Gold’s Selloff Isn’t the End of the Bull, It’s Another Great Buying Opportunity, Says Rosenberg

All right. Six months ago in this chair, David Rosenberg told this audience to buy gold. Obviously, that call worked out in a big way before the pullback. I mean, gold did run up to that record north of $5,500. And he also said two other things that day, that a recession almost nobody is positioned for was on the way, and that the two props under this whole cycle, the AI spending boom and the stock market wealth effect, would not hold, with the real bubble sitting in investor expectations, not in the technology itself. Now, since then, gold has pulled back down about a quarter from the top, though it has clawed some of that back. The labor market has been cooling, and the big AI names have wobbled a little bit here. And the real debate now is how close we are to that reckoning he laid out. So this is about what part of his framework is playing out, what is not, and what investors should actually do now. Now, he's not a guy that deals in hype. So let's get into it. All right, David Rosenberg, of course, president of Rosenberg Research, joining me now. Always good to have you on the program, Dave. Good to see you. You too, Jeremy. You know, we talked a little bit in that intro just about six months ago when you were on here. I mean, gold was still having a nice run, but then we saw that huge run up to past $5,500. So let's start here with gold, because, you know, that call obviously worked. You said buy it, it ran past that 55, gave back about a quarter, though it's clawed some of that back. I mean, is the bull still alive or has it run its course here? No, I think the bull is still alive. You know, nothing goes in a straight line. And you know, when I saw you in Vancouver in January, I mean, both gold and silver looked like a dotcom stock circa 1999. So what happened in this correction, a lot of it was margin call related, because that's what happens is that investors sell their winners to meet their margin calls. But let's face it, March was like Liberation Day because of the war. It was a massive risk off trade. You sell your winners. You know, look what gold did. You would have thought gold would have surged after Lehman collapsed in the summer of 08 and gold went down for the same fund flow reasons. But at some point, that correction played its course and it was another great buying opportunity. You know, gold bottomed at $250 an ounce in December 1999 with the Washington agreement that put a moratorium on Global Central Bank sales of bullion, which drove the gold price down in a secular fashion for 20 years by 60%. You know, this is a correction, right? And I find it very interesting that when the stock market corrects hard, everybody's talking about, I got to get back into these better price levels. Gold goes into a correction and everybody freaks out. The gold bull market is over. You know, I started in the business, you know, because we were talking earlier about Alan Greenspan, rest in peace, dying today at the century mark. But if you remember, he was the Fed chairman, racing rates in 1987 and we had the stock market crash. The S&P 500 was down over 20% in one day. That was my first day as a street economist. And it was a huge correction in the context of what was an uninterrupted almost 20-year bull market. This is, we had about 12 corrections just like this in gold since it bottomed in December 1999. And so the question is appropriate, is the secular long-term bull thesis over? I don't see why it would be. The bull thesis is really predicated on central banks continuing in a structural way to rebalance their reserves away from the U.S. dollar and towards gold. And there's no reason for me to believe that that process is over. It's probably only halfway through based on the work that I've done. So I'm still, if you're talking long term, three to five years, I'm still bullish on gold and the gold mining stocks. Three to five. I mean, I guess it could bring us to China just a little bit because Westerner investors were kind of selling for, as you mentioned, liquidity and China was buying physical metal. It's kind of a different story than that gold demand kind of collapsed. I mean, it's interesting, even though the price was falling, the buying didn't stop where it kind of counted. I guess customs data came out this morning. China just imported the most gold in over two years, up about 76 percent this year. So I guess, David, I mean, if Western leveraged money was selling and China was taking physical metal, I mean, does that tell you that the bull market is just transferring from paper holders to kind of stronger hands? Yes, I think that's exactly what's happened. And I wrote about the weak hand, strong hands, fund flow situation. The reality is that there obviously was selling going on, you know, in that period after we hit those, you know, stratosphere levels, you know, back in January. So yeah, you know, the higher they go, the harder they fall. That's what happened with gold. You know, you've seen that happen. Look what happened with Bitcoin. I mean, Bitcoin sliced in half, you know, gold wasn't sliced in half, but it's not really a speculative play anyways. But be that as it may, this is like the 12th correction in gold since the bull market began. And every time the question is, you know, is the bull market over? The World Gold Council just put out its report last week. The central banks in the survey say they're going to continue to expand their gold holdings. And that's all you really have to know, because, you know, for the past decade, the driver of demand and demand is expanding, call it two, two and a half percent per year. And that's being driven by what the central banks are doing. The available supply is easier to model, and that's expanding one percent. And the demand from the central banks is running two to two and a half percent. You don't have to be the world's rocket scientist economist to know that those supply and demand curves over time are going to lead to a higher gold price, but it doesn't move in a straight line. I don't know why people believe it should move in a straight line. And this way, what corrections do in the context of a secular bull market is they provide an opportunity for people that didn't get in previously to get back in at better levels. So the day that I hear the central banks need to do the reverse Washington agreement and put a moratorium on their buying, well, my thesis will change. But from the last time you and I spoke, the thesis didn't change. I mean, the price level changed and we went through, you can call it a technical bear market if you want, and then we've recovered some off of that and we recovered some off of that