Where Is Money Rotating To Now? (Uncut) 02-25-2025

there is a shift going on here and I think we could be at a major inflection point in terms of the Market’s focus and again it’s not won’t be just the mag 7 and in fact the mag 7 can start to lag other areas of the market which would have implications for the S&P 500 because 40% of the S&P is in 10 stocks will Nvidia sell less chips Tesla’s auto business uh had some cracks in their last quarter and I’m not trying to downplay their businesses what I’m really more saying is is their stock market dominance I think is coming to an

end Peter bfar returns to the show today he is a CIO of Bly Financial Group lots to go over today Peter we going to talk about the Doge program that’s underway we’re going to talk about uh the evolution of trade policies from Trump we’ll talk about earnings we’ll talk about the tech trade which you told me offline maybe over and just generally the major risks and opportunities for investors for the remainder of the Year welcome back to the show Peter good to see you thanks for having me David good

to see you as well let’s take a look my screen let’s start with this piece of news here uh Trump says Doge could return 20% of its savings directly to taxpayers that could reignite inflation I mean that’s from this article in CNN I’ll ask you if it’s going to reignite inflation let’s take a look at what was discussed Trump said he’s considering a plan that would give 20% of savings identified by musks Doge back to Americans potentially complicating the country’s ongoing battle with elevated inflation there’s even a under

consideration A New Concept where we give 20% of the Doge savings to Americans citizens and 20% goes to paying down debt uh the idea of the so-called Doge dividend a check sent to every taxpayer and funded with Doge savings was publicly floated on Tuesday by usero musk’s social media platform this sounds a lot like a stimulus check doesn’t it what’s your yeah exactly what it would be uh it would be one time though wouldn’t necessarily be an ongoing thing I don’t think or maybe it is uh but yeah it

would be a tax cut I I I I I would prefer that they save the spending cuts for um the the extension of the expiring uh tax cuts this year rather than the one this one time thing but maybe it’s not one time I don’t know uh but yeah if there’s not enough supply for stuff to meet the a pickup and demand that these checks would create then yeah it would lead to another bad of inflation so um sounds good I’d love a $5,000 check as I’m assuming everybody would but um I think we need to think broadly about it

the uh savings that the Doge program is claiming to make it’s now in the billions um what impact if any is that going to have on first of all the deficit which scoten treasury secretary scoten wants to reduce to 3% of GDP and second on economic growth if indeed that markets uh we not the markets but the government is a lot more efficient and saves more money any Market impact whatsoever well I think over time it’s it’s definitely going to be a good thing thing if if the government is spending less money and more money is left in the

private sector uh I think what doge is uncovering is is great uh and exposing a lot of the uh inefficiencies and the waste that uh the government has because there’s very little accountability in government uh but in the short term you know we have to understand that any reduction in the US budget deficit relative to GDP well it is very well needed from a big picture long-term perspective Ive it does have negative economic implications uh we have to understand that the US economy right now is being held on the shoulders of upper

income spending AI spend and government spending and the government spending directly or via the IRA or the chips act or infrastructure spending has been a huge boost to economic activity also looking out over many years govern government budget deficits has been a a corporate Surplus Plus in the private sector so if if there’s going to be less of a budget deficit again good thing long term but in the short term that can be less corporate profits so it’s just like a drug addict that um needs to get

clean uh getting clean is a good thing but there could be a withdrawal period uh that could be painful this is my uh screen once more CME fed watch tool the probability of a cut by the next beating basically nil cut by May um a little bit higher but still not significant it’s not until June that we see a higher probability of a 25 basis point cut uh the markets like the FED perhaps uh are anticipating inflation to stay stickier hence the lower probability of a cut uh before June what’s your read on inflation is

inflation going to remain sticky do you think well I think on the service aside we could see further uh moderation as lower rank growth works its way into that calculation uh I do think that rents will resume their upward Trend next year but at least for the next six months we could see deceleration there on the flip side though uh it does seem that there and and there’s some meance to that so it’s not necessarily going to be clean uh Services inflation has been booed by motor vehicle maintenance costs Motor

