want to receive value obviously for the energy that they sell and receiving uh it's receiving gold for it makes absolute sense and I I think that if that were to happen gold would be priced dramatically higher from from a technical perspective gold looks very good here we would talk about it almost every week there's been a giant cup and handle basic formation and a couple fake outs too and break out from the handle to the upside of that basic formation failed last year a year and a half ago and then we broke to the downside and that failed and we're back to the middle again back to the Apex of that bullish triangle right at 1820 or so and then gold is trading at 1822 right now and you know we've been saying look for that 1820 level because if it gets back there then both fake outs both the upside breakout and fake out and the downside breakout and fake out will have proven to be false and so it's kind of really taken people for a ride and we're right back to that decision point so if we can see gold really break out again to the upside from here this decision point this could be the time that it really runs and the technicals say it should run to around 2500 or so so yeah we like the miners we think they're very undervalued like John I think mentioned earlier we like the physical metal and whether or not oil gets repriced in gold or or gold for oil happens we think that gold will do well if gold for oil does happen gold will do phenomenal so it's just a small allocation of five to ten percent of your investable assets and physical gold and silver is a is a good idea in our opinion and it's a good diversifier and it should do very well and you know again the technicals look very timely here so we would consider adding it or taking a look at your allocation and rebalancing it all right it's going to be interesting uh you know in the immediate term seems that every time the Federal Reserve opens its mouth this is long you know track record uh it seems to always no matter what happens with other assets it always seems to punch the precious metals right in the face we're going to find out in just a couple minutes if that happens again today or not so by the time folks are watching this they'll know also you know Felix and Luke I think you know both have said hey you know all assets are probably not going to do so hot in q1 as we have sort of more of the same going on um with you know slowing economy potentially rates going back up a bit um so you know who knows we'll see what's going to happen in the next quarter or so um and maybe maybe they don't quite catch fire in that time frame for the reasons that Luke and Felix have mentioned if so I imagine you guys would say that's a good time to be dollar cost averaging in uh if you haven't yet and then of course both Felix and Luke and you know again no but he has a complete Crystal Ball but if if their probability is prove correct you know there could be some big events around into q1 into Q2 that forces a Fed pivot and we would expect precious metals to be one of the asset classes that reacts more immediately to that news than others right Mike I I would think so you know and you talked a little bit before about conventional Financial advice conventional Financial advice is not going to tell you to hold real things like gold and silver and we've heard stories of of people we've talked to that have advisors that have said things like well you can't go down to the grocery store and buy a loaf of bread with with gold I guess that's technically true but you really can't buy a loaf of bread with a share of Apple stock either you know so I mean there's really this this lack of Acceptance in the general Community don't don't listen to that listen to yourself and I'm not saying that we're right I can't guarantee that either but it just makes sense gold and silver have been money for thousands of years and we're not saying put 100 of what you've got into it we're saying put five or ten percent of your investable assets into it and again we're right at that level where technically it looks great and uh any one of these other catalysts happen it will do very well and so this is it's not about being a gold bug or being extreme it's a it's a very good asset to diversify with and um you know we like it a lot all right we're gonna have to start wrapping up here one thing I'd like to talk with you guys about maybe next time is Tesla um Tesla was the Wonder stock um of the whole you know hyper growth Tech movement um the the stock hit an all-time high of about 380 bucks a share and this is after many splits uh back in November of last year uh it's now down to below 160 as of the time that we're talking here so it's lost a lot of its value and we had talked a few weeks ago after I'd interviewed David Traynor about zombie companies and he was bringing up Tesla as a potential trigger that enough weakness in Tesla because so much speculative Capital has gone into that stock if enough of that gets vaporized then that could start a Cascade of losses across kind of the zombie uh swath of U.S corporations um so I just think it's something to keep our eye on I would love to get your guys thoughts about that I just want to sort of pre-sell that discussion here um John just heading back to you I'll give you the last word here as we wrap up again just a reminder we are just a couple of weeks away from the end of the year um anything you might want to remind folks to do in the remaining days of the year would be great and and just to get a reminder you guys are open through uh the holiday season if folks want to have discussions about other wrapping uh up the things they need to get done before the end of the year or want to talk to you about getting on a solid footing for 2023 correct uh yeah so year end always uh brings to mind uh tax planning because that's how our tax year is structured it's a calendar year tax year so um things like uh uh managing or harvesting uh unrealized losses in a thoughtful way um especially if you have have gains on the books and you want to avoid or defer or diminish the amount of capital gains taxes you might have um you know thinking about so obviously if folks have required distributions they have to take from their IRAs and inherited IRAs um absolutely get those done