despite the fact that because of the Fed, real interest rates have gapped up and the dollar's been strong. And I think gold has actually been behaving very well in the past little while in light of that. The fact that the lows are holding despite a stronger dollar and higher real interest rates, just think what happens when the dollar reverses course and when we find out that worse is not going to raise rates after all. So, you know, I'm taking a look at the situation, you know, rather constructively, you know, so that's, you know, to me, it's really if, you know, look, you and I and everybody on the call, we have to understand that we don't like the central banks, but they're players at the poker table with the rest of us. You know, if you ignore quantitative easing under Bernanke in 2010, 2011, boy, you missed out on a lot. And so the central banks continue to diversify, and I'm not talking about dollar debasement, but the reality is that the share of global trade that the United States accounts for is like, you know, down to 20, 25%, but the share of reserves and dollars is still closer to 60%. And you go back to that period of the peak in gold price in 1980, the share of gold and central bank reserves was 70%. We got down to 10% in late 1999 at the price lows, and we haven't even come close to mean reverting yet. So when I'm taking a look at what mean reversion means, classic Bob Farrell rule number one, is you correct two extremes. So this process of central bank diversification, I mean, that's your story for gold. What else has changed with gold, really? What's changed? I mean, it's still the beautiful, shiny, malleable metal that never changes characteristic. This had nothing to do with the dowry season in India or really about Costco selling its nice little bars. This had to do with the central banks. You either invest along the central banks or you don't. I choose to. So until that changes, and remember, it was the central banks that ended, the central banks cost the 20-year bear market, and then it caused the end of the 20-year bear market back in 1999. And it was the central banks, if you're paying attention, that actually, if you were long gold, they were your best friend. And I don't see any evidence to suggest that that process is stopping, notwithstanding the gyrations we're going to see along the way like we have this year. Right, right, right. And I mean, you know, let's stick on this point because it's interesting. I mean, you've always said gold is really a verdict on something bigger, kind of that whole system. And I mean, the biggest piece of that system right now is obviously the stock market. So let's go there. I mean, you've made that point for a while now that the entire economy is based, basically leaning on one thing. I mean, you know, it's what, the S&P? I mean, walk someone through that. How did the S&P 500 become the thing holding everything up here? Well, it's because we have the highest concentration of equities on household balance sheets ever. 73% of the American household financial asset mix is in the equity market. So that takes out what we saw in the late 1990s. We'd never seen this before. So everybody's in the stock market. Only 7% of that financial asset mix is in bonds. But who wants to own bonds? If you go to the wine and cheese party at your neighbor's place, are you really going to stand there and talk to people about the fact that you just loaded up on 10-year treasury notes or the front end of the curve? I mean, don't you want to make friends? You don't want people to walk away from you. It's just that, you know, the reason why it's become such a huge part of the economy is because of the concentration on consumer balance sheets, and consumers are still 70% of GDP. So you know, we have this bizarre situation, for example, where if you're taking a look at real personal disposable income, that's after tax, after inflation, personal income, it's negative 1.1% year over year. If we just looked at the income side of the ledger, we'd be talking about a consumer recession. But because we're all narcissists and we measure economic success through GDP, which is all about spending, well, consumer spending is up more than 2% in the past year, and incomes are down 1%. So the driving force here is that people are looking at their 401ks and the people that own equities, look at their 401ks and they're saying, I'm richer, I'm wealthier. So I'm willing to spend more of my after tax income. So that's why the personal savings rate has gone from like over 5% a year ago to like barely more than 3% right now, there's been an epic decline in the savings rate. Now, when I talk to a lay audience, a non-economic audience about the personal savings rate, first their eyes start to roll and they fall asleep. But I would argue that it is the most important behavioral aggregate in the national accounts, that decision at the margin, psychologically, subconsciously, how much am I going to spend of my after tax income? How many pennies will I put in the piggy bank? And what will I spend? When you feel wealthier because of the stock market, you naturally spend more and more of your after tax income. And that's what's referred to as the equity wealth effect on spending. Because if we didn't have the equity wealth effect on spending, and households were forced to live within their means, which means spend out of current income, consumer spending would be running negative 1.1% right now. And we'd be talking about a consumer recession, perhaps a mild one, but we wouldn't be talking about a solid economy. That's for sure. Now, I need to bring Greenspan in just for a second, because obviously, it's the news this week, you mentioned it, you know, 100 years old, he's the man who gave us the phrase irrational exuberance and what people came to call the Greenspan put, I mean, the idea that the Fed will always ride in and rescue the market. I mean, you're describing a market price, like nothing can go wrong here. So are we living in the world of Greenspan build? Not anymore. And, you know, that moniker came because after that huge decline, on the day that I started October 1987, he flooded the system of liquidity. And then when it was obvious that the worst was over, that the stock market collapse was not going to produce Armageddon, a depression or even a recession. I mean, keep in mind that, you know, in that same quarter that Greenspan cut rates to save the stock market, the economy was growing like five percent, we were at full employment and even corporate earnings were up like 50 percent year over year. And he kept on cutting into March of 1988. So and he said afterwards when he talked about it, that these were insurance cuts to make sure that the market was lifting off