GOLD to $4,000 Is Still Conservative | David Hunter
Summary
Market Outlook: David Hunter predicts that the current bull market cycle, which began in 1982, is nearing its end, with potential for a final market melt-up before a significant downturn.
Gold and Precious Metals: Hunter has been accurate in his gold price predictions, now forecasting gold to reach $4,000, with potential for even higher prices, while silver is expected to outperform gold in the current bull market.
Federal Reserve and Interest Rates: The Fed is anticipated to cut rates, possibly by 25 to 50 basis points, as Hunter argues they are behind the curve, with inflation trending down and a weaker economy than perceived.
Bond Market: Hunter forecasts a significant bull move in bonds, with the 10-year yield potentially dropping to zero during an expected global bust, driven by massive quantitative easing.
Retail vs. Institutional Investors: Retail investors have been more bullish and active in the market compared to cautious institutions, which are now realizing they need to become more aggressive.
Economic Indicators: Despite revisions in job reports and signs of a slowing economy, the market remains optimistic, with Hunter suggesting that the Fed's focus on employment data might be misplaced.
US Dollar and Global Markets: The US dollar is expected to decline further, with Hunter targeting a drop to 82 on the Dixie index, which will influence gold prices and global market dynamics.
Investment Strategy: Hunter advises caution as the market approaches a potential bust, suggesting that investors should prepare for significant corrections in asset prices, including gold and silver.
Transcript
Is this the final meltup before the bust? The S&P 500 is at 6550. Gold is trading at 3650 an ounce and no stopping. The Fed is supposed to cut next week and we have to discuss implications. Are we going to go bust right after? What what what is the timing on everything and are we just going to keep rising or just going to keep seeing rising equity levels, gold prices, and many other things? So, I've invited David Hunter back. He's one of my favorite guests on the show. He's been making some very, very accurate calls here, especially in regard to the gold price. If you flip through our YouTube thumbnails, he called for 3,000 3,400. Now we're sitting at 3650. And I'm really excited to hear his next call for gold, of course. But also bit of a reality check. We had a jobs report revision. Almost a million a million people disappeared from the jobs report, yet unemployment stayed the same. Please explain that one to me and many other things that are going into the Fed decision next week that we will have to dissect a little bit. Before I switch over to my guest, hit that like and subscribe button. It helps us out tremendously and we much much appreciate it. And uh I know I've mentioned it before, but it's free so it doesn't hurt. Thank you so much for doing that. Now David, it is great to welcome you back on Sore Financially. It's good to see you again. >> Yeah, good to see you, Kai. Thanks for having me on. >> You know, David, before we get to the micro, um let's take a step back and let's just discuss where are we in the cycle right now. Markets are rallying. What what what's the indication? What's your what's your you know forecast here? Yeah, I think we are, as I've been saying for a long time, I think we are late in a long cycle. The a bull market cycle that started back in 1982. So, this is the 433rd year as of August of a bull market cycle that I think is coming to an end. Um, I expect to see we probably could top out by the end of this year or sooner. Um, but we've got um I I raised targets back in April when, you know, when we had liberation day and everybody got bearish, I raised my target to 8,000 on the S&P. Um, from there in my July investment letter, I raised my target to 8,700 on the S&P, 30,000 on NASDAQ, uh, 60,000 on the Dow, and, uh, the Russell 3,400. So, I obviously think there's still a lot to go here, even though I think it's going to happen pretty fast. Uh, it is late in the game. We've had a long, long cycle. Um, the economy is slowing. uh we may in fact already be in recession, but at this point the evidence is not building to something that says I'm I'm calling for a global bust next year as you know, but um the evidence right now allows most of uh investors to see this as a soft landing uh and earnings are still intact. So basically, you've got the best of both worlds. slowing economy, what I think are going to be declining interest rates and uh earnings still growing. Uh that's that's music to the ears of Wall Street that will get all the skepticism that's built up on Wall Street. They've fought this this market since 2022 all the way up. You're starting to see them begin to say, "Hey, I got to I got to get more aggressive because this thing has legs." >> Yeah. is like an interesting factor and I'm not sure we've discussed this before, David, but it's mostly retail that has been driving the markets over the summer to these highs and institutions were still sitting on the sideline to a degree just being more cautious. Do you see them piling back in now? >> Yeah, you know, I want to caution people. It's not that institutions go all in or all out. They're they're probably not very much in cash, but they're more defensively positioned. Um they have been skeptical towards the market. You're right. The retail investor surprisingly when we had that swoon back in April um they stayed in the market pretty much um and and and said this is a buying opportunity. It was the institutions that jumped on the bare market bandwagon and said, "Oh, we're going lower. We're going a lot lower." you know, strategists across the street, across Wall Street were were lowering numbers and talking about 4,000 or 3,000 on the S&P. Um, and it was surprising to see the retail investor stay basically uh on board and and bought down there. I like I said um at the very bottom of the selloff in April, I I raised my targets while everybody else was lowering their targets. So, you know, kudos to the retail investor that they this time were the smart money and and it was the institutions that weren't weren't so smart. >> Yeah, I know. All indications pointed towards a recession at some point as well, of course. So, you do want to be a bit more defensive in your investing style, I guess, right? Is that uh what what the institution has been you you've been saying they've been more defensive like what what were they investing in now they're coming back into the tech tech sector and where are they allocating now? Yeah, first of all, I think a lot of their concern is valuations. You know, we're at all-time highs in terms of valuation. Uh and and of course that's led by AI and and the Magnificent 7. Uh not all the market is all that um highly valued, but but they look at valuations and say, "Gee, we're late in this game." My thing has been I've been consistently the biggest bull on the street um for the last several years. My thing has consistently said that um there is more to go and that you know because this is a um final year of a big bull cycle we will probably go parabolic at the end so I think we're entering that parabolic phase now where are the institutions positioned you know they may be more in um some of the more defensive areas they may be in bonds they may be other places and they may have little cap But um they they definitely are understanding now that they've missed a lot and they've got to get more aggressive. >> Yeah. Bad news is good news again, David. And you know, bad news meaning