Markets ‘Radically Overbought’ And Setup Mirrors 1987 Crash, Says David Rosenberg
Summary
Precious Metals: Rosenberg remains bullish on gold in a secular sense but warns of a near-term pullback, urging profit-taking or hedging and keeping liquidity ready to re-enter.
Silver Risk: He views silver as particularly overbought and vulnerable to a sharp correction despite the broader precious metals bull market.
Central Bank Demand: The key driver for gold is sustained central bank buying since 2010-11, creating a persistent demand-supply gap and supporting higher long-term prices.
Policy Uncertainty: Gold’s valuation benefits from heightened policy uncertainty, with potential Fed appointments and executive actions contributing to risk-off demand.
Government Bonds: Extensive discussion of bond markets highlights Japan’s inflation-led nominal GDP surge and the appeal of government bonds’ certainty versus equities.
Equity Bubble: US equities look stretched, with CAPE near 40 and a negative equity risk premium compared to 30-year TIPS, signaling dangerous relative valuations.
Rates and Curve: Potential Fed shifts could steepen the yield curve; however, long-duration bonds face inflation risks if policy overtly eases.
Other Opportunities: He notes interest in Asian equities, India, European aerospace/defense, North American energy infrastructure, and local-currency EM bonds as areas to watch.
Transcript
Good morning. Thank you for joining us. Very, very pleased to be joined by David Rosenberg, president of Rosenberg Associates Research Associates and uh one of the more esteemed economists we have here in Canada. Welcome all the way from Toronto. We're going to get his outlook on the economy, growth, and uh stock market and gold and silver. Let's start with gold and silver. Before we start, uh David, uh let's get a sentiment gauge, quick sentiment gauge from the audience. Show of hands if you think uh $100 silver and gold uh $5,000 gold is just the beginning of another bull run and we're going to higher prices from here. Okay. All right. Uh show of hands at this at the top. Okay. Over to you, David. So, how do we know if a market in particular, let's take gold and silver as topic? What indicators do you look at? Well, I think that we have to separate out what is uh a near-term radically overbought condition in anything uh and what is in a true secular bull market. So I would say that uh gold and silver in particular silver I saw some people put up their hands the chart on silver right now and I've been bullish on precious metals and I still am but if you're chasing this thing right now with a vertical line going up I think you're making a really big mistake if you've been in the trade and I've been in the trade for some time. I've been taking profits because nobody ever got hurt by booking a profit. The charts right now, the chart of gold is very strong. Uh, and I would say it's probably overdone. Silver though looks very dangerous to me. Okay. So, I would just say if you've been longing the trade, either take profits or find a way to hedge your position. I do think we are in a secular bull market uh in commodities and in the precious metals complex. So, this is not to say that the bull market is over. It is to say that we are right for a very significant near-term pullback and you want to have liquidity on hand to get back in a much better prices. Okay, this is as if I started in the business, okay, at the Bank of Nova Scotia in October 19th, 1987. I'll ask a show of hands. Anybody know that date in particular? So for the other 90% Google October 19th 87 when the S&P 500 went down 23% in one day and the chart of the Dow NASDAQ S&P 500 going into the fall of 1987 looked just like silver does right now and then if you were long cuz you were greedy you had your head sliced off. So the bull market's intact. the second bull markets intact, but we could get a big correction from these infl super inflated levels that are going to surprise a lot of people, then you're going to have people secondguessing whether the secondary bull market is is still intact. And that's what I'm waiting for cuz that's what I'm going to jump back in in answer to your question. >> Thank you very much. Well, you were you've been in the market for a long time. 2011 was the last gold silver peak before we had a multi-year correction and bare market. What's different this time? How are we not going to get a 2012 next year? >> Well, uh I'm not going to say that uh we're not going to get a pullback. I think that we're going to get a pullback. I think that what is making this into a secular bull market. And I'll I'll talk more about gold than about silver because silver tends to get caught in short-term supply squeezes more than gold does. If you go back to that 1980 period, the Hunt brothers were cornering silver, not gold. Gold is easier to get caught in these heightened bouts of volatility. And volatility works in both directions, down and up. What makes this situation uh different right now is that in 2010 2011 what had happened over that previous 10-year period up until then was the central banks were not net buyers of gold. What happened in the move from the lows of 1999 at $255 an ounce up to say over $1,000 back