Vehicle Insurance Airline fairs and other things uh on the good side that’s where most of the disinflation has taken place over the last couple years and I’m beginning to see signs of uh a bottoming out we’ve used car sale prices that are lifting again Huntsman uh a big Chemical Company in the US talked about on their conference call this week about uh possibly raising prices in a on a few of their their chemicals um so I I do think that that while inflation looking at over the next couple of quarters could decelerate in

the aggregate I don’t think it’s going to be by much and I do think you throw in the prospects of tariffs even though some can will argue that it’s a onetime uh impact uh that there is enough uh muddiness in the data for the FED to have no confidence at all right now uh about what they’re going to do with rates I mean one of the precursors of Powell cutting interest rates last year was he wanted to have confidence in the trajectory of inflation well I don’t think he can have any confidence in a

further deceleration in the trajectory of inflation and that’s why I think they’re going to sit on their hands at least for the next few meetings before we continue with the video I’d like to tell you about the precious metal sector now gold is you know a hit record highs so the question on everybody’s Minds is what should we be following and tracking in relation to Gold well I’m here to tell you that Stellar gold is a name to watch Stellar is a leading gold developer with two Cornerstone gold projects in Canada the tower gold

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below or scan the QR code here where David Lin viewers can sign up for their macro gold newsletter to get inside knowledge and updates for free let’s talk about economic growth now on Thursday uh the uh Lei leading economic index came out unexpectedly decreases in January reversing most of its gains for the previous two months the conference board released a report on Thursday showing an unexpected decrease by its reading on leading e US economic indicators in the month of January uh cord’s board said his leading

e economic index fell by 0.3% in January following a revised 0.1% uptick in December now I know this is just one month but are you seeing other signs that may perhaps point to a Slowdown in economic growth Peter well I talked about the strength of the economy being an upper income spending AI spending anything related to the government but the flip side of that and this all points to what I have referred to as a very mixed and uneven economy is lower to Middle income spending has been more muted

particularly on the lower end uh as as people deal with the cumulative rise in inflation and prioritize things that they need rather than things that they want uh the pace of existing home sales is at a 30-year low manufacturing’s been in a recession for more than two years now global trade is relatively muted and with respect to the labor market on one hand the positive is the pace of firings has been relatively muted obviously we’re now beginning to see it in in DC Maryland and Virginia of course uh but

the pace of hirings you know has been uh has slowed and has been more subdued relative to the last couple of years uh so I think all in all uh as I said it’s a very mixed and uneven economy right now okay well the markets have taken a bit of a um slide earlier uh today on the trading session the Dow was down about basis points the S&P down about the same uh down D down 500 basis Points Walmart forecast races concerned about earnings uh stocks dropped on Thursday uh Dow member Walmart dropped more than

6% after the company said it expects fiscal year sales to grow between 3% and 4% which I guess is a disappointment to some um if Walmart is given the bad guidance you should be paying attention to it since uh this particular analyst analyst H it’s past uh Fitzpatrick managing director at RJ O’Brien Associates okay so Walmart one of the largest retailers in the nation in the world arguably um dropping more than 6% on the day what does that signal to you if anything well I think their n yes their

guidance was was a touch light but overall the number was fine I think the problem with Walmart is more so the stock than the company itself uh the stock went into the into the numbers release trading at 38 times earnings and there are a bunch of stocks like this trading at crazy multiples I mean Costco is trading at 60 times earnings phenomenal business but a Nutty multiple uh and we’ve seen that in in a variety of other stocks and there is a common theme on the day that we’re taping this of a lot of these high multiple stocks

are getting hit uh it was a momentum trade that took them to tremendously uh elevated levels and uh I think the Walmart news I guess maybe it’s just a wakeup call whether this is the beginning of something more will have to see but uh all these momentum stocks all these Comfort stocks including the mag 7 uh really sucked a lot of the stock market energy away from everything else and into these names and uh what we’re seeing is a tremendous rotation taking place inter International stocks uh and