jobs report revisions higher than expected, 911,000, unemployment number ticking up, job openings much lower as well. Yet the market is rallying. Um what what do we make of that the jobs report and how is that influencing future market decisions? Also Fed decisions here, David. Yeah, we get these, you know, adjustments. They they go back and look at the numbers and and revise and we always are surprised. There's pretty sizable um adjustment either up or down, mostly down lately. Um and and it's hard to understand exactly how they can miss by that much. Um this time around there is at least I have some concern that with such a large number almost million jobs uh and it was for 2024 um that maybe some games were being played to kind of prop up um the economy, make it look better than it was uh for the election, meaning the the Biden administration may have may have played around a little bit at least. That's a question you have to ask. I don't have any proof and I don't I don't know. Um but frankly, yes, what the number means is we have a weaker job situation than we thought. Um, and I've been saying for a long time that this is, you know, the end of the cycle and that what comes after that is going to be uh probably worse than 20089. So, so this kind of feeds into my belief that under the surface things aren't as good as maybe uh the market would have you believe or maybe you know some of the statistics would have you believe. >> Well, the Fed seems to be putting a lot of emphasis on the employment data lately. Less so inflation that seems like to be tackled. They're not too worried. Again, we're getting one more print here later this week, David, as we speak. But, uh, is is that the right thing to do? And what kind of what can the Fed do to sort of counter the the employment data trends that we're seeing? Is is a 25 basis point cut going to do anything? Like, what do we need to see for a trend change? >> Yeah, I I have consistently said in recent months the Fed is behind the curve. Um, I tend to agree with what Trump's saying, probably not for the same reasons, but I do believe that the Fed is overly restrictive, that the economy, as I said before, under the surface is weaker than people realize, weaker than the Fed realizes, and that inflation is trending down, not up. Uh, so I believe they should have uh been cutting rates uh well before this. Um, I think we'll probably see a quarter point cut next week, but it could be a half given PPI came out today. Uh, you know, below expectations, actually below zero for the monthly print. Um, and it does tell you, at least based on that number, that inflation is not the issue here, that jobs are the bigger issue. So, the Fed is starting to recognize that. I think we will see um you know a cut for sure next week. Um tomorrow is CPI. So if that if that comes in in line or or better than expectations, meaning weaker, um that could push us to a half point cut. Um but either way, basically a Fed cut means um that the Fed is becoming a wind at your back as an investor. Uh it's not so much that that quarter point or half point is going to make a huge difference, but it does send a message to both the bond market and the stock market that the Fed is in easing mode or is beginning in easing mode. And I think that is the case that they will be cutting after that. As I say, I think the economy is going to continue to trend down towards recession and ultimately something worse than recession, meaning a global bust. and that inflation is going to trend down into ultimately when we get the bust actual deflation. So, I was not ever in the camp of thinking that inflation was uh ticking back up and that we were going to have, you know, a higher uh higher inflation, a bigger problem there. I think it's going the other way. >> Yeah. No, it's it's interesting like you know, I'm being a bit physicious here, but just looking at the data, how bad is 4.3%. Is it about the pure number or is it about the trend? And I'm I'm guessing the answer here, David. >> Um, how bad is 4.3%? >> Yeah. In in relationship like 4.3% it doesn't sound as dramatic like Europe has like 6.3%. >> Oh, you're talking about unemployment. >> The unemployment numbers. I'm just trying to like put some perspective around it. Why it's being so hyped up for a lack of better term here and being so focused on >> Yeah. Obviously 4.3% at in in past times was considered full employment and we do have we still have a situation where you know there there are things where we can't find the workers to do you know we're we're attracting capital into this country. We're building new plants and some of those plants are not moving along because there is not the the skilled labor needed for them or the labor needed for them. So, it's not so much that anybody's worried that unemployment is too high. I think they're worried about it reversing here. And labor, uh, employment is a lagging indicator. So, if that's starting to turn negative or turn the other way, um, other things have already been weakening. So I've I've faulted the Fed for a long time for having it's their mandate so they have to but putting too much emphasis on a lagging indicator that means you're going to always be late. >> Um and that's that's frankly what their MO is that through cycle the cycle to cycle they come in too late to tighten they come in too late to ease and we get bigger swings in both directions as a result. No, let's discuss a bit the butterfly effect coming from a rate cut. Like what what are the implications? Um maybe we'll start with the bond market. David, you've been calling for 2 and a half% at some point. You mentioned originally this summer, but things have been delayed. Um but things are trending down with the rate cut expectations, especially on the 10-year. Um what are some of the implications for the bond market if the Fed starts to cut, maybe even have a jumbo cut here next week, 50 basis points? >> Yeah, I I think the bond market has begun a big bull move. Um it it has turned in the last I don't know couple months um since May I think. Um and my expectation is that we will have um sub three maybe two and a half% as we enter the the bust and when we go into the bust which is next year sometime um we'll see rates drop all the way to zero and I'm talking about the 10ear rate could fall to zero. Um, and at the same time, um, you know, you could have short rates in negative territory then. So, you know, I'm not so worried about the interim rate. Is it going to be 3%? Is it going to be 2 and a half%. The point is that we're at, you know, we're we're at 406, I think, today, and we're heading towards 3%. I think we'll be there this year. Um, and maybe below. So, um, and then from there keep trending down to to zero. The reason I can say zero in the bust is because I think the Fed ultimately since it waited so long and since we have so much leverage in the system, we're going to have a a freef falling financial system uh similar to 20089 except worse. And that means there's going to be so much money printed in response to that. I've I've said for a long time we could see as much as 20 trillion in new QE out of the Fed and proportionally similar out of every central bank in the country. So, uh you know, we're at 406 now. We were, you know, at 470 several months ago earlier this year. Um and if we're going to zero, that's a huge move in the bond market. And meanwhile, most most of the street has been bearish bonds. So just like the stock market, the Wall Street has has been basically looking the wrong direction um I think in the market and um I think they are just now starting to