in 2010 2011. That first few chapters of the story of gold cuz gold has been in a 25 year secular bull market. It's just that very recently with the price action people have taken notice. But you can't take a look at the secular bull market in gold without looking at it in the context of the secular bare market that preceded it. Because from 1980 to 1999, the gold price went down 60% and nobody wanted to touch it because the global central banks were dumping gold on the market and replacing it with government paper, treasury bills, shortdated bonds. So the low in the gold price took place in 1999 when the world central banks led by Europe signed what was called the Washington agreement which ended the global central bank sales of gold but they didn't start to buy gold on net till 2010 2011 and they've been net buyers of gold ever since. And at the peak in gold in 1980, the share of bullion in central bank foreign exchange reserves was 70%. And then at the price lows in 1999, the global share of bullion in foreign exchange reserves was only 10%. The bank Canada got down to zero. And the irony of irony is that we are the world's fourth largest gold producer. The Bank Canada of all central banks has no gold in the vault. Today that ratio of gold reserves in the central bank vaults globally is about 25 to 30%. So this move towards diversification of central banks and that's the big driver. The big driver is not the Chinese melting down their jewelry or some phenomenal dowry season going on in India or Americans lining up at Costco to buy those nice shiny little gold bars. It's the central banks that are driving annual growth in demand now of roughly 2 and a.5% bumping against stable supply growth of 1 to 1 and a.5%. That's the gap between demand and supply that's driving the price up immeasurably and and that's ongoing. So, uh you're asking me about what changed going into 2012. Well, I suppose that what happened was that Ben Bernani embarked on an unexpected round of quantitative easing to boost the stock market and that generated a lot of enthusiasm uh over the risk on trade and gold historically is a hedge against risk on trades. is traditionally a riskoff asset. And on top of that, whether you like him or don't like him, Barack Obama was president, not Donald Trump. And whether you like or don't like Donald Trump, he is the king of uncertainty. And if you ever want to measure what is the valuation metric for gold, what is it? >> What is the valuation metric of gold? It doesn't have a dividend discount model. You don't do like um measurements of default risk recovery rates like you do in the corporate credit market. It's Yeah. It's it's one divided by C where C is certainty. So if you're long gold, Donald Trump is your best friend. Uh because this chaotic policy environment is not going away anytime soon. I expect that he will have the rug taken from underneath him in the midterm elections. But that is not going to stop him from doing what he's been doing all along, which is bypassing Congress and running policy through executive order. So, I'd say that um this bull market in gold is is definitely here until the 2028 elections. It doesn't mean we're not going to have a near-term correction. Corrections are normal. Corrections are healthy, especially from asmmptoic levels that we have today, especially as it pertains to silver. So, from now till the 2020 elections, I'm probably bullish on gold. Uh two things would have to change for me to turn bearish on gold. The first time I hear a central bank like last week, the National Bank of Poland said that they're going to be adding significantly to the gold reserves. This is this is basically we are we are it's just like with Ben Bernanki's QE. You might not like what governments do or central banks do, but they are at the poker table with the rest of us when it comes to making investment decisions and they have deeper pockets than everybody else. So, this is actually a bet on the central banks. I said before that the timing of the 1999 low in gold at $255 an ounce was not purely coincidental that that was timed right as the Washington agreement was signed. The central banks got out of the business of selling gold. So it's just a bet. It's not a bet on how smart everybody in the room is. It's just a bet that the central banks have your back if you're long the gold price right now. So the first time I hear a central bank say a major central bank say we're done filling our gold reserves and I don't think we're there yet. Either that has to happen or when I change my name from Rosenberg to Goldberg. That'll be the classic contrary trade. Before we continue with the video, let's talk about today's sponsor, Monetary Metals. With gold prices having hit all-time highs, we know why people hold gold. It's because it's real money. But what if your gold could do a lot more than just sit in a vault? Well, that's where Monetary Metals comes in. They offer a way for you to earn a yield on your gold paid in physical gold. Through their leasing marketplace, you can earn up to 4% yield per year in gold. That means instead of storing your gold in a vault and letting it sit idle, you can lease it out to vetted businesses in the gold industry and get paid