Episode Transcript
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Speaker 1 (00:04):
Ifiko boom boom boom boom boom boom boom boom ah
pies boom boom boom boom boom boom boom.
Speaker 2 (00:13):
The newly elected president, even before he was sworn in,
threatened to take over Greenland, recapture the Panama Canal, and
to make Canada the fifty first state. I'm Barry Riddolts,
and on today's edition of At the Money, we're going
to discuss whether the saber rattling has implications for your portfolio.
(00:35):
To help us understand all of this and its implications
for your portfolio, let's bring in Jeff Hirsh, editor in
chief of Stock Trader's Almanac, an author of twenty eleven's
super Boom, Why the Dow Jones will hit thirty eight
eight twenty and how you can profit from it and
full disclosure. Jeff wrote a piece I want to say
(00:56):
it was like twenty ten, talking about the upcoming super
boom driven by the combination of war and inflation, and
basically said the data suggests we should hit thirty nine
thousand by twenty twenty five. And I called him out
on this nonsense. This is the single craziest thing I
had and by the time you and I finished that
(01:18):
conversation and you showed me that data was overwhelming. Not
only did I you convince me, but I wrote the
forward to that book that ended up coming out in
twenty eleven. So let's discuss what war plus inflation means.
In the late nineteen seventies, your dad very famously said
(01:40):
the combination of the Vietnam War and the oil embargo
driven inflation was going to lead to a five hundred
percent bull market, which kind of shocked everybody when he
came out with it. But that analysis turned out to
be exactly right. Explain the thinking behind this.
Speaker 1 (01:57):
Yeah, we've still got some of the old thirty four
to twenty T shirt. It's now thirty four to twenty
T shirts, But yeah, that's right. In seventy six, founder
of the Almanac, my late great father Yalehurst, discovered this
amazing perennial pattern and how this phenomenon is based upon
the exorbitant governance spending creates high inflation, and how the
subsequent decline of purchasing power of the dollar drives the
(02:19):
market to incredul this new heights. You yourself, you know,
were incredulous at the time. Cycles based on the previous
moves from from World War One, World War two, and Vietnam,
which is what Yale was keying on and the associated
massive government spending and the inflation caused by it.
Speaker 2 (02:39):
And then the subsequent version that you were writing about
was Iraq and Afghanistan. And there was some surges of
inflation during the financial crisis kind of eased back when
when the FED took rates down to zero. Tell us
a little bit about what you were looking at in
(02:59):
ten that said, hey, we get to thirty nine thousand
in fifteen years.
Speaker 1 (03:04):
Yeah, I remember, you know what, I remember your actual post.
I think the headline was WTF.
Speaker 2 (03:11):
That's right, that's right. We were about ten thousand on
the Dow at that time. You were calling for going
from ten to almost forty. It felt like it was ridiculous.
Speaker 1 (03:21):
I mean, we had Yale's work behind us. That amazing
chart that that I redid of his where it shows
the you know, it's the log chart of the Dow
which shows the inflation, the CPI and the moves.
Speaker 3 (03:32):
I mean, there's there was some you.
Speaker 1 (03:34):
Know, people talk about these cycles with you know, the
seventeen and a half year, the eighteen year sixty What
did they talk about these sort of arbitrary lengths of time.
We looked at it, and what Yale discovered was that
these events in history that create these these cycles, like
Archduke Ferdinand getting assassinated in nineteen fourteen, the Germany sign
(03:55):
of the Armistice in twenty eighteen, the Gulf of Tonkin
resolution in sixty four, Saigon falling into seventy five, and
then for us currently, what we were seeing, what we
were seeing at twenty ten was this development of after
nine to eleven, which was an act of war, and
ahead of the time we were looking, we had already
gone into to Afghanistan. We were the whole saber rattling.
(04:18):
There was a bye bye vibe we put out in
twenty two when.
Speaker 3 (04:21):
We in O two.
Speaker 1 (04:22):
Excuse me when we went in there, But we were
looking for the end of this huge military involvement overseas.
US boots on the ground in massive numbers is what
created this pattern, or initially created it, and we were
looking for the end of the combat, you know, in Afghanistan,
(04:42):
to sort of spark the end of the war, end
of the secular bear market, and the beginning.
