Dot Com Bubble 2.0 Ready to Burst (Uncut) 02-14-2025

Dot Com Bubble 2.0 Ready to Burst – ‘Everybody is All-in’: David Rosenberg

Hello everybody and welcome to Commodity Culture where our goal is to make you a better investor in the commodities sector. My name is Jesse Day and on this episode I’m joined by David Rosenberg, a renowned economist with decades of experience including stints at Gluskin Chef and Merrill Lynch. He is currently the founder and president of Rosenberg Research.

We’re going to discuss why he thinks the broad market is overvalued by pretty much all available metrics and what he thinks is behind the current mania in the mag 7. We’re going to get his forecast for gold and silver in 2025, discover where he’s currently looking to allocate capital in the financial markets and so much more. I hope you’ll enjoy today’s conversation with David Rosenberg. David Rosenberg, it’s great to have you back on the show.

I want to start the question off with the same question I ask every guest and that is what are the main themes and trends you’re currently watching when it comes to the economy and financial markets that you think more investors should be paying attention to? Well, we could be here all afternoon. I think that we have to come to grips with the fact that Trump 2.0 is Trump 1.0 on steroids and that we are into a period of heightened and elevated uncertainty. I mean, the world is always uncertain, but we’re talking about levels of uncertainty that are two to three times standard deviation more than we’ve seen from the norms of the past.

So we’re really in a bog of uncertainty. That means that whatever confidence intervals you have on your forecast are naturally going to be a lot wider and it means as an investor that risk premium should be wider across all asset classes. And I think that we have to pay attention to the most powerful person in the world, Donald Trump, not just what he says, but what he does.

So we are basically high alert from a policy perspective more than we’ve been accustomed to in the past. And I think that if you’re going to ask me what economic indicators we should be looking at the most, I think we should be looking at the indicators that caused the Fed to surprisingly cut interest rates in 2019. Nobody was expecting that at the beginning of that year.

And it wasn’t just because of the tariffs, which never did generate lasting inflation, but more of what it did to business spending, because the United States, unbeknownst to many people, went into a capex recession in the second half of 2019. And it was because of all the uncertainty surrounding Trump’s trade policies. So I think that anything that gives us a forward-looking view on business spending, business sentiment, capital spending intentions, those are going to be the real keys, because ultimately, the direction capital spending goes inevitably ties into hiring plans, and then hiring plans insofar as it impacts the labor market, then has an offline impact on the consumer.

So I think that if you’re going to ask me what we should be paying attention for as economists and for people of the economy, I think the message from the business sector right now is going to be extremely important going forward. Today’s sponsor, ARK Silver, Gold, Osmium. They offer personalized service and competitive prices with no minimum purchase for silver, gold, platinum, or osmium.

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So go to ARKSGO.com and contact Ian Everard today at 307-264-9441 or by email at ian at ARKSGO.com and make sure to tell him that Commodity Culture sent you. And we have really seen Trump shoot from the hip, it seems, in a lot of circumstances. It’s interesting to see kind of the polarization continue with some people believing he’s some kind of genius who is just pulling the art of the deal.

He’s going to make America great again. On the other side, he’s pointing out some of the things he’s doing, like launching a meme coin to start his presidency and then having his wife follow suit. These things just seem completely off the wall insane.

I want to get your thoughts on his recent tariff threats against both Canada and Mexico. This is a tweet you made recently. Kevin Hassett on CNBC saying, this is not a trade war but a drug war.

Meanwhile, Donald Trump is openly lamenting that the entire world is ripping off the United States on the trade front. If there is still a bull market out there, it is in insanity. Now, what are your thoughts on these tariff threats at the midnight hour coming to an agreement to put a freeze on both Canada and Mexico’s tariffs for 30 days? We’ll have to see how that develops.

What was the impetus behind that? We’re hearing fentanyl coming into the border. I’ve heard some people say that’s kind of a ruse and the real reason could be something different. What are your thoughts? Well, I think it’s certainly a ruse when it comes in the Canadian context.

For one thing, I think the grand total of 0.2% of the fentanyl coming into the US is coming in through the northern border. And all the news stations I’ve been watching for years are showing that the illegal immigration problem has been at the Mexican-US border. It’s not been at the Canadian border.

So it’s all, I think, a little unusual as to why Canada would be tarred and feathered. Some people say that because Donald Trump’s relationship with Trudeau was so dismal, but Trudeau was basically yesterday’s story as the leader. So you pack that away.

And in terms of trade policy, yeah, there’s some threats and menaces out there. I think China obviously being one of them, and there’s been this prolonged economic war and trade war with China. I mean, that’s separate.

We know that China is an unfair trading partner. Donald Trump may look at just trade deficits blankly and blindly between countries, but outside of the inexpensive oil that Canada sends into the US, the bilateral balance is actually pretty well close to zero. So like most Canadians, you’re scratching your head, well, why Canada? And I’ve got some more bigger picture thoughts on that as to the future, since he calls Canada the 51st state.