in more gold. Thousands of investors are already earning a monthly yield in gold and silver through monetary medals. So scan the QR code here or go to monetary-meals.com/lin link in the description down below to learn more. Don't just hold gold, put it to work. Okay, keep us updated on your name change, but we have to move on to the economy of the last uh 10 minutes. So uh yield spiked earlier this week. Uh Japanese JGBs and US Treasury yields alike. We had a warning here from Ken Griffin of uh of Citadel at Davos. I think there is an explicit warning that if your fiscal house is not in order, the bond vigilantes can come out and retract their price. Let's talk about the bond market. Maybe gold is acting as a proxy for bonds trading in line with yields. What do you think? >> Well, I I don't necessarily agree with what he said. >> Okay. >> Because what's happened in Japan, which nobody talks about, is their debt their debt to GDP ratio is has come down significantly. They're the only country in the world where their debt GDP has actually come down measurably over the course of the past few years. And then the question is why? That might come as a big surprise to a lot of people here because we talk about the debt to GDP in in Japan. It has come down radically. Why? Why? Because the denominator called nominal GDP has ballooned. Has ballooned. Nominal GDP in Japan is surging because they finally climbed out of their long-term secular deflationary morass. So the situation in Japan is not about their debt. It's about inflation has come back in Japan. It's boosting nominal GDP dramatically. So it's not about the debt. It's about the Bank of Japan is like the proverbial deer in front of the headlights and they've not been raising rates sufficiently. Okay, so that's the story is the bond market in Japan has signaled to the BOJ that you are radically behind the curve. So that's the story as far as Japan's concerned. Of course, all these markets globally, fixed income equities, they all have their correlations with each other. So there's been some spillover even into Canada from what's happened in Japan. But that's really a small part of the story. The other part of the story is that investors are nervous in the fixed income market, especially in the treasury market from taking on duration risk because of Donald Trump, because of the chaotic policy and they don't know who he's going to appoint. Who's he going to appoint as the next Fed chairman? It's coming soon. Is it going to be Kevin Worsh? is going to be uh Kevin Hasset, is going to be Kevin Cosner. Now people think it's going to be um now people think it's going to be Rick Ryder who's the CIO of Black Rockck. But whoever it is, I think that people are scared of duration because they feel that Trump is going to appoint a Fed chairman that's going to dramatically cut interest rates way below its equilibrium level and unleash the inflation genie. It's rather it's almost hard to wrap around your head that the guy who's now running this affordability campaign is going to risk taking interest rates below where they should be. Now, I'm not bearish on rates, not by a long shot, but you know, he could take rates down to 1%. If he gets the right person in, that's going to drive rates down. And so, that's good for short-term rates, good for a steepening yield curve. That might be great news for the financial stocks, steepening yield curve. But if you believe that Trump is going to risk taking the inflation genie out of the bottle, then the last thing you want to do is own long duration bonds. So that's really what the story is. >> By the way, FOV this week's the same. >> Well, there I I don't think there's any doubt about that. That's not the surprise. the surprise will be really um is is there anything in the press statement >> or is there anything that when Powell's up at the podium but let's just say that you know the market at this point is not really expecting the Fed to do much at all despite Donald Trump's bravado very interestingly enough the market is not expecting the Fed to do very much at all in the coming year >> we have 5 minutes let's close off in the markets show of quen real quick uh are we in a market bubble stock market US stock market bubble Okay, that seems to be half plus the uh plus the panelist. So, >> well, I count I count for at least half, right? >> Okay. >> My my votes the most important vote. >> All right. Tell us about the stock market bubble. >> Let's just say this. Okay. So, my favorite valuation metric. Well, firstly, if you go look at the traditional metrics, price to earnings, price to sales, price to book, we're all at two two standard deviation events. Jeremy Grantham came on my webcast not too long ago and said that is the official definition of a bubble in anything when you reach a two sigma event. My favorite indicator is called the cape the Schiller price earnings multiple if you heard of that the Schiller PE and it's the 10-year smooth. It smooths over the cycle goes back over 100 years. So you have a really rich time series. Well that multiple right now is at 40. That multiples is at 40. What does that mean? It means that the earnings yield in the stock market is 2.5%. Where is the 30-year tips in