recognize that if the Fed's starting to ease, we're getting on board the bond market. So it's not so much the quarter point cut, it's more the signal it sends that if the Fed's easing, we can feel, you know, better about buying bonds. And as I've said, the Fed controls the overnight money, the bank lending rate. Um they don't f they don't control um loan rates. They don't control the 10-year which sets a lot of loan rates, mortgage rates. Um that's controlled by the or determined by the bond market. And the bond market's been on this for several months even though the Fed has not. No, it's like I have two questions lined up for you now, David, to sort of follow up that discussion because you know the bond market and a lot of our guests here on the on the show also called for higher bond yields because of the debt situation in the US. People are just worried losing trust in the system selling or asking for higher premiums as well. Like how does that sort of balance each other out? Like why why do you think bond yields are rising now or sorry declining bonds meaning entering that bull phase again versus the debt uncertainty and the other you know uncertainty that's coming with it? Yeah, that nar that narrative has been with us most of this year. I mean, they've been talking about long, you know, long bonds going up and the short rates coming down and that, you know, because of all the supply of debt that has to be financed, it's going to keep long rates moving up. And I've disagreed with that uh throughout, you know, throughout the last many months. Um, and I I you know, vehemently disagree with that. I think Long Bond is going to come down with the rest of the market. Um, they're just wrong. I mean, I I understand their worry. Um, they think the foreign investor has walked away from the Treasury market. You know, they don't want our our bonds anymore. At least China doesn't and others don't. Um, so they don't see the buyer there. um they see um you know the big supply of treasuries having to come out every month and you know in uh big supply to have to sell those bonds that pushes puts pressure on rates upward. So, I understand where they're coming from, but because I am in that camp that says the economy is weakening, inflation's coming down, um, and ultimately we're late in the, you know, the market cycle, um, I think bonds are going to be in demand. Uh and and as a you know, not this year, but in the bust, the thing I don't worry about at all that they are all worried about is who's going to buy those bonds because the Fed's going to be buying up every bond they can find to get QE out the door. If you're talking about, you know, we did uh let me step back. In in 2008, going into the decline in 2008, the Fed balance sheet was 875 billion. it it rose to 3.7 trillion after you know in the years following um the great financial um crisis in 20089 and then 2020 hit and it rose to 9 trillion. So our B the balance sheet went from 875 trillion. I mean 875 billion to 9 trillion over the course of the last um well 15 years let's say. Um and it's backed off now to six trillion. They they've been tightening for three years. Um if we're going to 30 trillion, if we go up 20 some odd trillion to 30 trillion, that's that's beyond anybody's ability to comprehend. I mean that's just the five trillion was beyond it. And now this could be four times that or more. Um and so how do you how do you create money? You create money by buying the treasury bonds from the dealer banks putting money in the system right. Uh so even if the treasury is going to be >> David oh they can find. So, I am not worried about who's going to buy the bonds and I'm not worried about as a result I'm not worried about rates going up. Rates are going to be going down and going down big. Perfect. Perfect segue actually to to discuss sort of how does it impact the consumer, right? Uh auto loans, mortgage rates, they're all tied to the longer end of the yield curve here, meaning the 20 and 30-year bonds. um in in in regard to uh the rates like what do you think the expectations or the not the expectations the the outcome will be for those for this market for the housing market in particular is such a huge factor. >> Yeah. In the short run meaning you know if we get rates down you know a few cuts here between now and the end of the year and we get mortgage rates down under 6%. Um you could get a bounce in in housing. Housing's declining. Housing's rolling over. That's part of the weakness I think we're seeing in the economy and why I'm so sure the economy is going to continue to weaken. But you could get a bounce in housing and autos as rates come down because, you know, I don't think it's just a September cut. It's probably three cuts into the end of the year and they could be, you know, half point cuts if things continue to deteriorate. So, um, so I I think you could get a bounce, uh, in some of those things. And that's one of the reasons why we're not going to see the stock market fall out of bed because I think there's counter measures here that are going to be it's going to allow the narrative to continue to be soft landing. You know, no recession in sight, even though I think we could already be in recession when when they go back and look at it. But so short term you could get a bounce in housing and other interest rate sensitive areas like autos. Um but ultimately the reason I'm so bullish on the bond market so bearish on rates saying rates are going to go down a lot is because I think the economy is going to weaken a lot in 2026. So meaning you know a very deep recession and ultimately a bust. So, so I don't think rates as they're falling during that period are going to help the consumer. The consumer is going to be in trouble. You know, job the job market's going to be uh deteriorating a lot. You could go to double digit unemployment um by the end of the bust. Um so, you know, again, go back to 20089. That's kind of the script. Um except I think because of the leverage in the system this time could actually be worse. >> It it could be because uh everybody's leverage debt is insane. Reaching where how closer to 38 trillion now? Uh getting closer by the day obviously. >> Well, and this is this is a global bus. So I use the number 330 trillion in global debt. 330 trillion. Wrap that around your brain. Uh and quadrillions in notional value of derivatives. And derivatives are leverage on the markets. Um whereas debt is leverage on the system, on the economy. So you've got two forms of de leverage there that are way beyond anything we've ever seen in history. We're in uncharted territory and leverage is is great. It enhances um returns on the way up. It enhances the economy on the way up. The problem is when things turn sour uh turn south um basically leverage exacerbates the downturn in a big way. So that's that's the thesis is I think people are underestimating and including the Fed underestimating the size of the risk out here. The magnitude of the risk I think is beyond anything we've ever experienced. >> No risk is enormous. Absolutely David. Um, you know, running through topics here because we only have for 30 minutes time today. Um, US dollar. We need to talk about the Dixie as well in in relationship. It is holding in better than I would expect. Personally, we're trading around 975 on the Dixie. Um, what are your expectations for the dollar? I know you've been calling for a bit lower dollar here in general. Like, are you surprised it's holding in as well as it is? >> Not at all. I mean, the dollar's fallen from, you know, basically 110 to 97 in the matter of a year probably