the lows, which it was. Now, look, everything moves in a cycle and we actually got a cyclical bear market that started in 1990 and 1991. We actually had a recession. And well, and then, of course, Greenspan cut rates after that, but that we did have a recession on our hands. Yeah. In a recession, you cut interest rates. But, you know, we had another example of Greenspan, you know, with the soft landing back in 1996. We had a booming stock market, Greenspan's cutting interest rates. We had, you know, the fallout from long term capital and the Russian debt default and the Asian crisis. The U.S. economy was humming right along, the unemployment rate was at a cycle low and he cut interest rates like three times in the summer and fall of 1998. So and then, of course, you got Bernanke and Bernanke was like, you know, there was the Bernanke put was the Greenspan put on steroids because it's one thing to embark on quantitative easing because you have a non-functioning mortgage market like we had in 2009. But then we had QE2, we had QE3. And it's interesting that I believe it was in 2011 where after one of his quantitative easings that had nothing to do with the economy, he published a piece and I think it was on the Washington Post and it was an editorial that he wrote where he said, we're doing this to boost the stock market. He came right out and said it. And so then, you know, you have, you know, Powell, we always, Powell comes in at the beginning of 2018 and he sounds pretty hawkish and everybody knew from his record he was not a big fan of quantitative easing. And then look what he did to the balance sheet, you know, back in 2020 during and after Covid and how slow he was to pull back on that balance sheet. So all the way through, investors had it in their mind that the Fed will always be there to bail me out. The Fed will always have my back, that that is ingrained in the mindset. So the question is about Warsh. Well, I think without any proof just yet that he's probably going to be more transformational than Powell was. Powell just ended up being another conventional central banker. I'm not sure Warsh is going to be that. I think that he let it, he let it be known right away. I mean, it's obvious who did not provide the DAW plot. Do you really have to think about it? It's not guesswork. He didn't provide a DAW plot and he kept the press statement tight. I mean, the number of words were down 62 percent from where they were in Powell's last press statement. And then his press conference was cut really short. So he already told you that his plan to cut back on Fed communication. Well, the proof of the pudding's in the eating, because he did exactly that last week at the meeting. And his and now we can expect that on the table is going to be the end of these DAW plots. I mean, that'll have to come down to a vote. So I think that he's already shown in the first meeting that he is a different, different Fed chairman. And I'm positing that he could be the first real transformational Fed chairman since Volcker replaced Miller back in 1979. And I'm not going to say that he will never do QE. If the markets fail, the central bank has to step in to make sure that the markets are functioning. That'll be a last resort. Is the Fed put alive? Well, the Fed put will always be alive, but I think that the strike price for Warsh is going to be different than any of his predecessors. Did it catch you off guard? Do you still think that there's kind of the data drags them to cut? What does each path look like there? Well, look, it was I didn't find that he was overly hawkish. To tell the truth, I know that, you know, in the press conference, he mentioned price stability or inflation something like 31 times. We did the word count. And he mentioned the labor market six times. So people are saying, well, you know, he's leaning towards the inflation side of the mandate. OK, well, you can interpret it that way. Or maybe he just believes that the labor market's in really decent shape. I don't know how we could think that when you consider that on a year to year basis, there's been no growth in nonfarm payrolls. And the household survey actually shows year over year that employment's contracted modestly. But the narrative to the narrative on the economy is is still strong because people look at the stock market and make their assertion that the economy must be great if the stock market's great. So I'm not so sure, you know, the markets were priced for two cuts several months ago and now are priced for two hikes. And what changed? Like what changed? What changed was the war. What changed were oil prices. Well, now Trump is driven onto the off ramp and clearly wants this deal for a deal to become a deal. Oil prices have retraced 80, 85 percent of the run up. You're taking a look at the inflation expectation metrics out of the bond market. You look at the TIPS market and you look at the the breakeven levels on inflation. I mean, the the five year is down to like two point two seven percent. It's at its low point for the year. If you look at the chart of market based inflation expectations in the past few weeks, it's like a hot knife through butter. And yet the Fed's still talking hawkishly. I think that, you know, they're they're talking hawkishly because they're still to this day shamed by their bad call on transitory in twenty twenty one and twenty twenty two. They're still they're still that element of it. I mean, these are human beings, not robots, and they weren't going to get caught off guard again. And the difference, however, in my mind is that back then the covid price shock got transmitted into wages. Of course, when the government's paying people two years not to work and give them expanded benefits so they they make more staying on the couch than going back to their old job, just as the economy was reopening. So the corporate sector had to bid up wages. So you had like it wasn't the 1970s. It wasn't like we didn't have a 10 year wage price spiral, but we had an 18 month wage price spiral. This time around, it's a different labor market. I mean, you could look at the four point three percent unemployment rate of that turns you on. It's a lagging indicator and it doesn't tell you what's really happening beneath the surface, what's happening with the layoff rate, what's happening with the hiring rate, what's happening with the job opening rate and what's happening with the voluntary quit rate, which was surging. People were job hopping like there was no tomorrow and pressuring employers to raise their wage. The quit rate, you know, Janet Yellen was really maybe the best labor economist to ever head the Fed. No matter what your opinion of her is, she is a classically trained labor economist. The quit