the United States? The 30-year inflation linked Treasury bond, where is that trading right now? Anybody know? Okay. Well, I get paid to know. It's 2.65%. Erggo 2 and a half% equity earnings yield 2.65% 65% real yield cuz a real yield against a real yield. That's the comparison. Long duration asset equities longest duration in the treasury market the 30-year and it's telling you that the equity risk premium is -5 basis points. So if you were long now I'm not going to say you can't go and buy individual subsectors or companies but you know this is not a stock picker market. Hasn't been for a long time. It was when I started in the business in the mid 80s. 90% of this market today is purely passive investing. People or institutions just blindly buying the indices. But when the equity risk premium is negative, just know this. This is what the stock market is telling everybody in this room. And you can choose to believe it if you want to. I choose not to. The markets are telling you that equities as an asset class is a more riskless basket than the treasury market is. that equities have all of a sudden become a riskless asset when they're trading in their real yield below the risk-free rate. Now, you're going to say, well, treasuries risk- free. Treasuries have duration risk, inflation risk, cyclical risk. You can argue Fed risk. But the thing about treasuries that are different than everything else that you might be doing, equities, gold, silver, commodities, real estate, the government bond market is the only market where you know with 100% certainty what you will get paid in 1 year, 3 years, 5 years, 10 years, 30 years. So it is the guaranteed security of payment that makes bonds more attractive. It's when bond when when tre when equity yields are trading below treasury yields, it doesn't happen that often. I don't care about the two trillion debt. So maybe they'll reflate their way out of that $2 trillion debt. That does they're not going to default on that debt. If they default on that debt, you can kiss capitalism and democracy aside, okay? Or goodbye. Do you know what I mean? They're not going to default on the debt. And I've heard that, by the way, from the time I started the business in 1987. That's all I've heard. The debt will not be defaulted. Um I think at some point there's going to be what happened in Canada. The United States will face the day of reckoning when there will be a tailed auction or even a failed auction. People tend to forget what forced. Does anybody here remember in 1993 the red book? The liberal government red book. Nobody remembers John Creten and Martin's Paul Barton's red book. Really? In '93? Yes. Thank you, sir. We'll play some peuckle together when we're finished. And uh and next thing you know 1994 we have uh the budget restraint of budget restraints because the markets forced it on Canada. Now Canada's not the reserve currency. So let me just say there will be a point in time if you're worried where the markets will force us on the United States. We went through pension reform, reform to social security in Canada, government spending cutbacks at the federal level that you could not have predicted when the Liberals ran for election in 1993. So, let's just say that no, there's no default risk in government bonds. Okay, >> print the money. >> Okay, so they'll print the money. So, hedge your position in gold. Okay, if you want to say to me that equities are a great hedge against inflation, there's a lot of people and promoters that would agree with you. However, however, what I'm talking about is relative valuation right now. That's all I'm talking about. As we sit here today, the investment community is telling you that equities are less of a risk than government bonds. And I think that's a dangerous proposition. >> One minute. Uh David, can you just give us one or two assets that you do like for 2026 besides gold and silver, which we talked about risk? Yeah. >> Yeah. Well, look, uh I like the um I I'll give you some ideas. Uh I still like uh I still like uh Asian equities. uh they still trade it much more compelling valuations than the US. I like European aerospace defense. Uh that is another secular trend that is not going away anytime soon. Uh we've been long energy infrastructure uh in North America and although that's become tied to the AI trade to some extent, revamping the power grid and pipeline expansion is not going anytime soon. So you can pick your spots. I I think that in terms of global markets, India looks very attractive uh within that Asian bucket. And something we're taking a look at very closely right now and answer to your question about bonds is that of course we talk about treasuries uh emerging market bonds uh are looking local currency because the US dollar is in a bare market and that's going to continue. Uh emerging market bonds you could buy ETF definitely is on the radar screen right now. >> Thank you very much. Uh, Rosenberg Research and Associates. That's your website, correct? >> That's right. I'm Rosenberg. I'm research and I'm the associate. No, I'm just kidding. I I I have a team of 15 people working, but uh check out the website. Thank you very much. >> Thank you. And I'm David Lynn. Check me out on YouTube.