I don’t think Canada will become the 51st state because he would need to have 60% of the Senate go on board with that, and that’s just never going to happen. But he might have some other ambitions later on, especially with the USMCA being redrawn next year, that other concessions may have to be made in terms of US access to Canadian resources. We’ll see how that plays out.

But that’s really not about the here and now. I think it’s back to your question, what happened in the past week? Because when Donald Trump was at the White House, he was asked by a reporter, is there any chance that we are going to avert these tariffs? 25% on Canada and Mexico, 10% on Canadian oil exports to the US. And he said, there’s no chance that this is a done deal.

There’s no chance it’s going to be averted. And then next thing you know, on Monday, one phone call with Mexico, two phone calls with Canada, and a 30-day reprieve, if you want to call it a reprieve. So we have to ask ourselves as rational beings, what happened? Why didn’t Trump unveil the tariffs that he said he was going to? And my thoughts are as follows on this file.

I don’t think he was ever going to slap on those tariffs. So yes, I think it was a ruse, and I think it was a bluff. Nobody called Donald Trump’s bluff.

And when you think about what did, let’s say Canada, for example, what did Canada really give up? What did we give up? A couple of helicopters and drones over the border? Whatever, 10,000 Mounties and cadets on the border and a fentanyl tar. What is that even? What did Canada give up really that caused the tariff file to temporarily circumvent? Not much. But you see what Trump is going to do now is go back to the general public in the United States and say, I got to win.

I got to win. Now, it’s really not that much of anything when you think about it. And what Mexico did, well, they should have already done, and they were already doing things as Canada was.

There was already $1.3 billion being flowing into border enforcement and control. So all this stuff was in train. But Donald Trump does like to exaggerate and embolden, and he will go back to the electorate of the United States, go back to the population and say, I got another win.

Remember, he’s the same guy when back in December, he hadn’t even taken office yet, and it was his envoy that went in and pressured Bibi Netanyahu for this lopsided terrorist hostage deal that Trump claimed as a win. He claimed that as a win. He needed a win on day one, and he got the win in the Middle East.

He got the hostage deal. That was really Trump’s deal, not Biden’s, even though Biden was president at the time, technically speaking. So he needs wins.

He got a win. Colombia got a win. Venezuela got a win.

Panama getting a win. Mexico a win. Canada wins.

He’s collecting all these wins in his pockets. And he needs those wins because at some point, we’re going to turn our attention to fiscal policy, and he’s going to need those hardcore Freedom Caucus members in the House where the Republicans only have a three-seat majority to get other things through. So the more that Trump can actually bolster his popularity and power, and the more that he can drive the polling numbers, especially in those red states where the Freedom Caucus members reside, he’ll apply more pressure and get other things done.

So I think that’s really what the end game is. When you really think about it logically, seriously, in the Canada-Mexico situation, 40% of U.S. food imports come from Mexico. 60% of U.S. imported oil comes from Canada.

And here he campaigned mostly, campaigned on a lot of promises, no, falling just short of pledging root beer in the water fountains at every high school in the country. But he pledged that he was going to bring gasoline prices and grocery prices lower. He was going to be the anti-Biden on the inflation file.

Well, so someone’s got to tell me, how do you bring down grocery prices with a tariff on Mexico when there’s such a principal exporter of food into the United States? How are you going to bring down gasoline prices when you put a tariff of any kind on Canadian oil coming into the United States, oil that cannot be easily substituted away from? So it never made any sense. If he creates the conditions for inflation, inflation is a killer and a killer for anyone’s political prospects, just ask Jimmy Carter, rest in peace, or Joe Biden, that inflation brings down empires, it brings down economies, it brings down presidencies. So it never made any sense.

And although I wasted a lot of time worrying and writing and analyzing the tariffs for the weekend, on Monday, I was kicking myself because I was saying I should have known. I should have known that it was always a threat never to be carried out. Now you’ll say, well, we’ve got a 30-day reprieve.

Sure. And then maybe there’ll be another 30-day reprieve where we’ll just say, okay, these guys have done enough and now I’m going to move on. And now, of course, he has moved on to China.

So I don’t think that we’re going to be seeing tariffs on Canada. I don’t think that’s going to happen. I know a lot of people are concerned.

We should be concerned. It’s not like a zero probability. But because it doesn’t serve his interests, I know you’ll say, well, it’s part of his big, bold industrial strategy.

But come on. Canada has been hurt more by globalization than the United States has. Our manufacturing base, whether you look at industrial production or manufacturing employment, has been gutted more than it has been in the United States.

What manufacturing jobs or investment is he going to be taking from Canada into the United States? Now we can talk about China. That’s different. But there’s nothing to be taken.