or less. Um, and I think it's my my target is 82. That's far below here. It'll happen in some pretty steep steps. So, the first step down in, you know, the mid 90s uh and then you consolidated here. Um I think the next step down takes you down through 90 and then the third step down to 82. So um I'm you know I'm not surprised at all. Um you have to go through consolidations when you have such a big decline it then goes the other way for a little while. You have to convince some of the people that were jumping on the bandwagon but not with conviction that whoops this thing's going the other way. So, so I think I think we've just pretty much gone through that consolidation and now we're beginning the next leg down and I think it could happen pretty fast. >> Yeah, it's the typical like was it the bare flag? Not the bull flag, the bare flag because we're seeing that stabilizing pattern. We've seen that in gold, which is a perfect segue like I've planned it. We've seen it in gold, but to the upside, it was a bull flag. Now we're seeing that bare flag in the dollar. Is that a fair observation here, >> D? Absolutely. And I and I do say gold gold was in a consolidation from basically April till recently and it broke out, you know, from 3,300 3,400 broke out here and we're at new highs again. I raised my target to 4,000 last year or not last year I think uh a couple letters ago. Um and uh I I am not I'm not going to be surprised if that proves to be low um more conservative. So, I'm very bullish gold here. I'm even more bullish silver. Silver's uh had a great run. It's It's up I just did the numbers yesterday from April to now. Uh gold is up 21% I think and silver's up 49%. So, it's quietly, people haven't really noticed, but it's quietly outperforming gold as it does in a bull market. So, I think silver has a long ways to go. Gold probably has a good ways to go, too. Um, so I think the weaker dollar is certainly part of that story. Lower interest rates is certainly part of that story. You know, global unrest and global uncertainty is certainly part of that story. And the central banks around the world gobbling up gold is is certainly a piece of it too. So um, and then the the final piece which people always underestimate is the power of the momentum. you know, it's uh all of a sudden the institutions are starting to notice gold even though it's been running for years. Um you know, because it's got that momentum now, they're starting to say, "Hey, we have to have a a piece of gold in our portfolios." >> Yeah. Even good friends of mine started reaching out asking me about gold mining stocks now, which has me very nervous quite quite honestly. it's getting closer to a a place where it'll because if I I believe in the bus most assets are going to go down other than treasuries. Um but so gold will correct if if 4,000 were the high and it may not be you know could just easily be 4500 but if 4,000 is a high you could be back to 3,000 or below in the bust. I you know people want to target in the bust. I go we don't even know what the high is on the way up. So, but it it'll get hit by, you know, 30% or more probably. Silver, if my target on silver is 75, if if we correct from 75, that is more volatile. So, that could go down, you know, back into the below 30 or back into the 20s. Um, so they're not going to be straight lines. uh in both cases I think this is important in both cases in the postbust area with era which is 2027 and beyond um I believe you'll see gold probably in the early 2030s and silver same time frame gold to 20,000 and silver to to 500. So that's why it's important to understand that in the bust you can have a sizable correction. So, you may not want to be a buy and holder and just say, "I'm going to ride through it." Because if you lose 30 to 70% of your money in the bust, you may not want to hold, you know, you may get nervous and get out at the bottom. Um, so it's better to get out when it's moving up. Um, on the other hand, um, there is a much much bigger upside to this post bus. >> What What is priced in? Maybe last question on gold here. What what is currently priced in? because I'm a little nervous looking at it. Is it two rate cuts, three rate cuts like the market predicts by year end? What what is priced into gold right now? And are we going to have a sell the news day on on next Wednesday here? Is that something you look at as well? >> Well, think about that. I think that tells you this the sentiment that's on the street. Everybody's got a including yourself just there. Everybody's got a foot out the door saying when do I exit, right? And so, um, what we've had here, we're just beginning an easing cycle. if the Fed is truly just beginning to cut and that there's going to be many many cuts between now and the end of next year um where where you could see the Fed fund rate go from you know four and a quarter here down to um down to even zero. Um they don't know that yet. They have no idea that's what's coming. But if if in the next 18 months that's what you're looking at um you know and you're early on in that and you're at a point where it doesn't look like the economyy's falling out of bed, gold's got a ways to run. Silver's got a ways to run. The stock market's got a ways to run and yet everybody's getting nervous here rather than bullish. >> No, that's uh we've seen that in in April, of course, and last year in uh in August as well. Everybody was nervous. Volatility was high, but volatility doesn't exist right now. And and I should be putting a bow around their conversation right now, but volatility is dead. If volatility was a heartbeat, the VIX, it'd be flatlining right now. It's at 15. Zero volatility pretty much. >> I said I said probably three or four years ago because I was calling for this this meltup. And you know, I I get accused of raising my targets constantly. I go, that's what you do. as the evidence proves it's got more, you know, there's more things saying it should go higher, you raise your target. So, you know, I started out at 6,000 or even before that at 4,000, but I've raised it to, you know, 7,000 and 7,500, then 8,000, now 8,700 um on the S&P. And same thing, I've raised my gold target a few times. Um but um it's it's the case that this thing is a big historic bull market. Um and uh you just got to you got to stay with it. I'm sorry. I lost my train of thought and what you would Oh, you were talking about the VIX. Several years ago, >> I said the VIX could go to 10 and that was when it was in the 20s. I said if if we've got and that was when I thought the market might go to 40 5,000. Um, I still would say that, but the the low on the VIX, I think, is down just below 10. I think that's probably where we're headed again. So, everybody gets worried when it gets down at 1415. I go, it can keep going and there's no magic at 10. If it wants to go lower, it's really I it's a trading vehicle. There are times when it when it, you know, the market goes through a swoon and it it bounces back up over 30 and maybe over 50, but other than that, I don't use it at all to say this is the top in the market because it can go lower. >> No, absolutely. No, fantastic. David, we got we got to wrap it up here as always. I really enjoy your views and I really appreciate the updated calls. Um, where can we send our audience to find more of your work, David? >> Yeah, thanks. Um I am on Twitter every day or on X every day. So my handle there is at Daveh contrarian. Um and I also uh do publish a quarterly uh investment letter. Uh all macrobased, no advice. Um but um it's by subscription. So if anybody is curious about that, interested in information about the subscription, um they can direct message me on X and I'll be glad to provide the information. >> Fantastic, David. Tremendously appreciate you. Thank you so much for coming on. Great conversation as always and everybody else, thank you so much for tuning in to SOA financially. It was great to catch up with David Hunter again. Let me know your thoughts. Do you agree with his calls? Are we going to see higher gold prices before the bust and where are we headed in the bust? really curious to hear your thoughts. Put them down below and don't forget to hit that like and subscribe button. Helps us out tremendously reach a wider investor audience and we much much appreciate it. So, thanks so much for doing that and we'll be back with lots more. Take care out there. [Music]