Speaker 3 (04:49):
Of the of the boom, and I think we.
Speaker 1 (04:51):
All kind of have looked back little heinsins around twenty thirteen.
I think that little bear market bottom in fifteen and
sixteen kind of you know, signifies the end of that
secular bear not the ultimate bottom. I mean, we don't
measure the secular bear market from seventy four to two thousand,
measure eighty two.
Speaker 2 (05:11):
Right, that was the new highs that were set, and
arguably this cycle new heis was set in twenty thirteen
that eclipsed seven and two thousand. So I recall early
on in the COVID crisis and the first CARES Act,
and I read a fascinating analysis that pointed out the
(05:31):
fiscal stimulus of CARES Act one and two was about
ten percent of GDP. I think was just Kars Act
one about ten percent of GDP. You had to go
all the way back to World War II, and then
after that the Marshall Plan to see ten percent of
GDP as of fiscal stimulus, And I wonder how that
(05:53):
equates to the equivalent of war plus the obvious subsequent
inflation we experienced in one twenty three is the quote
unquote war on COVID very parallel to what we've seen
in the past.
Speaker 1 (06:06):
One hundred percent very parallel and and that's something we've
spoken about. And it's it's really about overall federal spending.
I mean, the evolution of this pattern of federal spending.
It's not just war but spikes like you just mentioned
in federal spending like we had in COVID where it
goes above trend. I mean this probably started to change
a little bit going back to FDR with the New
(06:28):
Deal ahead of World War Two, and then the federal
highway you.
Speaker 2 (06:32):
Know, spending the state highway system.
Speaker 1 (06:34):
Yeah, that continued after World War Two. So it's it's
really about you know, past federal spending driven by war
conflicts and you know, but spending outside of the normal
budget and COVID and the you know, Inflation Reduction Act,
the CARES Act are prime examples of massive government spending
(06:54):
driving inflation and superbooms.
Speaker 2 (06:57):
So it's a new era, it's a new presidency. There
has been emphasis on things like military spending, energy production,
spacel like exploration. Uh, they're carrying over the previous emphasis
on AI and data center builds. How do you look
(07:17):
at that? How does federal policy and spending in those
areas seem parallel to pass military spendings. How does that
affect your projections?
Speaker 1 (07:27):
I mean it's quite parallel, but it's part of my projections.
I mean, we've updated our super forecast. I think we've
got some further upside to you know, sixty two thousand
and change, which I've written about probably by you know,
average ten percent game of year, probably by twenty thirty.
And that's all now based because it was what starts on.
(07:48):
But right now, you know, it's about tech. It's all
about tech. Ukraine and Israel have shown us and proven
that the conflict is all about tech. Now, got drones
and cyber wars. You know, i'd expect the US military
to be spending and ramping up tech. So all that
military spending you may find its way into technology. I mean,
(08:11):
let's call it defense tech.
Speaker 2 (08:12):
And you see that in companies like Pallenteer and Lockheed
not just drones but single jamming and there's just an endless.
Speaker 3 (08:22):
Array of security.
Speaker 2 (08:23):
Yeah, it's clearly causing a big boom and fiscal spending.
But let's bring this back to the newly elected president Trump. Canada, Greenland, Panama, Canada.
I keep I can't believe we're talking about Canada take off,
so that sort of saber rattling. Do you need a
(08:45):
hot war for the same thing to take effect or
do you just need the government's fiscal spending and the
threat of war to lead this to the same sort
of cycle.
Speaker 1 (08:56):
I think it's not so much the threat of war.
It's overall federal spending and you know, saber rattling. Yet
it's saber rattling. You know, I'm not convinced anything is
going to happen there per se, But it's really about
the spending in general. And if we're going to be
doing deals with Greenland, UH for security and raw materials
that would be beneficial. We've got you know, China doing
(09:19):
deals in Africa and around the world. There's there's there's
definitely a new push for for global you know, security
and global dominance, and we've got to play in that field.