and other names outside of these uh these momentum stocks that have just been tremendous to the upside okay well uh the other piece of views we should discuss is perhaps um Tech now you told me off like the tech trade is over um before we get into specific new developments within the tech space um curious to get your thoughts on that and what you mean by that well I’m I specifically mean the mag seven and when I say over I’m I’m talking in terms of their dominance relative to everything else where there was just a one decision

uh trade and to buy these seven stocks and I think that there is some reality check to their fundamentals and potentially their growth rates and that maybe some of these businesses transition to more value stocks than growth uh whether it’s it’s the Deep seek news that that definitely caused a lot of people to question and and this questioning actually started last year in terms of all this hyperscaler spend and what the revenue uh drivers will be from that spend and the Deep seek certainly took it brought it front and

center and then you you wonder okay ai’s influence on Google search business for example should I be paying 33 times uh earnings for Apple stock that doesn’t really grow anymore in terms of its growth rate uh will Nvidia sell less chips because of of of of the ability to to do things cheaper even though uh not at least right now because the hyperscalers are still spending an extraordinary amount of money uh Tesla’s auto business uh had some cracks in their last quarter now again these are all great companies and I’m not trying

to downplay their businesses what I’m really more saying is is their stock market dominance I think is coming to an end and then you look at Europe for example which is their performance is double the S&P this year and that Europe seems to be coming to A Jesus moment that uh they themselves have been Their Own Worst Enemy in terms of crimping economic activity through their bureaucracy their red tape their welfare state and uh maybe they’re beginning to see the error of their ways and we’re beginning to see

that from some European leaders realizing that uh they have to spend a lot of money on defense uh so uh that is going to boost European Defense stocks uh we’re seeing the AI trade in in China now uh taking form Alibaba up 10% on a good earnings report following uh perform good performance and some of the other uh big tech stocks in in in in China so there is a shift going on here and I think we could be at a major inflection point in terms of the Market’s focus and again it’s not won’t be just the mag 7 in fact the mag 7 can

start to lag other areas of the market which would have implications for the S&P 500 because 40% of the S&P is in 10 stocks so if I understand correctly are you are you saying that we’re potentially going to see Capital flight away from the me 7 into competitors in Asia perhaps even in Europe is that what’s going to happen next quarter I I think it can be that I think it can be rotation into small midcap stocks too but there are ALS Al bigger implications if this is going to take place because Foreigner let’s just take the

the foreign investor you know they they have or even the foreign Central Bank foreign Central Bank has has reserves that they allocate into different things they allocated into other foreign currencies they allocated into other foreign B Bond markets particularly us treasuries they own gold and I think that US tech stocks the mag 7 had become a reserve holding of many foreigners and some foreign central banks the 10th largest holder of Nvidia is Nores Bank noris bank the Central Bank of Norway that owns about 325 million shares of

Nvidia to use that as an as as the example I’m giving uh the Swiss National Bank that prints money out of thin air to buy stocks they own about 70 million shares of Nidia it has become a reserve asset for some of these countries well if this trade is sort of tiring out well what happens if foreigners start to reallocate some of this Capital into other things maybe outside the US does that also have implications for the US dollar which then take that one step further the US the Trump 2.0 that is

going through the the Tariff um motions again one of the mitigant factors on tariffing other countries is having a strong dollar well what happens if the dollar doesn’t stay so strong because of other factors like the tech trade ending and the dollar after this extraordinary rally since November starts to Peter out well we lose that that mitigant factor of putting on tffs in other countries so I think there’s a lot to this Tech trade uh unwind if it were take to take place if I am right that it’s possibly sort of

ending in it in its dominance uh so so I think that these are just things that we should all be thinking about AS Global Investors does the end of this Tech dominance suppose it does happen um does that mean a rotation into other asset classes like bonds or does that mean uh a decline in most asset classes like what we saw in 2022 when bonds and gold and stocks all did poorly well I don’t know yet I think right now we’re seeing rotation into other markets uh internationally Europe and and and parts

of Asia uh you know the the Russell 2000s use that as an example of of of maybe rotation to the US not really seeing that just yet uh but even but within the S&P there is some sort of Shifting around I mean Bank stocks have traded really well over the last couple of months so that’s sort of taking the Baton at least short term uh from US tech stocks so uh whether this drags down the whole Market I I don’t want to say just yet uh but I think right now it’s at least uh some of this money is finding new homes okay I’d like to