GOLD to $4,000 Is Still Conservative | David Hunter
Summary
Transcript
Is this the final meltup before the bust? The S&P 500 is at 6550. Gold is trading at 3650 an ounce and no stopping. The Fed is supposed to cut next week and we have to discuss implications. Are we going to go bust right after? What what what is the timing on everything and are we just going to keep rising or just going to keep seeing rising equity levels, gold prices, and many other things? So, I've invited David Hunter back. He's one of my favorite guests on the show. He's been making some very, very accurate calls here, especially in regard to the gold price. If you flip through our YouTube thumbnails, he called for 3,000 3,400. Now we're sitting at 3650. And I'm really excited to hear his next call for gold, of course. But also bit of a reality check. We had a jobs report revision. Almost a million a million people disappeared from the jobs report, yet unemployment stayed the same. Please explain that one to me and many other things that are going into the Fed decision next week that we will have to dissect a little bit. Before I switch over to my guest, hit that like and subscribe button. It helps us out tremendously and we much much appreciate it. And uh I know I've mentioned it before, but it's free so it doesn't hurt. Thank you so much for doing that. Now David, it is great to welcome you back on Sore Financially. It's good to see you again. >> Yeah, good to see you, Kai. Thanks for having me on. >> You know, David, before we get to the micro, um let's take a step back and let's just discuss where are we in the cycle right now. Markets are rallying. What what what's the indication? What's your what's your you know forecast here? Yeah, I think we are, as I've been saying for a long time, I think we are late in a long cycle. The a bull market cycle that started back in 1982. So, this is the 433rd year as of August of a bull market cycle that I think is coming to an end. Um, I expect to see we probably could top out by the end of this year or sooner. Um, but we've got um I I raised targets back in April when, you know, when we had liberation day and everybody got bearish, I raised my target to 8,000 on the S&P. Um, from there in my July investment letter, I raised my target to 8,700 on the S&P, 30,000 on NASDAQ, uh, 60,000 on the Dow, and, uh, the Russell 3,400. So, I obviously think there's still a lot to go here, even though I think it's going to happen pretty fast. Uh, it is late in the game. We've had a long, long cycle. Um, the economy is slowing. uh we may in fact already be in recession, but at this point the evidence is not building to something that says I'm I'm calling for a global bust next year as you know, but um the evidence right now allows most of uh investors to see this as a soft landing uh and earnings are still intact. So basically, you've got the best of both worlds. slowing economy, what I think are going to be declining interest rates and uh earnings still growing. Uh that's that's music to the ears of Wall Street that will get all the skepticism that's built up on Wall Street. They've fought this this market since 2022 all the way up. You're starting to see them begin to say, "Hey, I got to I got to get more aggressive because this thing has legs." >> Yeah. is like an interesting factor and I'm not sure we've discussed this before, David, but it's mostly retail that has been driving the markets over the summer to these highs and institutions were still sitting on the sideline to a degree just being more cautious. Do you see them piling back in now? >> Yeah, you know, I want to caution people. It's not that institutions go all in or all out. They're they're probably not very much in cash, but they're more defensively positioned. Um they have been skeptical towards the market. You're right. The retail investor surprisingly when we had that swoon back in April um they stayed in the market pretty much um and and and said this is a buying opportunity. It was the institutions that jumped on the bare market bandwagon and said, "Oh, we're going lower. We're going a lot lower." you know, strategists across the street, across Wall Street were were lowering numbers and talking about 4,000 or 3,000 on the S&P. Um, and it was surprising to see the retail investor stay basically uh on board and and bought down there. I like I said um at the very bottom of the selloff in April, I I raised my targets while everybody else was lowering their targets. So, you know, kudos to the retail investor that they this time were the smart money and and it was the institutions that weren't weren't so smart. >> Yeah, I know. All indications pointed towards a recession at some point as well, of course. So, you do want to be a bit more defensive in your investing style, I guess, right? Is that uh what what the institution has been you you've been saying they've been more defensive like what what were they investing in now they're coming back into the tech tech sector and where are they allocating now? Yeah, first of all, I think a lot of their concern is valuations. You know, we're at all-time highs in terms of valuation. Uh and and of course that's led by AI and and the Magnificent 7. Uh not all the market is all that um highly valued, but but they look at valuations and say, "Gee, we're late in this game." My thing has been I've been consistently the biggest bull on the street um for the last several years. My thing has consistently said that um there is more to go and that you know because this is a um final year of a big bull cycle we will probably go parabolic at the end so I think we're entering that parabolic phase now where are the institutions positioned you know they may be more in um some of the more defensive areas they may be in bonds they may be other places and they may have little cap But um they they definitely are understanding now that they've missed a lot and they've got to get more aggressive. >> Yeah. Bad news is good news again, David. And you know, bad news meaning jobs report revisions higher than expected, 911,000, unemployment number ticking up, job openings much lower as well. Yet the market is rallying. Um what what do we make of that the jobs report and how is that influencing future market decisions? Also Fed decisions here, David. Yeah, we get these, you know, adjustments. They they go back and look at the numbers and and revise and we always are surprised. There's pretty sizable um adjustment either up or down, mostly down lately. Um and and it's hard to understand exactly how they can miss by that much. Um this time around there is at least I have some concern that with such a large number almost million jobs uh and it was for 2024 um that maybe some games were being played to kind of prop up um the economy, make it look better than it was uh for