rate is one of her favorite economic variables. And again, it's very behavioral. The quit rate now is going down when people are not leaving their job in search of greener pastures. And that's very important because it has like a 75 percent correlation with wages six months down the road. So this is where I know I don't think the Fed is going to be raising interest rates. Do I think they'll be cutting? Yes. Imminently? Definitely not. But maybe by the end of the year, it's interesting that the market thinks that the Fed could start raising rates as early as September. I sort of roll my eyes at that one because even through this short war and the effects though have been pernicious, there was no real sign of broadening out through the pricing system. There is no evidence that was feeding into wages. This is something totally different than 2021 and 2022. And so the question is, you know, the Fed has been known to pivot. They have been known to pivot. If you go back, for example, you know, Powell comes in in January 2018 and hiked rates four times that year. And when you go to the end of 2018, the hike rates in December, even though the credit markets had frozen up, the the dot plots were calling for two rate hikes in 2019. And if I recall, I think the Fed cut rates three times. If you bet against the dot plots, then you did very well for your clients. And I'm betting against the dot plots right now for a very similar reason. You know, that's kind of a distinction. I mean, you're saying that this is not 2021, 2022, because the price shock is not broadening through the system. It's not showing up in, I guess, wages, inflation expectations. And it's not even showing up in that real demand boom. So so by year end, the Fed, if they have to look through this war shock and start cutting, I mean, I guess what is the one kind of data point that proves that you were your first year? I mean, is it wage growth? Is it break evens? Is it this core services, job openings? Do you think real disposable income will start coming up? I mean, is there anything there that could make that case? Well, you know, as for real disposable income will depend, it's another war. It's a war between wages versus prices. And if the oil price normalizes, I don't think it's going back down to 60 or 65. But, you know, inflation is a rate of change, right? Like you don't have to get back and we're not going to get back, I don't think, without a global recession. We're not going back to the pre-war levels. But we might be at a new level. But inflation is about a rate of change. It's not about a level. You know, when Volcker started cutting interest rates, you know, back, say, in 1980, 81, inflation was falling. But the oil price itself was like almost 40 dollars a barrel. It wasn't like three dollars anymore, like it was a decade earlier. Right. So inflation is not about levels. It's about rate of change. And the rate of change in inflation is going to be coming down. The question you have to ask yourself is, what is the case for the Fed? What is the case for the Fed? Because the whole reason why they became more hawkish was because of the war and the fear that this was another supply shock that was going to have a big impact on inflation. And their big concern was, will it have an impact on core inflation? Now, we could have the debate as to whether it was ultimately going to show up in core inflation, but we don't need to have that debate anymore because oil prices will come right back down again. And there might be some spillover because we know the impact on fertilizer. There may be some hit to food. But just remember that the Fed focuses on the core, ex-food and energy. And people will say, well, I guess people at the Fed, I guess they don't drive a car and they don't go to the grocery chains. But that's not why. It's because the core is sensitive to demand conditions in the economy. Food and energy usually gyrate because of supply, not because we changed our diets overnight. So, yeah, I think that, you know, we're going to go. I think that as far as rates are concerned, we're going to go back to where we were a few months ago. I think that, you know, the camouflage, we had a couple of months of good retail sales. Yeah, well, the World Cup is going on. And you also saw it in the recreation services and tourism. The employment side there was very strong in the last jobs number. That's not sustainable. And then you had really we just we just came off the last vestige of the stepped up income tax refunds. By the way, even with that, you know, it's not as if consumer spending is booming. It's 2 percent. There was a time when we talked about 2 percent consumer spending. We thought, OK, that's actually pretty soft. But today people think it's pretty strong. But that's what the trend in consumer spending is in real terms. I think that we're now looking at the income tax refund effect, and my understanding is that all that money got spent. That's now in the rearview mirror. So it's going to be very interesting to see how the economy performs. We know that the AI spending boom, that's not going away anytime soon, but it is sapping tremendous resources and momentum out of old economy capex, which actually is in a recession. We don't talk about old economy capex. We don't talk about industrial spending, commercial construction, all the other aspects. We just talk about AI related spending, which is now about half of total business spending. I mean, this is the biggest spending boom on a piece of capex as a share of the economy that we've ever seen before. It takes out the railroads of the 1850s, let alone fiber optics and telecom equipment back to the late 90s. We've not seen this before. That's really the sole source of vitality for the economy. Runner up is that drop in the savings rate because of the equity wealth effect. And what if that goes away? So I actually think I'm not going to quibble about the numbers. I'm just going to say that beneath the veneer, there's more fragility to the US economy than meets the eye. And I think they were going to see that come home to roost in the second half of the year. And I think inflation is going to surprise to the downside. And all the reasons for the Fed to swing hawkish is they're going to pivot the other way. And that's how I'm positioned. Now, you know, from the other side is that oil coming down is not kind of a race food and insurance and electricity tariffs, household inflation, psychology. Could war still say, hey, I need more time before I declare the shock contained? Well, yeah, I think that's 100 percent right. To me, it's a it's a matter of like you've got one or two rate hikes priced in. So let's just talk about it. They're going to hike rates. No, I don't think they