Our manufacturing base, industrial base, and employment in the factory sector has been dilapidated over the course of the past several decades. So there’s no big, bold industrial policy to grab jobs and investment from Canada into the United States. It’s just not going to happen.

So again, it was always just a ruse as far as the bilateral situation is between Canada and the United States. It was all about him being able to get a win. And he got a win.

And he can’t afford to create a tariff situation. I know people like to go back and say, well, you know, in 2019, 2018, 2019 tariffs. Well, back then they weren’t blanket tariffs.

They were like whatever, solar panels and washing machines and steel. It was small tariffs on a select number of countries, a select number of goods, far less dramatic and radical than what he’s talking about this time around. But don’t forget that we weren’t really talking about inflation back then.

Back then, it was before COVID. Now, even though inflation has come down a long, long way, people still have the elevated price level. I mean, prices have not come down.

Just the rate of inflation has come down. And people still have that miserable experience in 2021, 2022 on inflation on their brain. That hasn’t gone away.

That didn’t exist back in 2018, 2019. And you have a 4% unemployment rate in the United States. So the Fed’s big concern, because don’t forget, he also wants lower interest rates.

But how is that going to be possible? Because the Fed rightly will be concerned that at a time of full employment, and you put in these tariffs, what’s going to be the wage response in an environment where the labor market is quite tight? And that’s the Fed’s big concern, because if the tariff inflation, which we all know will probably be temporary, but it won’t be so temporary if he’s in the wages. And so that’s the big, more pernicious inflation risk, is wages and the prices, prices and the wages, wages and the prices, and then you get into a vicious spiral. But that’s the risk.

And I think that Trump wants to preserve his legacy. He wants that fifth face on Mount Rushmore. And if he dares to create the conditions for inflation, all that is going to be kiboshed.

So I’m not taking the tariff threat. I mean, I guess I’ll take it seriously. I’m not going to take it literally.

Extremely logical breakdown. Very much appreciated. I do want to talk about Trump’s energy policy, because as you mentioned there, he wants to bring the price of energy down.

Drill, baby, drill has been a huge slogan and part of his campaign. But a lot of people on the oil side in the oil markets have pointed out that he can’t just force these oil producers to start drilling more, especially when a lot of them are now focused on paying down debt, returning capital to shareholders. They’re not looking to ramp up production here.

There’s talk about how he’s going to try to pressure OPEC to turn on the spigots a little bit. That also seems to be quite difficult given the current geopolitical landscape. I wonder what your thoughts are there and how you see the oil and gas markets evolving moving forward here.

Well, the thing is that you gave a long statement without a question, and that long statement would have been my answer. He can’t, the producers already said that they have no intention of embarking on substantial production and keeping in mind that, especially when you talk about shale and the Permian Basin, a lot of the marginal productivity is not what it was, say, 10 or 20 years ago. So I think you’re 100% right.

You pose the assertion, not really a question. But yeah, I think that I don’t expect they were going to see the drill, baby, drill. And I don’t really expect to see that OPEC is going to be biting.

If anything, they might be restricting supply. But that’s always a political decision. I think that the oil price, I don’t have a strong view.

WTI has been range trading for the better part of the past year. And I expect that that’s going to continue. I don’t expect that we’re going to be seeing a big decline in oil prices because of drill, baby, drill.

If that’s really the thrust of the question, will we get big disinflation from energy? Without a global economic contraction, that might be difficult to achieve. I do think that his deregulation reduces the corporate cost curve. That certainly worked.

Very difficult to measure. But that certainly worked in his first presidency. And deregulation is an inflation killer at the margin.

And then there’s all these other impacts between possible trade wars, trade war with China. So China, we’re not talking about food or fuel, but we’re talking about appliances, electronics, clothing, and the extent to which there’s any ability of importers or retailers in the United States to pass on those cost increases. That’s a big question mark.

But the big elephant in the room has nothing to do really with politics. It has to do with what’s happening with the economy. And you’ve got this tremendous capital investment ongoing.

Deep Seek hasn’t changed the capital spending plans in corporate America for this shift in the innovation curve. And we know what the internet did. We know the internet bubble burst in the financial markets, but the impact it had on productivity, cost and inflation was tremendous for the next decade.

And this is probably going to be a similar game changer. Everybody has inflation on the brain. I get asked, well, what about oil? What about deregulation? What about tariffs? But nothing I don’t think will be as big as the shift in the technology curve that we saw take place back towards late 2022.

That’s a big game changer. Productivity is antithesis to any inflation view from a supply side perspective. So we just layer that on.

I’m a big disinflationist, even if the oil price just basically stays where it is indefinitely because of the reasons I cited. I want to discuss gold for a moment. Last time I had you on the show, you said the gold market had changed as gold was rising alongside the U.S. dollar and performing exceptionally well as rates were being raised, two things that gold traditionally does not do.