Markets ‘Radically Overbought’ And Setup Mirrors 1987 Crash, Says David Rosenberg
Summary
Transcript
Good morning. Thank you for joining us. Very, very pleased to be joined by David Rosenberg, president of Rosenberg Associates Research Associates and uh one of the more esteemed economists we have here in Canada. Welcome all the way from Toronto. We're going to get his outlook on the economy, growth, and uh stock market and gold and silver. Let's start with gold and silver. Before we start, uh David, uh let's get a sentiment gauge, quick sentiment gauge from the audience. Show of hands if you think uh $100 silver and gold uh $5,000 gold is just the beginning of another bull run and we're going to higher prices from here. Okay. All right. Uh show of hands at this at the top. Okay. Over to you, David. So, how do we know if a market in particular, let's take gold and silver as topic? What indicators do you look at? Well, I think that we have to separate out what is uh a near-term radically overbought condition in anything uh and what is in a true secular bull market. So I would say that uh gold and silver in particular silver I saw some people put up their hands the chart on silver right now and I've been bullish on precious metals and I still am but if you're chasing this thing right now with a vertical line going up I think you're making a really big mistake if you've been in the trade and I've been in the trade for some time. I've been taking profits because nobody ever got hurt by booking a profit. The charts right now, the chart of gold is very strong. Uh, and I would say it's probably overdone. Silver though looks very dangerous to me. Okay. So, I would just say if you've been longing the trade, either take profits or find a way to hedge your position. I do think we are in a secular bull market uh in commodities and in the precious metals complex. So, this is not to say that the bull market is over. It is to say that we are right for a very significant near-term pullback and you want to have liquidity on hand to get back in a much better prices. Okay, this is as if I started in the business, okay, at the Bank of Nova Scotia in October 19th, 1987. I'll ask a show of hands. Anybody know that date in particular? So for the other 90% Google October 19th 87 when the S&P 500 went down 23% in one day and the chart of the Dow NASDAQ S&P 500 going into the fall of 1987 looked just like silver does right now and then if you were long cuz you were greedy you had your head sliced off. So the bull market's intact. the second bull markets intact, but we could get a big correction from these infl super inflated levels that are going to surprise a lot of people, then you're going to have people secondguessing whether the secondary bull market is is still intact. And that's what I'm waiting for cuz that's what I'm going to jump back in in answer to your question. >> Thank you very much. Well, you were you've been in the market for a long time. 2011 was the last gold silver peak before we had a multi-year correction and bare market. What's different this time? How are we not going to get a 2012 next year? >> Well, uh I'm not going to say that uh we're not going to get a pullback. I think that we're going to get a pullback. I think that what is making this into a secular bull market. And I'll I'll talk more about gold than about silver because silver tends to get caught in short-term supply squeezes more than gold does. If you go back to that 1980 period, the Hunt brothers were cornering silver, not gold. Gold is easier to get caught in these heightened bouts of volatility. And volatility works in both directions, down and up. What makes this situation uh different right now is that in 2010 2011 what had happened over that previous 10-year period up until then was the central banks were not net buyers of gold. What happened in the move from the lows of 1999 at $255 an ounce up to say over $1,000 back in 2010 2011. That first few chapters of the story of gold cuz gold has been in a 25 year secular bull market. It's just that very recently with the price action people have taken notice. But you can't take a look at the secular bull market in gold without looking at it in the context of the secular bare market that preceded it. Because from 1980 to 1999, the gold price went down 60% and nobody wanted to touch it because the global central banks were dumping gold on the market and replacing it with government paper, treasury bills, shortdated bonds. So the low in the gold price took place in 1999 when the world central banks led by Europe signed what was called the Washington agreement which ended the global central bank sales of gold but they didn't start to buy gold on net till 2010 2011 and they've been net buyers of gold ever since. And at the peak in gold in 1980, the share of bullion in central bank foreign exchange reserves was 70%. And then at the price lows in 