will. Then it's another question as to, you know, will they will they cut rates? And that will depend on how fast inflation comes down, how sticky or nonsticky core is, what happens with wages and the unemployment rate. So there's a lot of things that will go into that equation. And and will the Fed be late to cut rates? They're always late to cut rates. They're late to raise rates. They're late to cut rates. They're a very deliberate, slow moving institution unless they're shocked into it because something happens in the markets. But I do think that no matter when it is, I'm trying to pinpoint it right now is next to impossible. But I think it's just a big enough conviction to say, I think the next move will be a cut, not a hike. And I'm not going to I'm not going to waste time thinking about what meaning it's going to be, because that's a big enough call in its own right, considering what the market is discounting right now. Yeah, absolutely. And before we kind of get into because I want to pivot and talk about what people should do in this environment, but I want to kind of come home for a minute where you are in Canada. You're one of the famous economists from that country. And I just kind of want to talk about Canada for a second, because inflation just printed its highest since 2023. But when you look under the hood, it's basically, you know, gasoline and your core measures are sitting right on target. So strip out the noise for me. I mean, what what is the real condition of the Canadian economy right now? OK, well, you know, it's as they say in the Quebec side of the border, it's flat as a coup de castor, which is a beaver tail. So the Canadian economy is flat. And the Bank of Canada. And this is why I couldn't believe that anybody would believe that the Bank of Canada would be raising interest rates when every single meeting they talked about that the economy is still operating under excess supply or what's called a positive output gap. So, I mean, that's code for an expansion in idle resources. That's inherently disinflationary. So I look at today's CPI report. You know, yeah, it was all all gasoline. You strip out, you strip out energy and inflation is running roughly two percent. Now, we and my firm, we construct a core core Canadian index with the same thing for the United States. Because what about airlines? Airlines are joined at the hip to energy travel services joined at the hip. You have other segments that are included in core traditional core, but you might want to adjust for that because they're moving in lockstep with what energy prices are doing. And so when you do the further adjustment and you look at the core core, we're running at one point six percent. When you look at underlying inflation in Canada and really adjust for what's happening on the energy side, one point six. That's it. Yeah. When you do the proper when you do the proper adjustment, because, you know, if you're going to if you're going to say, you know, oh, well, we're going to exclude food and energy. Sure. Well, food doesn't really have, you know, leakage impacts. I mean, energy has a leakage impacts. They're like first cousins or maybe a sibling travel services and airlines delivery services. They reside like right next door. They are basically connected. So when you do that further adjustment and do the core core, it's one point six. Really is that and I know what's happening with health care, insurance, and that's global in nature. To me, I look at that. That's not demand driven inflation. That's a that's almost a de facto tax hike. I don't seriously look at that as inflation. Does it raise the cost of living? Yes. But what happens is that because nobody has a cola cost today like they did in the 1970s, like your your wages aren't catching up to even that sort of cost push inflation, which tells you nothing about the economy. It leads to a compression in real incomes, and that leads to a compression in consumer spending. We've been seeing this, as I said, already in the US. It wasn't for the stock markets ballooning, taking the savings rate down at some point that is going to end. And we'll see that the emperor is is donning fewer robes than what meets the eye right now. You need Canada economy is flat. Inflation is not a risk. You know, once again, the Bank of Canada is trying to preserve its credibility because it lost part of its credibility with the same transitory trade. You know, five years ago, I think the risk again, I don't think the bank will be doing anything for a long time. But if you ask me, what's the next move? I think the next move will still be a cut. And don't forget, well, what are the what are the implications going to be for business capital spending in Canada? If Trump decides that he wants to walk away from the USMCA? Yeah. But this is this is what I was going to ask. The bank will be compelled to cut rates in that environment. Yeah. Yeah. And I mean, you've argued, obviously, a lot of this is self-inflicted. I mean, weak productivity, a competitiveness gap with the US on taxes and capital. I mean, is that fixable? Is it is it a cut then? Or are we kind of looking at a structural decline that no cut solves? Well, I mean, we've been in structural decline in Canada for more than a decade. There's nothing new there. There's there's nothing that the liberal government has really done to address it. You know, maybe, you know, lip service, obviously, fast tracking natural resource projects, you know, seeking trading relationships elsewhere. But that's never going to be a full antidote for the trading relationship with the United States. I said before that the biggest economic crime that the government committed was when Donald Trump cut the US top corporate income tax rate from 35 percent to 21 percent. We never responded. The top marginal corporate in Canada with the provincial abatements is still around 26 percent, five percentage points higher than it is in the US. But we're the we're the junior partner. We're the smaller country. We we have to be tax competitive, which we used to be. We never responded. That was a huge negative shock for Canada. And to this day, we never responded because in today's world in Canada, the government does well. I think the Conservatives would have done it differently. But the liberals and their constituents can't go to the people and say, well, we're going to cut income taxes for fat cat companies on Bay Street, even though the corporate sector hires 70 percent of the people in this country. And that's why we have continued to see year after year net direct investment outflows. And these are not foreign companies doing it. Canadian companies are moving into the US because capital will go where it's treated the best. So, yeah, that