And now that we’ve taken out another all-time high, how are you currently viewing the gold market? Do you think we’re still early days in this precious metals bull market? Well, it’s hard to say if it’s early days. It’s really just a matter of are we in a gold bull market? Yes, we are. Because people like me are asked all the time, what’s your price target on this? What’s your price target on that? So you come up with a price target.

I was talking about $3,000 on gold and we’re almost there back when it was 2,000. And back then, people couldn’t believe it. And now we’re almost there.

And now people are saying to me, once we get to 3,000, what are you going to do? I said, well, I guess I’ll have to either decide are the factors that precipitated the bull market, are they in force or are they subsiding? And because everybody is desperate for a number, I guess I’ll be forced to come up with some sort of number for the gold price. The gold price forecast is very difficult to do because it’s not like the equity market where it’s all based on discounted cash flows. You have your dividend discount model.

You have earnings forecast, your estimate of the fair value multiple, price to book, price to cash flow, price to earnings. It’s not that difficult to come up with a forecast for the S&P 500. It’s difficult to get it right.

But to come up with a numerical estimate for the stock market isn’t altogether that complicated. You have bond yields. I’ve got a forecast bond yields.

Sure, okay, inflation expectation, the term premium, real interest rates. And you can come up with a reasonable forecast for bond yields. Might always be right, but you can have a numerical estimate.

What about in the credit market? Corporate bond spreads. Yeah, sure. Where are we in the business cycle? What’s the default risk ahead? And what’s the recovery rate? And then where’s the fair value, high yield or investment grade spread? Sure, no problem.

I will come up with a number for you. How do you do gold? How do you do gold? Gold is really just basically almost, the equation is more like a quotient. It’s a one divided by T where T is trust.

And maybe that’s why Bitcoin’s done so well is that there is ongoingly less and less trust in fiat currency and government debts and central banks. So you’re right, I’ve written extensively and continue to do so about the complexion of gold, what makes it special. And the fact that it has been going up at a time when the U.S. dollar has been in a bull market, ipso facto means that gold’s making new highs in every major currency.

That’s a very big deal. What the markets are telling you, very important information is that gold is no longer being viewed as a commodity. It’s being viewed increasingly as a currency.

And a currency that is no country’s liability. Now, people will come and say, well, isn’t Bitcoin or the crypto space the same? I mean, they call Bitcoin digital gold. Well, Bitcoin is digital.

I don’t know if it’s so much gold because Bitcoin, for example, has three times more of the correlation with the NASDAQ 100 than gold does. Bitcoin is not really a diversifier in the portfolio. You could just go out and buy the NASDAQ 100.

It’s the same thing. It’s really just a risk on trade. Gold is really a risk off trade.

It’s a balance in the portfolio. You don’t buy gold to hit home runs. You buy gold to minimize the downside to your portfolio at rough times.

And it’s a true diversifier. It has one fifth the volatility. So Bitcoin, look, if you’re young and you can withstand the volatility, sure.

I gave a speech recently out in Western Canada and a gentleman in the crowd asked a question. He said, my mother’s birthday’s around the corner and I want to buy her some Bitcoin. What do you think? I said, well, I don’t mind if you buy your mother Bitcoin.

Just make sure you barbell that portfolio with a pacemaker. Okay, so gold has one fifth the volatility that Bitcoin has. So Bitcoin, gold is not for people with ice in their veins.

So in answer to your question, imagine what gold does if the US dollar ever embarks into a bear market. This has all happened in a bull market in the dollar. And then this has all happened with real interest rates going from zero in the United States.

Real interest rates in the treasury market have blown through 2%. Imagine if rates ever come down more forcefully. And because traditionally, gold is inversely correlated to real interest rates.

Historically, gold is inversely correlated to the dollar. So its complexion is changing. I think the supply and demand dynamics, I certainly think that you have a captive market.

And I hate to say this because, you know, central banks, we talked about central banks. But look, you can’t ignore central banks as much as we might not like them very much. And they’re always interventionist.

But if you ignored QE in 2009, you missed a very big story. And then if you missed the massive balance sheet expansion as the stock market hit its lows, you know, back in March of 2020, you were missing out on a lot. You have to watch the central banks because they have deeper pockets than most of the rest of us.

And the global central banks are diversifying in the gold. And I expect that that is really a fundamental supply-demand dynamic. You know, why I like gold is basically the production function is pretty stable.

You know, pretty well 1% growth annually. That’s what makes Bitcoin or crypto so attractive is that it’s a known and stable supply. The question is, what’s the demand? And I think that you have natural demand coming out of the central banks.

I think you have natural demand coming out of the retail sector. Now you can go buy gold bars at Costco. So it’s hard to say, you know, we go to $3,000, which is around the corner.