respond to uh this tweet by the uh CEO of Microsoft made earlier uh yesterday actually so after a nearly 20-year Pursuit we’ve created an entirely new state of matter unlocked by a new class of materials uh top with conductors that enable a fundamental leap in Computing we believe this breakthrough will allow us to create a truly meaningful quantum computer not in decades of some have predicted but in years uh imagine a chip that can fit in the palm of your hand yet is capable of solving problems that

even all the computers on Earth today combined could not uh it’s not about hyping Tech it’s about Building Technology that truly serves the world this is what he tweeted earlier and uh he’s referencing of course quantum computers is this a GameChanger for Tech or is it too soon uh I don’t know to be honest I do think though if he’s right it could be and it also could be uh very disruptive within Tech itself I mean think about all the data centers that are being built well if you can sort of shrink the

size of the capability of the data center uh there’s going to be a lot of wasted real estate out there uh there’s going to be a lot of technological obsolescence on all the data centers that are being built right now uh so but that’s what technology does it changes now I can be wrong on that maybe these data centers can hand you know need or or I should say Quantum Computing may need uh the current state of of this data center Builder I don’t know enough to say but I I do think it highlights you know the shrinking uh of technology

in terms of where it can physically be housed where we went from you know the Mainframe computer down to a cell phone um but Tech changes and this can be just another Revolution and again back to the Mac 7 you know the technology that these companies are creating are tremendous but that doesn’t mean that the stocks uh haven’t already priced in a lot of this good news that can lead to you know a per period of underperformance or the dramatic period of outperformance can you just think as an investor what

applications or how this technology May benefit the consumer which ultimately is the the biggest group of people uh that you know give these companies money the max 7 it’s not it’s not just the research centers and the you know defense sectors although that may be a big part of the revenue so a a computer chip the size of your pond that per his words can solve computer problems that will take the entire Earth’s computer together to solve today uh does that change the lives of you and me at all does that are we able to monetize that

for the regular person I mean I think the user not not necessarily but I think it will just make our our our lives easier uh just like I can go to chat g g chat gbt for an example and get an answer to a question quicker than I can go to Google even though Google’s using Gemini for example where you can go to perplexity I mean that’s the history of Technology it makes our lives more more productive and and sort of quicker in getting the things we want whether it’s getting an information bit or it’s

getting from New York to LA uh via an airplane quicker than a horse and buggy uh or a plane relative to a ship you know that that’s what technology does uh so you’re a little bit hesitant or skeptical about the uh prospects of tech so what do you like right now what are you more confident in asset class or sector-wise well I I think an interesting uh place to be right now is Commodities you know I talked about Europe for example uh if Europe is Europe’s economy can can start to grow again uh the the amount of money that

Europe’s going to spend on defense now you can of course be buy European Defense stocks but they’ve already had nice runs but the money they’re going to spend on defense is going to need steel it’s going to need copper it’s going to need nickel it’s going to need other Industrial Metals if uh the Russia Ukraine war ends hopefully soon imagine the the ra materials that are going to be needed to rebuild Ukraine uh Israel Gaza you’re going to hopefully have rebuild Gaza uh you’re going to have to rebuild parts of Southern California uh

so I think that the commodity trade could be pretty interesting here and look at China’s economy showing some signs of maybe bottoming particularly in the real estate side which has been a disaster for them uh as the rate of home price declines start to slow now I’m not expecting a a Resurgence of Home Building there but if you can get to a bottom in the housing sector there maybe that also puts a bottom in some of these Industrial Metals uh so we’re bullish on energy we’re along energy stocks um some

of the other industrial commodity stocks copper precious metals uranium uh and some of the agriculture stocks like fertilizers how much of a geopolitical risk premium is baked into energy or does that not matter I bring that up because just earlier this week Putin had a call with Trump they’re beginning their ceasefire negot negotiations uh excluding Ukraine and excluding the European allies by the way but that’s a different story the question is whether or not oil will fall if a deal is reached in the next couple of months I