1999, the global share of bullion in foreign exchange reserves was only 10%. The bank Canada got down to zero. And the irony of irony is that we are the world's fourth largest gold producer. The Bank Canada of all central banks has no gold in the vault. Today that ratio of gold reserves in the central bank vaults globally is about 25 to 30%. So this move towards diversification of central banks and that's the big driver. The big driver is not the Chinese melting down their jewelry or some phenomenal dowry season going on in India or Americans lining up at Costco to buy those nice shiny little gold bars. It's the central banks that are driving annual growth in demand now of roughly 2 and a.5% bumping against stable supply growth of 1 to 1 and a.5%. That's the gap between demand and supply that's driving the price up immeasurably and and that's ongoing. So, uh you're asking me about what changed going into 2012. Well, I suppose that what happened was that Ben Bernani embarked on an unexpected round of quantitative easing to boost the stock market and that generated a lot of enthusiasm uh over the risk on trade and gold historically is a hedge against risk on trades. is traditionally a riskoff asset. And on top of that, whether you like him or don't like him, Barack Obama was president, not Donald Trump. And whether you like or don't like Donald Trump, he is the king of uncertainty. And if you ever want to measure what is the valuation metric for gold, what is it? >> What is the valuation metric of gold? It doesn't have a dividend discount model. You don't do like um measurements of default risk recovery rates like you do in the corporate credit market. It's Yeah. It's it's one divided by C where C is certainty. So if you're long gold, Donald Trump is your best friend. Uh because this chaotic policy environment is not going away anytime soon. I expect that he will have the rug taken from underneath him in the midterm elections. But that is not going to stop him from doing what he's been doing all along, which is bypassing Congress and running policy through executive order. So, I'd say that um this bull market in gold is is definitely here until the 2028 elections. It doesn't mean we're not going to have a near-term correction. Corrections are normal. Corrections are healthy, especially from asmmptoic levels that we have today, especially as it pertains to silver. So, from now till the 2020 elections, I'm probably bullish on gold. Uh two things would have to change for me to turn bearish on gold. The first time I hear a central bank like last week, the National Bank of Poland said that they're going to be adding significantly to the gold reserves. This is this is basically we are we are it's just like with Ben Bernanki's QE. You might not like what governments do or central banks do, but they are at the poker table with the rest of us when it comes to making investment decisions and they have deeper pockets than everybody else. So, this is actually a bet on the central banks. I said before that the timing of the 1999 low in gold at $255 an ounce was not purely coincidental that that was timed right as the Washington agreement was signed. The central banks got out of the business of selling gold. So it's just a bet. It's not a bet on how smart everybody in the room is. It's just a bet that the central banks have your back if you're long the gold price right now. So the first time I hear a central bank say a major central bank say we're done filling our gold reserves and I don't think we're there yet. Either that has to happen or when I change my name from Rosenberg to Goldberg. That'll be the classic contrary trade. Before we continue with the video, let's talk about today's sponsor, Monetary Metals. With gold prices having hit all-time highs, we know why people hold gold. It's because it's real money. But what if your gold could do a lot more than just sit in a vault? Well, that's where Monetary Metals comes in. They offer a way for you to earn a yield on your gold paid in physical gold. Through their leasing marketplace, you can earn up to 4% yield per year in gold. That means instead of storing your gold in a vault and letting it sit idle, you can lease it out to vetted businesses in the gold industry and get paid in more gold. Thousands of investors are already earning a monthly yield in gold and silver through monetary medals. So scan the QR code here or go to monetary-meals.com/lin link in the description down below to learn more. Don't just hold gold, put it to work. Okay, keep us updated on your name change, but we have to move on to the economy of the last uh 10 minutes. So uh yield spiked earlier this week. Uh Japanese JGBs and US Treasury yields alike. We had a warning here from Ken Griffin of uh of Citadel at Davos. I think there is an explicit warning that if your fiscal house is not in order, the bond vigilantes can come out and retract their