You know, will I say $4,000? I mean, it’s a nice round number. I’ll just say, look, I will let you know when I turn bearish on gold or neutral on gold. And it’s not going to be about a particular number.

We might get to $5,000 on gold and I’ll still be bullish. So it’s going to be situational. When the tailwinds in the secular, and it’s been a secular bull market on gold.

When I see the tailwinds morph into headwinds, I’ll write a report on that. I just don’t know what price level it’s going to be at. But for the here and now, and I say certainly over the near intermediate term, I do expect that gold will continue to make new highs.

Do you think silver is worth having in the portfolio at present? Do you see it playing a similar role to gold? You know, central banks obviously not accumulating silver, although it has a very long history as a monetary metal. A lot of people are pointing to the fact that maybe now silver is strictly an industrial commodity and no longer a monetary metal. How are you viewing the silver market? Do you think it’s worth owning? I mean, I love gold and I like silver a lot.

That’s how I would characterize it. Silver does not have the same pure qualities that gold has. As I said before, and you correctly also identified that gold is trading more and more as a currency and a currency that has no country’s liability.

Silver’s got a little more volatility because it is also an industrial metal. So it’s got that more volatile characteristic. Generally, in a more risk on environment, an environment where I would see global industrial production on an upswing, that would be using silver from a industrial demand standpoint, that’d be more bullish on silver relative to gold.

But I actually have a fairly downbeat view on global growth. So I think gold is a better play risk adjusted, but I do like silver. Probably there’s no such thing in our business as a no-brainer.

That doesn’t exist. However, I would say that what I really, really, if I said I love gold, I adore the North American gold mining stocks. Because if the valuation gap with the underlying commodity were to ever close, and that’s the caveat, that group, that widely ignored group would have 70% upside return potential.

And I think should be on everybody’s radar screen right now. Yeah, that’s a big theme that’s been coming up on this show, actually, with a lot of guests is the valuation gap between the metal and the miners when it comes to gold. I heard you recently in an interview make an exceptional case for why the broad market is currently overvalued.

One of the points you made was all the passive ETFs and how so much of the market is invested there. Do you think these passive inflows are part of the reason why these indices keep inching higher despite these current overvaluations? Absolutely. The fund flows have been dramatic.

Back in the mid-70s, when Jack Bogle first unveiled, he was the pioneer of the Vanguard index fund. He said this will never be more than 20% of the market cap, and now it’s bordering on 60%. And I don’t even know if people know what they’re doing with the 401ks or outside the 401ks.

Of course, these are low-cost index funds. And in an environment where you have MAG 7, you have a handful of stocks driving the market higher, it’s tough as an active manager to beat the index. So the active management industry is bleeding, and the passive investment industry, the index investors, are just booming.

And they have to put that money to work. And as they put that money to work, they have to match the market. And it’s the most concentrated market, equally concentrated in technology as it was back in 1999 and 2000.

And so this is the deck of cards that we’re playing with today, is that we have intense concentration, not only in the stock market, but also in what the general public owns in their portfolio. What we’re up to now, when you look at the Fed flow of funds data, 70% of the US household asset mix, financial asset mix is in equities. That’s unheard of.

20% is in cash, 10% in bonds, 70% in stocks. This actually is higher than it was during the technology bubble in the late 90s. So we have intense concentration, keeping in mind, by the way, my age group, the boomers, over 60% of the financial asset mix is in equities.

We should be between 30% and 40% based on our life expectancy. We can’t afford to make a big mistake when you’re in your 20s or 30s, you can ride out, invest for the long run. Everybody is all in all the same time.

It’s really quite incredible. So you have this incredible concentration of risk on household balance sheets and within the equity component layer on concentration risk amongst a few companies and a couple of sectors. And I’d say that that’s very worrisome because we know that bear markets do exist.

Bear markets are connected to bull markets and bull markets connected to bear markets. I’m really worried because everybody today’s got this mindset. It’s almost like Chuck Prince, the CEO of Citigroup, back in June of 2007, when he famously said, you got to keep dancing till the music stops.

He didn’t know and hardly anybody knew that three months later, the music was going to stop in rather spectacular fashion. But the stakes are a lot higher this time because the exposure on household balance sheets is so much more acute. And what happens when everybody rushes to the exit at the same time, you’re not going to be squeezing that toothpaste out of the tube.

Who are the buyers on the other side? When everybody is all in, who are the buyers? Outside of me and Warren Buffett. I have liquidity. Warren Buffett is what, 35% cash? 30% cash.

He’s never been there before. I mean, he’ll be able to pick up the pieces. So here, the world’s most famous value investor can’t find value in the stock market, but everybody else is piling in.

But you see, the active management industry is like really bleeding outflows and all the inflows coming into passive funds. But think about the passive funds. People own the index.