don’t think so and the reason I say that is because we’re three years into this war and there’s really been no disruptions uh in the delivery of natural gas and oil because it’s fungible so yeah Russia had to Pivot to where they sell their natural resources uh but China and India were willing to gobble up as much as they could uh as well as some other countries so there’s really been no delivery disruptions therefore I don’t think that there’s any uh War premium in the price now what happens with Europe buying you know

natural gas for example from Russia again post uh any agreement I don’t know maybe Germany starts to buy natural gas from Russia again um that can actually then maybe lift the price of of energy as Russia gets some customer back I’m not sure but I don’t really think that there’s much geopolitical risk priced in right now interesting and what of Scott bent’s plan or not it’s not just his plan but the administration’s plan to drill baby drill pump out an additional 3 million barrels a day eventually what

does that do for the price of anything well as he’s not a CEO of an oil company um I don’t think he’s gonna have much influence uh the CEO of how would they do that you know they wouldn’t the the only thing the administration can really do is sort of ease the tax and Regulatory burden on drilling uh and maybe hopefully take that as a we to incentivize drilling but oil companies natural gas companies are only going to drill if the price is right and obviously the administration is not going to be able to affect that now when

desent said 3 million uh barrels it was really barrels equivalent so if if us uh companies can drill more Natural Gas Liquids he’ll flow that into the three million but again it has to be economically uh sensible to to drill more and uh only a higher price would bring that not a lower price let’s finish off by talking about the bond market now Peter you were on the show a couple months ago uh highlighting the possibility of higher yields uh the T gear has spiked throughout the beginning of February uh especially as tariffs

were introduced and then as you recall right after Trump placed tariffs in Mexico and Canada he reached some sort of agreement tentatively with those countries and then rescinded those tariffs at least with Canada and uh we saw the 10e fall we saw the dollar fall um and uh I I I just wonder whether or not the 10e is still following growth expectations or it’s just to play on the trade War uh progression what what’s your take well I think it’s a combination of things first of all I think we’re in a bond be Market uh

that’s going to last more than just a couple of years we’re in it for a couple years I mean historically Bond Bull and bare markets last 20 30 40 years we just came off a 40-year bull market that like I said is not going to end in two years uh now one of the benefits to owning long-term treasuries right now is Doge and and maybe hopes that uh the US government gets its finances back together again but on the flip side you know there are a lot of inflationary pressures that are still out there and

tariffs are going to bring it uh I I talked about uh the spending that’s going to go on and European Defense and the rebuild and possibly the bid under commodity prices uh I think I talked about rents decelerating this year but I think they’re going to pick up next year because there’s uh very little new multif family being built After the flood we’ve seen so uh and and and we’re seeing a sell off in bonds around the world I mean look at the Japanese bond market 10-year jgb yield is is at a a multi-decade high uh the 40-year jgb

yield is the highest since this this was first issued in like 2008 2009 uh so rise in interest rates is a global thing it’s not just a us thing and I do think that we’re going to be retesting at some point I don’t not smart enough to know when but the 5% uh level that we saw in 2023 I think is going to be retested at some point this year in the 10-year yield by the way the fact that the jgb yield is at a 14-year High and the 10year yield is not in fact it’s been coming down since the beginning of the

year what does that signal to you are we going to see a reversal of the Yen carry trade again I don’t know what’s left of the Yen carry trade to be honest I mean the yens have had a nice move here the yen is now sort of testing this 150 level um so after you know last August when it sort of blew up I really no idea what’s left of it uh and maybe with the Yen rallying and um you know no blowups right now until there is one I guess um tells me that maybe there’s not much left in it I’m not sure I I don’t know

how to quantify it to be honest great thank you very much for your update Peter where can we learn more from you and Bleckley Financial so on the investment side uh some people can go to ble.com and learn about our Wealth Management Services on the on the writing side I write every day I have a substack and uh people can go substack type in my name and and see what I write every day right well thank you very much for your market update please uh for for those of us watching please follow Peter in the links down below and uh we’ll see

you again soon thank you Peter take care appreciate having me thank you for watching don’t forget to like And subscribe