before you earn because there's a pretty hefty penalty for under withdrawing but also consider over withdrawing essentially taking um elective distributions from from an IRA especially if for example you're in a a year where your income reported income is going to be lower than you might expect in a future year perhaps you were in transition or lost a job um you know we do think and this ties into the the fiscal situation we touched upon uh earlier in this video and Luke talked heavily about um something's got to give the notion of of higher tax rates in the future is a very real possibility uh just to plug the hole if you will um so so you know taking uh elective distributions now when tax raises tax rates are quite possibly quite favorable to where they're going absolutely these are all things you think you should think about doing um um in terms of uh you uh I'm sorry Adam you there was another part of that question you asked me just quickly remind me what it was and I'll oh that you guys are open oh yes yes yes yes yeah we absolutely are we uh we pride ourselves in being accessible um you know most of our clients and Prospects I think would tell you they very rarely will get a voicemail or a non-human during working hours uh you know we do value balance work-life balance as best as we can get it so uh I think markets are closed the day after Christmas Christmas falls on a Sunday so the 26th of December I believe is a a market holiday so uh we're just gonna not be at the office that day so please folks uh appreciate that we'll we'll appreciate that down time as well for that day but otherwise we're open um we're available we're available to do trades as that need to be done but also have conversations with folks about their situation um and we have a team to do that that's why we have a team we all work together on clients behalf and and we'll we'll make sure we're accessible great all right well look um folks I highly recommend that you follow you know the the year-end best practices that John mentioned either yourself with your existing advisor or if you'd like some help reach out to the team there at new Harbor uh to do that uh just go to wealthyon.com fill out the short form there we'll connect you with one of our financial advisors based upon what you tell us your priorities are and just as a reminder those are free consultations they don't cost you anything there's no commitment to work with these guys we just offer it as a free public service to help people get as prepared as possible for the crazy type of year that we think may be lying ahead of us given what Luke and I just talked about um so if you haven't done that yet go ahead and do it um all right folks and uh happy holidays to everybody I hope everybody's looking at great times with family friends maybe some wonderful experiences if you're going to go travel um but if you enjoy these uh great discussions we have with folks like Luke Roman if you'd like to see Luke back on the channel other great names like him please do me a favor support this channel by hitting the like button then clicking on the red subscribe button below as well as that little bell icon right next to it and whatever happens over the remaining a couple weeks of this year cert will certainly be deconstructing uh whatever the FED announces in the next couple minutes when John and Mike are on here with me a lot next week we will be doing it here on this channel for you and hope you join us then John and Mike thanks so much for joining me again for another week everybody else thanks so much for watching enjoyed it once again Adam thanks so much we'll see you next week as always Adam thanks for keeping us on our toes great conversation with you always and we look forward to the next one if you'd like to schedule a consultation with one of the financial advisors at new Harbor Financial simply go to wealthion.com these consultations are completely free and there are no strings attached the good Folks at new Harbor will simply answer any questions you have about your investment goals or your portfolio and give you their best advice given their latest Market Outlook they're willing to do this because they care about protecting people's wealth and because wealthyon has connected them with so many thoughtful investors just like you over the past decade we started doing this because so many people have approached us in frustration looking for a solution because they're feeling out of alignment or downright ridiculed by the standard financial advisors who have been managing their money you know the type the kind that just pushes all of your money into the market scoffs at the idea of owning gold and when you bring up concerns about the Market's sky-high valuations they say don't worry the market will always take care of you for many of the reasons discussed in today's video we think this is one of the most challenging and treacherous times in history for investing we strongly believe that today's investors are best served working in partnership with a conscientious professional financial advisor who understands the risks in play now we're agnostic which professional advisor you work with as long as they're good if you're already working with one that's fantastic stick with them but if you don't or are having trouble finding one you respect or trust then consider talking to John and Mike and the team at new Harbor now For Those About to ask yes there's a business relationship between wealthyon and new Harbor which we've put in place to make sure everything is handled according to SEC regulations all the details on this are clearly provided on the wealthyon.com website also it's important to note that new Harbor is able to work with U.S citizens green card holders and those with existing Assets in the USA but for regulatory reasons they aren't able to take on non-us clients all right with all that said if you'd like some insight and guidance on how to protect your wealth during this unprecedented time in the markets go to wealthion.com to schedule your free consultation with the good Folks at new Harbor thanks for watching foreign

Channel: Wealthion

Views: 119,731

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Id: _0c5Ml3rH7k

Length: 58min 20sec (3500 seconds)

Published: Fri Dec 16 2022