It used to be active managers have to concentrate on risk. The active manager is a risk manager. And people just look at their gross returns.

They look 25% two years in a row, and their manager has only been up 10% or 15%. And so I’m going to fire you, and I’m just going to put in… Active managers do charge fees, but they get paid for their fees if they’re good at what they do, because they look at balance sheets, and they look at fundamentals, and look at valuation. The index fund is not going to, when the clouds come in, the index funds will not move you into cash.

In the old days, you’d have your broker, your financial advisor call you up. You’d have 15 stocks in your portfolio with your advisor, and he’d say, you know what? We’re going to blow out GM and invest in Exxon. Your index fund is not going to do that for you.

So I’d say it is troubling, but sentiment is so wildly bullish, and everybody… I talked, look, I got 3000 clients in 40 countries. Everybody’s got the same trade on at the same time. Everybody believes they’ll be able to time the exit, or most of them don’t believe there ever will be an exit.

Nobody believes that there will be an exit. They believe that the business cycle has been repealed. There will never be a recession again, and there will never be a bear market again either.

It’s actually an astounding development as to what we’re seeing right now. It reminds me of what Charles Mackay’s famous 1864 classic, the extraordinary popular delusions and the madness of crowds. I would suggest that that is a book everybody should have on their night table right now.

But when we talked before about just valuations, maybe it’d feel differently if the stock market wasn’t so screamingly expensive. Price is what you pay, value is what you get. But when you get a CAPE multiple, the sickly adjusted price earnings ratio that’s published 100 years worth of data from Robert Schiller, and it smooths out the business cycle, we are at like a 37 multiple.

We are 2.3 standard deviations above the historical norm, and we’ve only been here before. When you’re over two standard deviations from the norm of any valuation, you are in a technical price bubble. This is a price bubble that’s actually almost as equally large as what we had in 99-2000, but nobody wanted to believe it then either.

But really only 300 times has the CAPE been as high as it is today, both in level terms and relative to the historical norm, and that was 1929, that was 1999, and very briefly at the end of 2021. And the multiple is not a timing tool, but at any moment in time, it tells you, do you have tailwinds or headwinds at your back right now? I’m trying to tell people, not the stage right now to be chasing nickels in front of the steamroller. And if you miss the big AI trade and you miss the big past two years of 25% per year, you will see that again, but probably at a lower level because the market does move in cycles.

And people don’t realize, take a look at what all these stocks did and they weren’t dot-coms, these were not dot-coms, these were companies with balance sheets and with business models and with earnings back in the peak in 2000, Cisco and Intel and Dell and Microsoft and IBM, all real companies are all around today. They got caught between 60 and 80%. It wasn’t a dot-com bubble.

It was a broad technology bubble like we have today. And then if you are patient and you weren’t kicking yourself in the rear end because I missed the big internet bubble. I missed all the money made in the second half of the 90s, kicking yourself for that.

Well, 10 years later, you had a glorious opportunity to actually go back to the train station and hop aboard at different price levels. And I think that’s what we’re facing today because the old Mark Twain, history doesn’t repeat, but it rhymes. And this is what markets do.

Markets, especially when we see this inflection point in the technology curve, investors get more excited than the economy does. The S&P is not GDP. And we all know the productivity benefits for the internet were huge and long lasting and were occurring even as all these tech stocks were getting killed from 2000 all the way to 2010.

Productivity kept on surging. And the companies were great. Companies were great.

It’s just that their stock prices were just too inflated, had too much priced in. You see, the economy isn’t an animal. It’s not driven by animal spirits where things get priced in.

GDP is a real thing. The stock market is a financial thing. Actually, you’re staking a claim on future cash flows.

So there’s more guesswork in that than there is in GDP. That’s why the stock market and the economy aren’t the same thing. So when you’re taking a look right now at the five-year embedded earnings growth in the S&P 500, it’s 20% per year, 20% per year.

Historically, looking back over a century’s worth of data, what is the norm? What’s the norm? The norm is over five-year cycles, earnings growth is rising 7%, 8% per year. The market is now, because of generative AI and chat GPT and the data centers and all the spinoff effects, that we’re going to have 20% per year earnings growth for the next five years. Now, some people say to me, only 20? I think it’s going to be 30, to which I say, well, then this market’s for you.

But the market is priced in triple what the norm is. And to me, that does sound a little rich. You know, at the start, if we’re going to time it back to late 2022, with chat GPT, you’re basically not even 10% growth being priced in to the market on a five-year EPS basis.

We’re now 20%. And you want to chase this thing? Well, people have been chasing it and it’s been working because that by definition is what we have in our hands, which is a momentum-driven market. This is a market being driven by price momentum.

I think it should be troubling. I wrote a report called No Market for Old Fundamentalists because earnings momentum, earnings revision momentum for 2025 peaked last May. Earnings revision momentum peaked last May and has rolled over since that time.