that hasn't changed that to me. And nobody talks about it. We decided that we can't cut corporate taxes in Canada because it's not politically palatable. And that has been a structural drag on capital formation and productivity. And now we have no population growth, so the supply side is almost as weak as the demand side is. That's not good news for the Canadian dollar. That's for sure. And as far as the Bank of Canada is concerned, I would tend to agree with you. But, you know, the Bank of Canada has only one blunt tool, when you think about it, and it's interest rates. So if the economy is weakening and credit demands are weakening and you've got inflation properly measured below target and likely to fall in the next several months, you don't have a choice but to cut interest rates. You know, yeah, the Bank of Canada is not equipped to... The Bank of Canada can't cut taxes in Canada. The Bank of Canada can't go and do anything to stimulate productivity. It really just operates the economy through monetary policy. And its only tool, when you think about it, you know, beyond the balance sheet, its only tool is the overnight rate. Yeah, I mean, it feels like the problem is now a competitiveness problem more than a rate problem. OK, US or Canada, I guess it all comes back to the same question for people watching. I mean, what do they actually do? You keep pointing to kind of Warren Buffett sitting on a record mountain of cash. Jamie Dimon loading up on treasuries. And your message is be liquid. I mean, you even bought the long bond yourself. So for a regular person, don't give me exact percentages. Give me kind of the order. I mean, if you're building a portfolio in this environment or for this environment, how do you rank in kind of sequences? Is it cash, durations and bonds, bullion, the miners you brought up? I mean, the defensive, what comes kind of first and what comes last? You know, it's too bad, you know, on the Rosenberg Research website, we have the rosy model portfolio, which has been around since the beginning of 2023. It's up well over 60 percent. It's a model portfolio. It's not a fund. It's got a single unit holder, which is me. I see that. And it's based on the highest conviction themes at Rosenberg Research. It's like I said, been by far my best performing investment in the past three years. And but then again, it's not correlated with GDP. It is not correlated with the stock market because it's really an ideas based thematic. And it's diversified across all asset classes, currencies, fixed income, equities and commodities. And it's global in nature. So I guess what I would say is, you know, what's my philosophy right now? Right now, the Sharpe ratio of that portfolio is one point two. So it's above one. The beta is point four. I'd say keep the beta low. And so I want an hour in the risks. I have a lot of concerns. I have concerns over the valuation of the U.S. stock market in particular. The Canadian stock market, by the way, is not nearly as expensive, but it's still very expensive. You know, I've decided to express my equity exposure. By the way, people think I'm a perma bear. Well, with all due respect, 50 percent of this portfolio. OK, it's not 80 percent. Admittedly, 50 percent is in equities. But I prefer to own Asia because it's just has a positive equity risk premium. And I find that part of the world is far more vibrant in terms of economic growth potential. And it has less concentration, notwithstanding that there's Korea, Taiwan have concentration risks, but they're just, you know, I mean, the biggest component is China. They don't have concentration risk. And I like the Chinese market, to tell you the truth. So I like I like Asia and I like investing around thematics. So here's what I'm saying, because I have a barbell approach right now. I think we're coming out of this war. Now, when I talked about inflation before, I was talking about it at 60,000 feet up in the air. There are things that are going to be inflating in the future and it's going to be goods prices. And that's because we're going to come out of this war, understanding that if a country can have a chokehold by the Strait of Hormuz, which most people had never even heard of before, that you're going to be finding security of supply, inventory building, hoarding. That is going to be a new secular theme that's going to provide a higher floor for the commodity index. So I'm a bull on commodities. The link between commodities and the CPI is pretty loose, OK, and besides the fact that the CPI is mostly dominated by services, we're a service driven economy. This is not the bricks and mortar from 50 years ago. So we're going to have goods inflation. We're going to have goods inflation. And that's why when you're taking a look at the equities in my portfolio and it's on the website, it's all hard assets. It's pipelines, it's energy infrastructure, it's rare earths, it's base metals, it's gold, it's uranium. And the other half of the portfolio are bonds, especially bonds in areas of the world that I like, where I think they're they're attractively priced. That's Treasuries, Canada's and Australian bonds. I like Australia because I like their currency. I like their currency more than I like the Canadian dollar. They're hitched to the growth engine in Asia. And I like their bond market because their central banks already hiked rates three times. They're at the end of their tightening cycle. You always want to buy the bonds of a country at the end of their tightening cycle. I like Australian bonds and they're like yielding like five percent against like whatever, you know, two and a half to three in Canada. But I do like the Canadian bond market, by the way, like the U.S. bond market, like it's so it's a barbell between and, you know, the commodity inflation and then the overall disinflation. And you're going to say, well, how do you have both? Well, that's because I said before, I'm seeing a future of service sector disinflation, service sector disinflation. And the service sector is very hitched to the labor market. And the labor market has already cracked in Canada. And as I look beneath the surface, it's in the process of cracking in the United States, and it's very disinflationary for services and services dominate inflation more than goods do. So that's going to lead to a decline in inflation over the next 12 months or so at the portfolios and bonds. But because I like the pricing power inflation story in the commodity segment, basic materials and hard assets comprise really the other half of that portfolio. And that's how I'd be positioned. Well, that's how I am positioned. You brought up miners, which I want to get into. I mean, but for the person staying at home, you brought up something