And and Trump's kind of showing doing a show of strength,
but he's a deal maker. Whether you know you like
the man or not, or voted for him or not,
He's going to try to do everything in his power
(09:41):
to leave a legacy, like we spoke about previously, of
you know, a prosperous economy, a raging bull market, and
you know, global peace and security is what he's going
to try to do, and that's going to help our economy.
All the spending, whether it's stargate or military otherwise, is
(10:01):
going to create jobs and keep the economy going. I mean, uh,
it's really all about the economy, is Jim Carvel likes
to say.
Speaker 2 (10:09):
It's the economy stupid? Of course. So so let's look
at sectors. We've mentioned defense, what about energy? What about
consumer staples? Is there any specific sector effect to this
warplus inflation long term cycle.
Speaker 3 (10:25):
I think it's tech. I really think it's too tech.
Speaker 1 (10:27):
I mean you're talking about uh, you know, drones, robotics,
AI energy for sure, because we've got to power everything.
I actually currently have a position in the gas and energy. Uh,
you know, explorers and producers, the the equipment people there,
the x C S XOLE is the seasonal trading for
(10:50):
us as well.
Speaker 3 (10:51):
I'm not sure.
Speaker 1 (10:52):
Staples is the uh the place to be, but you know, uh,
general retail and buying a thing is up. But I
think energy and tech and all this new technology that
is that we're fighting wars with that we're operating everything
on is where it's at.
Speaker 3 (11:09):
I mean, you got to own the cues basically.
Speaker 2 (11:12):
Right the cues. There's a black rock ETF run by
the guy who's run their technology group for a long time.
I want to say it's their Artificial intelligence ETF. The
symbol is b AI, and I don't know, some crazy
chunk of it is in Nvidia, Microsoft and then everybody
else in that space. And it's sort of like a
(11:34):
cues on steroids. It's like two XQUS.
Speaker 3 (11:37):
And then there's the healthcare AI.
Speaker 1 (11:38):
We just heard you know, Allman and Ellison talking about it,
you know, in the White House with Trump there.
Speaker 3 (11:45):
It's hopefully it'll help.
Speaker 2 (11:46):
Us Sam Allman from Open AI and Larry Ellison from Oracle.
Speaker 1 (11:50):
Yeah, how we could cure cancer and do disease analysis.
There's a small microcapstock I have that's trying to do
medical you know AI to better diagnose and get you
better proper treatments and identify things with all your numbers.
Speaker 3 (12:05):
You know.
Speaker 1 (12:05):
Medical data, as you know is still analog huge, but
it's not quite digitized enough yet.
Speaker 3 (12:10):
So that's I think there's some future there.
Speaker 1 (12:12):
So add that to the list of technologies is you
know medical and healthcare AI.
Speaker 2 (12:18):
So to wrap up, we have a massive shift from
just monetary policy in the twenty tens following the financial
crisis to the COVID spend, the military build up, the
AI build up, the energy build up. These are all
policies and sectors of the economy that have been running
(12:41):
fairly hot for the past five or so years. The
new administration is expected to really supercharge this and if
historical patterns hold up, according to Jeff Hearst of This
Stock Trader's Almanac, we could see this market continuing to
rally for the rest of the decade, somewhere in the
high single digits, low double digits. If is that a
(13:04):
fair way to describe your perspective?
Speaker 3 (13:06):
For sure?
Speaker 1 (13:07):
Think about AI and all the related tech, about where
we were in like ninety two to ninety five with
Windows ninety.
Speaker 2 (13:13):
Five, right, you know, early Internet days.
Speaker 3 (13:17):
Early Internet days.
Speaker 1 (13:19):
Look, my view is that we're kind of at that
period of time in this technological boom. I remember the
other part of the supermom equation that I added to it,
on top of warrant inflation and peace was the culturally
enabling paradigm shifting technology which AI and all of its
related ancillary items that we that we spoke about are
part of and I think we're at that, you know,
(13:40):
early mid nineties timeframe.
Speaker 2 (13:43):
So to wrap up, if you're a long term investor
and you are constructive about both the economy and the market,
you should be looking at sectors like defense and energy
and technology, and you should not be surprised that the
current BOOL market might have a whole lot further to run.
I'm Barry Rittolts, and this is Bloomberg's at the Money