And the market’s up 20%. So what does that tell you? Is it an earnings-driven market or a momentum-driven market? It’s a momentum-driven market, which epso facto for me makes it a pretty dangerous market. And that’s why I have recused myself to a large extent.

I am pretending to be Warren Buffett, but I ain’t no billionaire and going to wait for the chips to fall. But I think that in a year’s time, those who had liquidity, those who can emerge to be the buyers as the selling comes to the fore, and it always does come to the fore, especially after a market that we’ve had in our hands the past couple of years, we’ll be the ones to pick up the pieces. And so that’s what I’m expecting.

And until that time, I’m saying play it safe. Well, given everything we’ve discussed today, I’d like to do a bit of a thought experiment. If you, David Rosenberg, had all of your assets disappear and you were given, let’s just say, a hundred grand to make it a round, even number, how would you be deploying capital in markets right now? Or would you have that entire cash position on the sideline at present? Well, I don’t believe in zero or a hundred, okay? Nothing is black and white.

And to be zero or a hundred in anything means that there’s certainty. And I started off by saying that we’re in a period of heightened, elevated uncertainty. So I think that you want to be diversified.

Diversification is not a dirty 15 letter word. I just don’t find that most people I speak to are not diversified. So I think you want to be diversified.

I think that you do want to have a good chunk in cash because unlike 2022, where there was no place to hide, bear market on bonds, bear market on stocks, but cash was paying you next to zero, you can get four to four and a half percent in treasury bills right now. Not a bad proposition. We may look back at the end of the year, that four, imagine if you could have made four and a half percent in 2022 with the stock market down 25%, bonds getting crushed, you would have been a hero.

But now the treasury bill market, courtesy of the Fed, is giving that trillion a silver platter. But you see, there’s so much greed out there right now. You see, in 2022, when there was fear, you could have got four and a half percent.

Well, you couldn’t, but if you could, you would have jumped at that. And that’s the thing about our business. It’s still governed in thousands of years, despite all the technology and all the sophistication, we’re still driven by the two primal emotions of fear and greed.

If fear sets in again, which I’m sure it will at some point, that four and a half percent, four percent in the treasury bill market will look like gold. But right now, after two years of 25% returns, four and a half percent, T-bills, please, no. But that’s the mindset, because now we have maximum greed.

The pendulum always swings. Trying to time it, don’t bother, because nobody can, but just know that it’s out there. I’d say that, you know, I like, I do like the bond market right now.

I do like the treasury market, maybe not the very long end because of the fiscal premium. But certainly, I think the mid part of the curve looks attractive to me. I think that I like the bond proxies in the stock market.

I didn’t say zero stocks, but I like what I call bonds in drag. Dividend growth, dividend yield, stable characteristics. I think the big U.S. banks, the bubble is not in the banks.

That was back in, you know, 07, 08. The big banks, I think utilities selected REITs with big fat dividends, payouts and yield. So I think that I want to have an income focus as opposed to a growth focus.

So where I can squeeze dividend growth, dividend yield and more stable parts of the U.S. stock market, that’s fine with me. Gold is a core position. I’d say that, you know, regionally, and I wrote this report recently to, because 70% of my clients are in the States.

And I said, you know, attention U.S. investors, leave New York and come to Toronto, because if you’re going to be all in on the stock market, or if you’re going to have exposure to the stock market, I mean, Canada is the 51st state. We don’t like to talk about it. Donald Trump likes to talk about it, but we are a sovereign country.

But the markets are so intertwined and the economy is so intertwined and Canada trades with a historically wide price, earnings multiple discount, better dividend yield, better dividend growth, cheaper stock market. And although there is a risk in Canada, I think the tariff risk is right now overplayed. I don’t think Trump’s bringing it in.

Doesn’t mean that the uncertainty is not going to linger. But then on the other hand, no matter what happens in Ottawa, and we’ll have an election probably sometime, I’d say during the spring or during the summer, the political change in Canada is going to be better. So geopolitical risks, Trump tariff risks, they may be high, but domestic political risks, that’s what it means for the economy.

Because even the liberals are backing off, for example, capital gains tax increases. They’re backing off climate change. So it’s interesting that in Canada, once we get past this tariff file, the uncertainty clouds are going to part.

So actually, if I’m going to be in the equity market, I like Canada, broadly speaking, over the US. And internationally, yeah, I think that you’ve got cheaper markets in Europe. But Europe, of course, has this fiscal and political clouds.

The economy in core Europe is very weak, even weaker than it is in Canada. But there are spots in Asia that look good. Japan, I think, is in a second or bull market.

I think the financials there, where Warren Buffett, I invoke his name once again, is heavily involved in the financials there. We like the Japanese financials as well as the BOJ raises rates. Well, you pick something up in the Japanese yen, make it long, but also you’ll get more interest margin in the Japanese financials.