the election, meaning the the Biden administration may have may have played around a little bit at least. That's a question you have to ask. I don't have any proof and I don't I don't know. Um but frankly, yes, what the number means is we have a weaker job situation than we thought. Um, and I've been saying for a long time that this is, you know, the end of the cycle and that what comes after that is going to be uh probably worse than 20089. So, so this kind of feeds into my belief that under the surface things aren't as good as maybe uh the market would have you believe or maybe you know some of the statistics would have you believe. >> Well, the Fed seems to be putting a lot of emphasis on the employment data lately. Less so inflation that seems like to be tackled. They're not too worried. Again, we're getting one more print here later this week, David, as we speak. But, uh, is is that the right thing to do? And what kind of what can the Fed do to sort of counter the the employment data trends that we're seeing? Is is a 25 basis point cut going to do anything? Like, what do we need to see for a trend change? >> Yeah, I I have consistently said in recent months the Fed is behind the curve. Um, I tend to agree with what Trump's saying, probably not for the same reasons, but I do believe that the Fed is overly restrictive, that the economy, as I said before, under the surface is weaker than people realize, weaker than the Fed realizes, and that inflation is trending down, not up. Uh, so I believe they should have uh been cutting rates uh well before this. Um, I think we'll probably see a quarter point cut next week, but it could be a half given PPI came out today. Uh, you know, below expectations, actually below zero for the monthly print. Um, and it does tell you, at least based on that number, that inflation is not the issue here, that jobs are the bigger issue. So, the Fed is starting to recognize that. I think we will see um you know a cut for sure next week. Um tomorrow is CPI. So if that if that comes in in line or or better than expectations, meaning weaker, um that could push us to a half point cut. Um but either way, basically a Fed cut means um that the Fed is becoming a wind at your back as an investor. Uh it's not so much that that quarter point or half point is going to make a huge difference, but it does send a message to both the bond market and the stock market that the Fed is in easing mode or is beginning in easing mode. And I think that is the case that they will be cutting after that. As I say, I think the economy is going to continue to trend down towards recession and ultimately something worse than recession, meaning a global bust. and that inflation is going to trend down into ultimately when we get the bust actual deflation. So, I was not ever in the camp of thinking that inflation was uh ticking back up and that we were going to have, you know, a higher uh higher inflation, a bigger problem there. I think it's going the other way. >> Yeah. No, it's it's interesting like you know, I'm being a bit physicious here, but just looking at the data, how bad is 4.3%. Is it about the pure number or is it about the trend? And I'm I'm guessing the answer here, David. >> Um, how bad is 4.3%? >> Yeah. In in relationship like 4.3% it doesn't sound as dramatic like Europe has like 6.3%. >> Oh, you're talking about unemployment. >> The unemployment numbers. I'm just trying to like put some perspective around it. Why it's being so hyped up for a lack of better term here and being so focused on >> Yeah. Obviously 4.3% at in in past times was considered full employment and we do have we still have a situation where you know there there are things where we can't find the workers to do you know we're we're attracting capital into this country. We're building new plants and some of those plants are not moving along because there is not the the skilled labor needed for them or the labor needed for them. So, it's not so much that anybody's worried that unemployment is too high. I think they're worried about it reversing here. And labor, uh, employment is a lagging indicator. So, if that's starting to turn negative or turn the other way, um, other things have already been weakening. So I've I've faulted the Fed for a long time for having it's their mandate so they have to but putting too much emphasis on a lagging indicator that means you're going to always be late. >> Um and that's that's frankly what their MO is that through cycle the cycle to cycle they come in too late to tighten they come in too late to ease and we get bigger swings in both directions as a result. No, let's discuss a bit the butterfly effect coming from a rate cut. Like what what are the implications? Um maybe we'll start with the bond market. David, you've been calling for 2 and a half% at some point. You mentioned originally this summer, but things have been delayed. Um but things are trending down with the rate cut expectations, especially on the 10-year. Um what are some of the implications for the bond market if the Fed starts to cut, maybe even have a jumbo cut here next week, 50 basis points? >> Yeah, I I think the bond market has begun a big bull move. Um it it has turned in the last I don't know couple months um since May I think. Um and my expectation is that we will have um sub three maybe two and a half% as we enter the the bust and when we go into the bust which is next year sometime um we'll see rates drop all the way to zero and I'm talking about the 10ear rate could fall to zero. Um, and at the same time, um, you know, you could have short rates in negative territory then. So, you know, I'm not so worried about the interim rate. Is it going to be 3%? Is it going to be 2 and a half%. The point is that we're at, you know, we're we're at 406, I think, today, and we're heading towards 3%. I think we'll be there this year. Um, and maybe below. So, um, and then from there keep trending down to to zero. The reason I can say zero in the bust is because I think the Fed ultimately since it waited so long and since we have so much leverage in the system, we're going to have a a freef falling financial system uh similar to 20089 except worse. And that means there's going to be so much money printed in response to that. I've I've said for a long time we could see as much as 20 trillion in new QE out of the Fed and proportionally similar out of every central bank in the country. So, uh you know, we're at 406 now. We were, you know, at 470 several months ago earlier this year. Um and if we're going to zero, that's a huge move in the bond market. And meanwhile, most most of the street has been bearish bonds. So just like the stock market, the Wall Street has has been basically looking the wrong direction um I think in the market and um I think they are just now starting to recognize that if the Fed's starting to ease, we're getting on board the bond market. So it's not so much the quarter point cut, it's more the signal it sends that if the Fed's easing, we can feel, you know, better about buying bonds. And as I've said, the Fed controls the overnight money, the bank lending rate. Um they don't f they don't control um loan rates. They don't control the 10-year which sets a lot of loan rates, mortgage rates. Um that's controlled by the or determined by the bond market. And the bond market's been on this for several months even though the Fed has not. No, it's like I have two questions lined up for you now, David, to sort of follow up that discussion because you know the bond market and a lot of our guests here on the on the show also called for higher bond yields