interesting. I mean, what is kind of the mistake? Is it owning no commodities because they fear recession or is it owning the wrong commodities because they're chasing yesterday's inflation trade? Well, I don't know if I have a great answer for that one. I think that, you know, if we get a bad recession, commodity prices will go down, but I think they'll go down by less than they have in the past, because I do think that what we're going to be seeing is buyers coming in at these dips because they understand the theme that I'm putting forward. So, of course, commodities will go down in a recession. They won't go down as much as they did before. And frankly, if that does happen to me, because I look at this, this is not a tactical call. This is a thematic call. This is like a classic family office. This is basically a three to five year call. Yeah. So just like my gold, you know, I wrote my first gold report when I was a Gluskin chef at the beginning of 2010, when gold was not even trading at a thousand dollars an ounce. So, you know, I don't get graded on a day by day basis. I take I do take a longer term view, but I'm not advocating buying the S&P 500 despite what people say that, you know, just just by the market. I don't want to buy a market where there's such concentration where ten names account for 40 percent of the index, because I don't think I want to own those ten names. And so, yeah, Dave, for the for the for the miners side, because our time always goes too damn fast. I could talk to you for hours, but for the minor side, I mean, you kind of flagged something interesting. The gold mining companies are trading as if, you know, gold was still around three thousand dollars an ounce. Well, before where it obviously is. I mean, is that the part of the trade where the real upside is? And if you don't want to name names of it, do we hit juniors? I don't know. Well, I don't I'm not licensed to name names. And my my entire model portfolio is all ETF based. So I don't like to take company specific risk at any event. Like even if I could buy companies, I don't think I would. I don't I don't like to have that degree of concentration. I'd like to own a sector or a subsector. I like that degree of diversification. So, yeah, I mean, in our model portfolio, it's split between physical bullion and and and the miners. The miners will have a lot more upside, as you've seen. I mean, in the correction that we saw, miners also have big downside and a correction, big upside when you're in a bull market, you know, like we saw last year. So I would say, well, you know, I'm not going to sit here and tell people what to do, Jeremy. I'm just telling people what it is that I'm doing. So I own I own both. And probably you can ask me that. So what's the next move in the rosy portfolio? Probably going to be building that position further because we're still about half where we were last year. And because and then once you once you don't rebalance and it goes to 20 percent and you're comfortable at 10 percent, you've got to say, did the thesis change? And the thesis didn't change. Just the price action did. And so it forced us into rebalancing. But I would say right now, if anybody's sitting on these winners, especially in the semiconductor space and the AI space, remember that it's only a paper gain until you sell. I don't have. So you're asking me about, you know, my philosophy is I am not a momentum trader. I do not invest that way. That's not even investing. I am not. I'm not counting cards in Vegas and doubling down. I have never been scared to take profits. I enjoy taking profits. That's when you make your money and then you can decide what you want to do with the proceeds. Spread it out amongst the other things in your portfolio that you like or establish a new position in something. And what we did very recently was establish a position again post-war in cyber security, as an example. So that's to me, that's that's prudent investing. And so, you know, when you're getting big, sharp moves, unless your thesis has changed, rebalance and always have. And my recommendation is, you know, have your portfolio, but also have your watch list right next to your portfolio. We've been writing a lot about the Canadian banks, and we like the Canadian banks. We like the Canadian banks. They're like total returns, like 60 percent in the past year. They just got an extra level of support by OSPI in terms of these new capital buffers. But we never pulled the trigger on it because I, you know, it's our top conviction views. If we had every conviction in there, it'd be like 100 names, 100 ETFs, you know, you got to keep it manageable. But the Canadian banks, because we're waiting for a correction and they will correct and then we want to come in and buy. And the long term chart, by the way, looks really good. Can you like right now we have energy infrastructure, like we have pipelines, but we don't have direct exposure to the oil price. And if we undershoot to the downside on WTI and Brent, we might want to get involved in the Canadian exploration and production subsector. So, you know, there's there's there are things out there that are on our watch list, because as Ira Gluskin famously said to me, if you don't have a plan B, you don't have a plan. So we have a model portfolio. And I write about this in my daily, but I'm always telling people, what am I likely to do next? And so these are some of the things that I'll tell you something else, by the way, you know, as I talk about the U.S. market, I mean, I mean, really, the U.S. market is trading technically, depending on how you measure it, with a negative equity risk premium. Like, think about that. The market's telling you that the equity market writ large is a riskless asset class, which we should all know is absolutely a nutty observation. But that's what the market's telling you right now. And I like to invest with the wind at my back, not the wind in my face. And so a negative ERP, however, there is one. And I'm writing about this tomorrow. Most people don't know about this. We're so fixated on what's happening in the U.S. We're so fixated on, you know, this, the A.I. continued build out the SpaceX. And nobody realizes that this bill that's working its way through Congress, this Homebuilding Act as part of the White House's affordability program. Let's just hope for their sake that he did it in time before the midterms. The homebuilding stocks, you know, they're a small share of the market, but they can often provide a lot of alpha. In a short period of time, they're so beaten up there, they've come up about 15 percent from the lowest, but they're down 60 percent from the cycle highs. And they're trading with like like Jeremy, the U.S. homebuilders are