So that’s an area that we like. And we put out actually a buy recommendation on the Hang Seng Index when it got down to an eight multiple almost this time last year. The Hang Seng, which historically was the poster child for the emerging markets, traded down to a multiple that the S&P 500 had back in late summer of 1982, which unbeknownst to everybody at the time, but we know historically was the touching point for almost a 20-year uninterrupted bull market.

So look, there’s places, if you have a chunk of your portfolio that you want and risk, I would say there’s better opportunities and equities outside the US. I’d say to be sector-specific in terms of stability, defensive characteristics, keeping your cyclicality exposure, your beta exposure well-contained, concentrate on dividend growth, dividend yield. You can just come into Canada, in my opinion, and buy the Dividend Aristocrats Index, which focuses on dividend payouts, dividend growth, dividend yields, stable companies.

And you’ll also be, and I say this to my American friends, in a dirt cheap currency, not necessarily that it’s at bottom, but closer to the bottom than at the peak when you look at the historical chart. So it’s all about generating ideas. I would say back to our initial comment, Jesse, about it being more elevated and uncertainty than in the past, it means that you have to be a lot more selective.

So everything that I mentioned, whether it’s gold and silver, gold mining stocks, all the other stuff, when my concern list and uncertainty list levels are a lot lower, I’ll have a more expansive list on where to invest. But right now, I think you have to really cull the portfolio for ideas that work best in this sort of ultra expensive US stock market, looking for opportunities abroad, but really focusing on de-risking the portfolio without necessarily moving everything to cash. So it’s really, in my opinion, more of an ideas generating market than it normally is.

Well, David, this has been a fantastic conversation. Tell us about Rosenberg Research, what it is you do there and where people can find it. Right, well, look, I have a staff of 17, I have a group of strategists and a group of economists and we always connect the dots between the macro and the markets to always identify opportunities that other people aren’t seeing, attach a market call to all our economic publications.

But ultimately, all our investors, all 3,000 investors in 40 countries, well, our clients are investors, so they wanna know, how do I make money and save money? So what we do is we connect the dots between the economy and the markets and formulate a cogent and coherent investment strategy across all asset classes. So we cover all geographies in the world, we cover the currencies, we cover the stock markets, the bond markets and we cover sectors. So it’s really quite in depth and we do it verbally through my webcast and we do it written.

I have two daily products, we have a couple of weekly products and we have a couple of monthly products, we do special reports. I probably have 12 different products and services because my client base is so diverse between institutional and what we call retailer or the general retail client and everybody’s got different interests. Some people just want, what’s your currency forecast or what’s your gold forecast or what’s your fixed income forecast or what’s your equity forecast or drill down to the sub-sector level.

So I try to cater to everybody. I have the capacity, put the capital into the company, hired the right people. So we have a lot of breadth, we’re not just a one trick pony just focused on the US stock market.

We cover pretty well everything and the one thing that our clients get is access to me, 24 seven access to me through the information box and that’s a service a lot of people don’t provide. Actually, one thing I learned all those years at Gluskin Chef on the buy side is that you can’t control the markets but you can control client service. I spent 20% of my day, Jesse, just answering client questions and queries.

So that’s probably when people say to me, what sets you apart from your others? I don’t know, am I a better economist or strategist than my competitors? I would never say that. I have a strong team. We’re very responsible, we’re very responsive but I really think that what gives us the cutting edge is the fact that all our clients have access to me 24 seven and I get back to them on the same day because I was brought up well.

So that’s the pitch more or less, having access to me and drilling deeper into things that I might have said or what other people have said. I think that’s a service that my clients really take advantage of and I’ll tell you the truth, I like it because it keeps me on my toes and it makes me a better economist and strategist when the clients come in and say, well, you said this and somebody else said that like, or is this contradictory? And yeah, so it’s a, you can be 64 years old and still think, okay, this kid can still learn something. And so anybody who wants to access us, just either Google Rosenberg Research or go to information at Rosenbergresearch.com and we’ll give you a free trial.

You can kick our tires and you can either buy everything in a premium package discounted or some people just buy one product or another depending on what their budgets are and we’ll manage to fit that in for you. Well, I will put a link in the description below to Rosenberg Research for those who wanna check it out. Thank you once again, David, for coming on the show and sharing your knowledge with the audience.

Thanks for inviting me. And thank you for joining us today. This episode is brought to you by ARK, Silver, Gold, Osmium.

For all your precious metals needs, head to arksgo.com and contact owner Ian Everard today at 307-264-9441 or by email at ian at arksgo.com and make sure to tell him that Commodity Culture sent you and I’ll see you guys on the next episode. If you would like to see more, be sure to subscribe and hit the bell notification so you’re always up to date with the latest episodes.