price. Let's talk about the bond market. Maybe gold is acting as a proxy for bonds trading in line with yields. What do you think? >> Well, I I don't necessarily agree with what he said. >> Okay. >> Because what's happened in Japan, which nobody talks about, is their debt their debt to GDP ratio is has come down significantly. They're the only country in the world where their debt GDP has actually come down measurably over the course of the past few years. And then the question is why? That might come as a big surprise to a lot of people here because we talk about the debt to GDP in in Japan. It has come down radically. Why? Why? Because the denominator called nominal GDP has ballooned. Has ballooned. Nominal GDP in Japan is surging because they finally climbed out of their long-term secular deflationary morass. So the situation in Japan is not about their debt. It's about inflation has come back in Japan. It's boosting nominal GDP dramatically. So it's not about the debt. It's about the Bank of Japan is like the proverbial deer in front of the headlights and they've not been raising rates sufficiently. Okay, so that's the story is the bond market in Japan has signaled to the BOJ that you are radically behind the curve. So that's the story as far as Japan's concerned. Of course, all these markets globally, fixed income equities, they all have their correlations with each other. So there's been some spillover even into Canada from what's happened in Japan. But that's really a small part of the story. The other part of the story is that investors are nervous in the fixed income market, especially in the treasury market from taking on duration risk because of Donald Trump, because of the chaotic policy and they don't know who he's going to appoint. Who's he going to appoint as the next Fed chairman? It's coming soon. Is it going to be Kevin Worsh? is going to be uh Kevin Hasset, is going to be Kevin Cosner. Now people think it's going to be um now people think it's going to be Rick Ryder who's the CIO of Black Rockck. But whoever it is, I think that people are scared of duration because they feel that Trump is going to appoint a Fed chairman that's going to dramatically cut interest rates way below its equilibrium level and unleash the inflation genie. It's rather it's almost hard to wrap around your head that the guy who's now running this affordability campaign is going to risk taking interest rates below where they should be. Now, I'm not bearish on rates, not by a long shot, but you know, he could take rates down to 1%. If he gets the right person in, that's going to drive rates down. And so, that's good for short-term rates, good for a steepening yield curve. That might be great news for the financial stocks, steepening yield curve. But if you believe that Trump is going to risk taking the inflation genie out of the bottle, then the last thing you want to do is own long duration bonds. So that's really what the story is. >> By the way, FOV this week's the same. >> Well, there I I don't think there's any doubt about that. That's not the surprise. the surprise will be really um is is there anything in the press statement >> or is there anything that when Powell's up at the podium but let's just say that you know the market at this point is not really expecting the Fed to do much at all despite Donald Trump's bravado very interestingly enough the market is not expecting the Fed to do very much at all in the coming year >> we have 5 minutes let's close off in the markets show of quen real quick uh are we in a market bubble stock market US stock market bubble Okay, that seems to be half plus the uh plus the panelist. So, >> well, I count I count for at least half, right? >> Okay. >> My my votes the most important vote. >> All right. Tell us about the stock market bubble. >> Let's just say this. Okay. So, my favorite valuation metric. Well, firstly, if you go look at the traditional metrics, price to earnings, price to sales, price to book, we're all at two two standard deviation events. Jeremy Grantham came on my webcast not too long ago and said that is the official definition of a bubble in anything when you reach a two sigma event. My favorite indicator is called the cape the Schiller price earnings multiple if you heard of that the Schiller PE and it's the 10-year smooth. It smooths over the cycle goes back over 100 years. So you have a really rich time series. Well that multiple right now is at 40. That multiples is at 40. What does that mean? It means that the earnings yield in the stock market is 2.5%. Where is the 30-year tips in the United States? The 30-year inflation linked Treasury bond, where is that trading right now? Anybody know? Okay. Well, I get paid to know. It's 2.65%. Erggo 2 and a half% equity earnings yield 2.65% 65% real yield cuz a real yield against a real yield. That's the comparison. Long duration asset equities longest duration in