because of the debt situation in the US. People are just worried losing trust in the system selling or asking for higher premiums as well. Like how does that sort of balance each other out? Like why why do you think bond yields are rising now or sorry declining bonds meaning entering that bull phase again versus the debt uncertainty and the other you know uncertainty that's coming with it? Yeah, that nar that narrative has been with us most of this year. I mean, they've been talking about long, you know, long bonds going up and the short rates coming down and that, you know, because of all the supply of debt that has to be financed, it's going to keep long rates moving up. And I've disagreed with that uh throughout, you know, throughout the last many months. Um, and I I you know, vehemently disagree with that. I think Long Bond is going to come down with the rest of the market. Um, they're just wrong. I mean, I I understand their worry. Um, they think the foreign investor has walked away from the Treasury market. You know, they don't want our our bonds anymore. At least China doesn't and others don't. Um, so they don't see the buyer there. um they see um you know the big supply of treasuries having to come out every month and you know in uh big supply to have to sell those bonds that pushes puts pressure on rates upward. So, I understand where they're coming from, but because I am in that camp that says the economy is weakening, inflation's coming down, um, and ultimately we're late in the, you know, the market cycle, um, I think bonds are going to be in demand. Uh and and as a you know, not this year, but in the bust, the thing I don't worry about at all that they are all worried about is who's going to buy those bonds because the Fed's going to be buying up every bond they can find to get QE out the door. If you're talking about, you know, we did uh let me step back. In in 2008, going into the decline in 2008, the Fed balance sheet was 875 billion. it it rose to 3.7 trillion after you know in the years following um the great financial um crisis in 20089 and then 2020 hit and it rose to 9 trillion. So our B the balance sheet went from 875 trillion. I mean 875 billion to 9 trillion over the course of the last um well 15 years let's say. Um and it's backed off now to six trillion. They they've been tightening for three years. Um if we're going to 30 trillion, if we go up 20 some odd trillion to 30 trillion, that's that's beyond anybody's ability to comprehend. I mean that's just the five trillion was beyond it. And now this could be four times that or more. Um and so how do you how do you create money? You create money by buying the treasury bonds from the dealer banks putting money in the system right. Uh so even if the treasury is going to be >> David oh they can find. So, I am not worried about who's going to buy the bonds and I'm not worried about as a result I'm not worried about rates going up. Rates are going to be going down and going down big. Perfect. Perfect segue actually to to discuss sort of how does it impact the consumer, right? Uh auto loans, mortgage rates, they're all tied to the longer end of the yield curve here, meaning the 20 and 30-year bonds. um in in in regard to uh the rates like what do you think the expectations or the not the expectations the the outcome will be for those for this market for the housing market in particular is such a huge factor. >> Yeah. In the short run meaning you know if we get rates down you know a few cuts here between now and the end of the year and we get mortgage rates down under 6%. Um you could get a bounce in in housing. Housing's declining. Housing's rolling over. That's part of the weakness I think we're seeing in the economy and why I'm so sure the economy is going to continue to weaken. But you could get a bounce in housing and autos as rates come down because, you know, I don't think it's just a September cut. It's probably three cuts into the end of the year and they could be, you know, half point cuts if things continue to deteriorate. So, um, so I I think you could get a bounce, uh, in some of those things. And that's one of the reasons why we're not going to see the stock market fall out of bed because I think there's counter measures here that are going to be it's going to allow the narrative to continue to be soft landing. You know, no recession in sight, even though I think we could already be in recession when when they go back and look at it. But so short term you could get a bounce in housing and other interest rate sensitive areas like autos. Um but ultimately the reason I'm so bullish on the bond market so bearish on rates saying rates are going to go down a lot is because I think the economy is going to weaken a lot in 2026. So meaning you know a very deep recession and ultimately a bust. So, so I don't think rates as they're falling during that period are going to help the consumer. The consumer is going to be in trouble. You know, job the job market's going to be uh deteriorating a lot. You could go to double digit unemployment um by the end of the bust. Um so, you know, again, go back to 20089. That's kind of the script. Um except I think because of the leverage in the system this time could actually be worse. >> It it could be because uh everybody's leverage debt is insane. Reaching where how closer to 38 trillion now? Uh getting closer by the day obviously. >> Well, and this is this is a global bus. So I use the number 330 trillion in global debt. 330 trillion. Wrap that around your brain. Uh and quadrillions in notional value of derivatives. And derivatives are leverage on the markets. Um whereas debt is leverage on the system, on the economy. So you've got two forms of de leverage there that are way beyond anything we've ever seen in history. We're in uncharted territory and leverage is is great. It enhances um returns on the way up. It enhances the economy on the way up. The problem is when things turn sour uh turn south um basically leverage exacerbates the downturn in a big way. So that's that's the thesis is I think people are underestimating and including the Fed underestimating the size of the risk out here. The magnitude of the risk I think is beyond anything we've ever experienced. >> No risk is enormous. Absolutely David. Um, you know, running through topics here because we only have for 30 minutes time today. Um, US dollar. We need to talk about the Dixie as well in in relationship. It is holding in better than I would expect. Personally, we're trading around 975 on the Dixie. Um, what are your expectations for the dollar? I know you've been calling for a bit lower dollar here in general. Like, are you surprised it's holding in as well as it is? >> Not at all. I mean, the dollar's fallen from, you know, basically 110 to 97 in the matter of a year probably or less. Um, and I think it's my my target is 82. That's far below here. It'll happen in some pretty steep steps. So, the first step down in, you know, the mid 90s uh and then you consolidated here. Um I think the next step down takes you down through 90 and then the third step down to 82. So um I'm you know I'm not surprised at all. Um you have to go through consolidations when you have such a big decline it then goes the other way for a little while. You have to convince some of the people that were jumping on the bandwagon but not with conviction that whoops this thing's going the other way. So, so I think I think we've just pretty much gone through that consolidation and now we're beginning the next leg down and I think it could happen pretty fast. >> Yeah, it's the typical like was it the