trading with a 10 multiple. The overall market is like over 20. Huge discount off everybody's radar screen. Everybody thinks that the U.S. housing industry is is dead, stuck in the mud. And I've been writing about that for some time. But I'm writing something different tomorrow because that's also on our watch list. So, you know, for the big Permabear, the Permabear Rosenberg is going to is actually going to buy the homebuilding ETF. That's something else on our watch list because this is a group that could double very quickly. So you see a good part of my model portfolio is is thematic with a long shelf life, classic family office. But it's like, you know, the reason why I own two year Canada's and two year treasuries, that that's not a thematic view. That's because I don't believe these central banks are going to raise interest rates. And I think if the market reprices to my view, you can make, you know, six, seven percent easy money at the front end of the yield curve with no duration risk. So, you know what? Sure, I'll have some of that. But the homebuilders, of course, would be would not be something that would be in the long term, but it could be something that that could pay off at least, you know, for a period of three to six months. So we're looking closely at it right now. Hey, let's let the cat out of the bag. No, no, no. I mean, you know, the playback is I guess the playbook is, you know, not hide from everything. It's liquidity duration. Bullion is kind of core protection. I'm seeing some select miners commodity for upside. And maybe these beaten rate sensitive equities like homebuilders where policy and rates can kind of change the math. Hey, before you take off on me, I mean, I was watching back our December interview today and you ended that interview with two words. You said buy gold. So I got to ask you before we signed up today, I mean, after this run, this correction, a stronger dollar and a little bit of a hawkish fit here. I mean, do you still say that today? And what would make you turn bearish? Well, look, what would make me turn bearish would be the first central bank that says I'm done. Yeah. The first time I see the inverse of the Washington agreement, then then the game is over. The 20 year there's there's nothing gold. Gold's physical characteristics didn't change and gold's physical characteristics will never change. The supply curve is relatively inelastic. It's always about what the demand is. We had a 20 year bear market from 1980 to 1999. Gold prices down 60 percent for only one reason. The central banks were diversifying out of gold and in the US dollars. And then we hit an extreme. And now that extreme is being corrected. And that's the story for the gold price. So, you know, we already came through the situation where, you know, real interest rates have gone up. The Fed talking hawkishly. The US dollar has gained momentum. I don't think any of this is permanent, by the way. But that's those have been some of the undermining factors for the gold price. Absolutely. Those those have been headwinds. I don't think that they're sustainable. I don't think there's so much leverage in the system, so much leverage in the system that they can't they can't raise interest rates without precipitating some sort of crisis. But I will say this much. If I'm wrong, if I'm wrong, here's why I'm wrong on that. But I'll be wrong and then I'll be right spectacularly. Is this now because we talked about Warsh at the very beginning? Yeah. Well, again, I wrote a report on this just last week. Where did you know that going back to Arthur Burns in the 70s, the first move by every Fed chairperson, I say chairperson because, well, Janet Yellen was a chairwoman. Even Janet Yellen, the dove, her first move was the rate hike back in 2015. Did you know that every Fed, every newbie, every newbie, every rookie made a rate hike their first move all the way back the past 50 years. So maybe there's something to be said about coming in and flexing your any inflation credentials. Oh, you know, OK, that'll be interesting to see. I'm not going to sell my two year notes. I think that if he raises rates, it'll be a colossal misstep. It'll be an ECB just did. Then again, look what the ECB did. They trichet raised rates in the summer of 08. Then look what happened. And not just that, but and this is why I still want to have gold as a buffer, a stabilizer, a ballast in the portfolio, because it is a hedge against instability. And here's what I'm going to say, because remember, I was born in this industry on October 19th, 1987. I told you that before. That happened in Alan Greenspan's first year as chairman. And if you go all the way back, never mind the 1970s, go all the way back to Eccles in the 1930s. And within a year of a rookie Fed chairman, chairwoman within a year, we get a crisis, either an economic crisis, a financial crisis or both every single time. Just take a look with Bernanke 06. Then look what happened. The rug started being pulled underneath the financial markets the following year. So for whatever reason, I'm trying to figure out the reason, but sometimes maybe there's no explanation except is it is what it is. Or maybe it's the markets always test a new Fed chairperson. They always face a critical test. But let me tell you something. It is not a test that will lead to lower gold prices and lower bond prices. It's a test that will actually trigger a risk off trade where you want to have bullion, which I own, maybe not enough, but I could rectify that and bonds when they're happy with my bond position. So just remember that. Remember that a little history can go a long way. Every central bank rookie comes to the Fed faces a destabilizing event in their first year. And maybe right now the markets are pushing worse to raise rates. Maybe this is one of those tests. Remember, the market also pushed Greenspan to raise rates in 87. And look what happened on my first day. Interesting time. David Rosenberg, president of Rosenberg Research. Dave, always sharp, always clear. Appreciate you making the time. Let's not wait as long next time. Thank you, sir. Appreciate it. Great. Great joining you. All right. That was David Rosenberg. Here's what I'm taking away. I'm in the headline this week. We're all about strong dollar gold sell off. Dave's whole point is it those are under the surface. Now, the deeper story, the bubble, the debt, the central banks quietly moving out of dollars and into gold has not changed at all. Now you decide who is reading this right. If you want the macro, nobody else will give you straight hit subscribe. And tell me in the comments, are you buying this gold pullback? You're waiting it out. I'm Jeremy Sappin for all of us here at Kitco News. Thanks for watching.