the treasury market the 30-year and it's telling you that the equity risk premium is -5 basis points. So if you were long now I'm not going to say you can't go and buy individual subsectors or companies but you know this is not a stock picker market. Hasn't been for a long time. It was when I started in the business in the mid 80s. 90% of this market today is purely passive investing. People or institutions just blindly buying the indices. But when the equity risk premium is negative, just know this. This is what the stock market is telling everybody in this room. And you can choose to believe it if you want to. I choose not to. The markets are telling you that equities as an asset class is a more riskless basket than the treasury market is. that equities have all of a sudden become a riskless asset when they're trading in their real yield below the risk-free rate. Now, you're going to say, well, treasuries risk- free. Treasuries have duration risk, inflation risk, cyclical risk. You can argue Fed risk. But the thing about treasuries that are different than everything else that you might be doing, equities, gold, silver, commodities, real estate, the government bond market is the only market where you know with 100% certainty what you will get paid in 1 year, 3 years, 5 years, 10 years, 30 years. So it is the guaranteed security of payment that makes bonds more attractive. It's when bond when when tre when equity yields are trading below treasury yields, it doesn't happen that often. I don't care about the two trillion debt. So maybe they'll reflate their way out of that $2 trillion debt. That does they're not going to default on that debt. If they default on that debt, you can kiss capitalism and democracy aside, okay? Or goodbye. Do you know what I mean? They're not going to default on the debt. And I've heard that, by the way, from the time I started the business in 1987. That's all I've heard. The debt will not be defaulted. Um I think at some point there's going to be what happened in Canada. The United States will face the day of reckoning when there will be a tailed auction or even a failed auction. People tend to forget what forced. Does anybody here remember in 1993 the red book? The liberal government red book. Nobody remembers John Creten and Martin's Paul Barton's red book. Really? In '93? Yes. Thank you, sir. We'll play some peuckle together when we're finished. And uh and next thing you know 1994 we have uh the budget restraint of budget restraints because the markets forced it on Canada. Now Canada's not the reserve currency. So let me just say there will be a point in time if you're worried where the markets will force us on the United States. We went through pension reform, reform to social security in Canada, government spending cutbacks at the federal level that you could not have predicted when the Liberals ran for election in 1993. So, let's just say that no, there's no default risk in government bonds. Okay, >> print the money. >> Okay, so they'll print the money. So, hedge your position in gold. Okay, if you want to say to me that equities are a great hedge against inflation, there's a lot of people and promoters that would agree with you. However, however, what I'm talking about is relative valuation right now. That's all I'm talking about. As we sit here today, the investment community is telling you that equities are less of a risk than government bonds. And I think that's a dangerous proposition. >> One minute. Uh David, can you just give us one or two assets that you do like for 2026 besides gold and silver, which we talked about risk? Yeah. >> Yeah. Well, look, uh I like the um I I'll give you some ideas. Uh I still like uh I still like uh Asian equities. uh they still trade it much more compelling valuations than the US. I like European aerospace defense. Uh that is another secular trend that is not going away anytime soon. Uh we've been long energy infrastructure uh in North America and although that's become tied to the AI trade to some extent, revamping the power grid and pipeline expansion is not going anytime soon. So you can pick your spots. I I think that in terms of global markets, India looks very attractive uh within that Asian bucket. And something we're taking a look at very closely right now and answer to your question about bonds is that of course we talk about treasuries uh emerging market bonds uh are looking local currency because the US dollar is in a bare market and that's going to continue. Uh emerging market bonds you could buy ETF definitely is on the radar screen right now. >> Thank you very much. Uh, Rosenberg Research and Associates. That's your website, correct? >> That's right. I'm Rosenberg. I'm research and I'm the associate. No, I'm just kidding. I I I have a team of 15 people working, but uh check out the website. Thank you very much. >> Thank you. And I'm David Lynn. Check me out on YouTube.