bare flag? Not the bull flag, the bare flag because we're seeing that stabilizing pattern. We've seen that in gold, which is a perfect segue like I've planned it. We've seen it in gold, but to the upside, it was a bull flag. Now we're seeing that bare flag in the dollar. Is that a fair observation here, >> D? Absolutely. And I and I do say gold gold was in a consolidation from basically April till recently and it broke out, you know, from 3,300 3,400 broke out here and we're at new highs again. I raised my target to 4,000 last year or not last year I think uh a couple letters ago. Um and uh I I am not I'm not going to be surprised if that proves to be low um more conservative. So, I'm very bullish gold here. I'm even more bullish silver. Silver's uh had a great run. It's It's up I just did the numbers yesterday from April to now. Uh gold is up 21% I think and silver's up 49%. So, it's quietly, people haven't really noticed, but it's quietly outperforming gold as it does in a bull market. So, I think silver has a long ways to go. Gold probably has a good ways to go, too. Um, so I think the weaker dollar is certainly part of that story. Lower interest rates is certainly part of that story. You know, global unrest and global uncertainty is certainly part of that story. And the central banks around the world gobbling up gold is is certainly a piece of it too. So um, and then the the final piece which people always underestimate is the power of the momentum. you know, it's uh all of a sudden the institutions are starting to notice gold even though it's been running for years. Um you know, because it's got that momentum now, they're starting to say, "Hey, we have to have a a piece of gold in our portfolios." >> Yeah. Even good friends of mine started reaching out asking me about gold mining stocks now, which has me very nervous quite quite honestly. it's getting closer to a a place where it'll because if I I believe in the bus most assets are going to go down other than treasuries. Um but so gold will correct if if 4,000 were the high and it may not be you know could just easily be 4500 but if 4,000 is a high you could be back to 3,000 or below in the bust. I you know people want to target in the bust. I go we don't even know what the high is on the way up. So, but it it'll get hit by, you know, 30% or more probably. Silver, if my target on silver is 75, if if we correct from 75, that is more volatile. So, that could go down, you know, back into the below 30 or back into the 20s. Um, so they're not going to be straight lines. uh in both cases I think this is important in both cases in the postbust area with era which is 2027 and beyond um I believe you'll see gold probably in the early 2030s and silver same time frame gold to 20,000 and silver to to 500. So that's why it's important to understand that in the bust you can have a sizable correction. So, you may not want to be a buy and holder and just say, "I'm going to ride through it." Because if you lose 30 to 70% of your money in the bust, you may not want to hold, you know, you may get nervous and get out at the bottom. Um, so it's better to get out when it's moving up. Um, on the other hand, um, there is a much much bigger upside to this post bus. >> What What is priced in? Maybe last question on gold here. What what is currently priced in? because I'm a little nervous looking at it. Is it two rate cuts, three rate cuts like the market predicts by year end? What what is priced into gold right now? And are we going to have a sell the news day on on next Wednesday here? Is that something you look at as well? >> Well, think about that. I think that tells you this the sentiment that's on the street. Everybody's got a including yourself just there. Everybody's got a foot out the door saying when do I exit, right? And so, um, what we've had here, we're just beginning an easing cycle. if the Fed is truly just beginning to cut and that there's going to be many many cuts between now and the end of next year um where where you could see the Fed fund rate go from you know four and a quarter here down to um down to even zero. Um they don't know that yet. They have no idea that's what's coming. But if if in the next 18 months that's what you're looking at um you know and you're early on in that and you're at a point where it doesn't look like the economyy's falling out of bed, gold's got a ways to run. Silver's got a ways to run. The stock market's got a ways to run and yet everybody's getting nervous here rather than bullish. >> No, that's uh we've seen that in in April, of course, and last year in uh in August as well. Everybody was nervous. Volatility was high, but volatility doesn't exist right now. And and I should be putting a bow around their conversation right now, but volatility is dead. If volatility was a heartbeat, the VIX, it'd be flatlining right now. It's at 15. Zero volatility pretty much. >> I said I said probably three or four years ago because I was calling for this this meltup. And you know, I I get accused of raising my targets constantly. I go, that's what you do. as the evidence proves it's got more, you know, there's more things saying it should go higher, you raise your target. So, you know, I started out at 6,000 or even before that at 4,000, but I've raised it to, you know, 7,000 and 7,500, then 8,000, now 8,700 um on the S&P. And same thing, I've raised my gold target a few times. Um but um it's it's the case that this thing is a big historic bull market. Um and uh you just got to you got to stay with it. I'm sorry. I lost my train of thought and what you would Oh, you were talking about the VIX. Several years ago, >> I said the VIX could go to 10 and that was when it was in the 20s. I said if if we've got and that was when I thought the market might go to 40 5,000. Um, I still would say that, but the the low on the VIX, I think, is down just below 10. I think that's probably where we're headed again. So, everybody gets worried when it gets down at 1415. I go, it can keep going and there's no magic at 10. If it wants to go lower, it's really I it's a trading vehicle. There are times when it when it, you know, the market goes through a swoon and it it bounces back up over 30 and maybe over 50, but other than that, I don't use it at all to say this is the top in the market because it can go lower. >> No, absolutely. No, fantastic. David, we got we got to wrap it up here as always. I really enjoy your views and I really appreciate the updated calls. Um, where can we send our audience to find more of your work, David? >> Yeah, thanks. Um I am on Twitter every day or on X every day. So my handle there is at Daveh contrarian. Um and I also uh do publish a quarterly uh investment letter. Uh all macrobased, no advice. Um but um it's by subscription. So if anybody is curious about that, interested in information about the subscription, um they can direct message me on X and I'll be glad to provide the information. >> Fantastic, David. Tremendously appreciate you. Thank you so much for coming on. Great conversation as always and everybody else, thank you so much for tuning in to SOA financially. It was great to catch up with David Hunter again. Let me know your thoughts. Do you agree with his calls? Are we going to see higher gold prices before the bust and where are we headed in the bust? really curious to hear your thoughts. Put them down below and don't forget to hit that like and subscribe button. Helps us out tremendously reach a wider investor audience and we much much appreciate it. So, thanks so much for doing that and we'll be back with lots more. Take care out there. [Music]