‘Nasty Surprise’ To Hit Economy, Markets, No One Is Ready | David Hay
Summary
Market Outlook: The podcast discusses the potential for a hidden recession, noting that consumer sentiment is strong but spending is down, which could be a leading indicator of economic slowdown.
Investment Strategies: David Hay suggests cautious profit-taking in gold miners due to their significant gains, while recommending a focus on commodities like silver and energy, which are expected to benefit from current liquidity and economic conditions.
Housing Market: The discussion highlights a significant downturn in housing permits and starts, with new home prices now cheaper than existing homes, indicating potential pressure on existing home prices.
Global Liquidity: The podcast emphasizes the impact of global liquidity on asset prices, with a focus on how stable coins and government actions might influence future market conditions.
Precious Metals: Gold and silver are highlighted as strong performers, with central bank accumulation driving gold prices, and silver expected to continue its upward trend.
Economic Indicators: The podcast points out that various economic indicators, such as the Chicago Natural Activity Index and unemployment rates for new entrants, suggest underlying economic weaknesses.
Fiscal Policy: The discussion covers the role of federal deficits and government spending in preventing a recession, with concerns about the sustainability of such fiscal policies.
Investment Advice: David Hay advises against relying on traditional 60/40 portfolios and suggests focusing on assets that benefit from a weaker dollar and steeper yield curves, such as emerging market bonds and commodities.
Transcript
The senior gold miner ETF is up like 95% this year. GDXJ, these are just enormous moves and there's no press. Nobody's paying attention to them. When nobody's expecting a recession, then that's when you can have a very nasty surprise and an exaggerated market reaction. If that happens, it's a very bizarre situation, David. And right now, all this this fake money that's been created has created a lot of economic activity. It's created a lot of froth in the financial markets. But I guess maybe I'm just too old. I think there's going to be a price tan. >> The economy is showing signs of a hidden recession. There are some very important indicators we need to be aware of as not just investors but people who observe the economy. Consumer sentiment is strong but spending is down. That's a leading indicator. What should we look at for the fast uh approaching slowdown that our next guest is warning us about? What should we do for the last quarter of 2025? David Haye joins us once more. He is a co-CIO or former co-CIO rather of Evergreen Gavacol. He is the author of the Haymaker publications and he's been an industry veteran for more than four decades um in the investment industry. So David's a regular on my show. It's always a pleasure to have him even though I'm on vacation this week which is why I'm not in a suit. Uh but um always a pleasure to speak with David in any capacity. Welcome back to the show David. Good to see you again. Great to be back, David. And I am happy that you getting some time off even though you're working on your vacation. I guess that just is, you know, you're just you get the work ethic that wish more people have. It's pretty pretty amazing. So, congratulations on how well your channel is doing, by the way. >> I appreciate it. Thank you. I I just enjoy speaking with you. So, right after this, we're going to go surfing, but uh this is this talking to you feels like feels like a nice vacation in itself. So, uh thank you for being back. Let's start with some of the leading indicators you were telling me offline about a potential recession. Now, David, you and I and many of my other guests have been talking about a recession for a long time. So, let's just take a step back before we even get to the indicators and the details. A lot of the viewers are wondering why do we even care about this topic anymore? The topic of a recession has kind of slowed down a bit in terms of interest. It's died down in the media. As you know, stock markets, risk assets, gold have all hit new all-time highs this year. No one's really concerned about an imminent slowdown, but yet here we are. That's our first topic. Why are we talking about this today? >> Well, I think you kind of hit the nail on the head there, which is if everybody is expecting a recession, then uh the impact when one arrives is muted because typically you have depressed asset prices, if if there's really a discounting of a looming recession, we don't have that. Now, 2022 is a different story. Uh you know, that's when the expectations went off the charts. It was like a, you know, a sure thing. I was with the consensus. I thought the odds favored a recession back then, though. I did say that it made me uncomfortable to be with the consensus. That was the my number one reason for thinking maybe one wouldn't happen. But I did say I thought we'd have a profits recession, industrial recession. We did have both of those, but we haven't had an actual recession. And because a lot of these indicators, these warnings have been flashing orange, yellow, even red for quite a while, there's a tendency to just say, well, it's not going to happen. Kind of the little boy that cried wolf. And so the, you know, kind of forget the rest of the story that the wolf did eventually show up. But I actually think that if you look at some of this data that's coming out, but there's more evidence of a of a true slowdown, which may or may not tip into recession. It's I mean, to be clear, I'm I'm confused just like the Fed is confused. They've got very different forecasts for uh the second quarter from the Atlanta Fed versus St. Louis Fed. Uh there's definitely some positive factors that we'll look at that may prevent a recession, but I do think that the weaker consumers, the lower income, lower net worth consumers are really struggling. I think that's hard to argue with. So, we look at the jobs market and that that was a big deal uh last month. It was was a supposed surprise when the jobs number jobs numbers for July came in a lot weaker than anticipated. I had done another podcast with one of your uh esteemed rivals back at the end of July and he and I both were saying those June numbers which were superficially strong just didn't make sense. There were so so many flaws in that report and that's something that I've been on for you know almost 2 years that you know look at the revisions. don't look at the, you know, spontaneously reported jobs numbers because they're almost always significantly revised lower and that really hit home uh with that July release. But it's not just that. I mean, this is a pattern that's been going on. And when we look at this, which is a, you know, number of payroll industries that are seeing declines month over month, you know, in terms of their uh, you know, their workers uh, you know, compensation, it's it looks like a recession. It's really at a level that's only been hit during past recessions. If we look at the two-month payroll net revisions, same story there. In fact, it's actually worse now than where it's been in some of the past recessions. So, it it's pretty clear and we've got some other evidence here that jobs market is is suffering. But the other point is if you just look at how infrequent recessions have become, it's it is different. And and you got to say I have to concede that we're not getting recessions as frequently as we used to get them. We've had 34 going back over the last 170 years. We really haven't had a true recession since 2008 2009. There was that flash crash you know back in during co but that was you know obviously uh artificially induced and you know quite shortlived. So, you know, just from the standpoint of are we due for them? You know, maybe we've taken away the cyclicality of the economy and certainly we'll talk about a factor a huge factor behind that which is the federal deficits. Uh we got that coming up. I don't want to spend too much time on it. But let's see the other warnings. Las Vegas is looks to be struggling. Uh some of some experts out there like David Rosenberg, Doug Cass, the Gabelli team thinks that Las Vegas is actually a very good leading indicator for the economy. And as we hear from this visual, uh it was bad in the first four months of the year. It's gotten worse since. So it's uh that's not, you know, maybe that's an anomaly, but here's what's not an anomaly. And that's the Chicago Natural Activity Index. It's got 85 different components. So you can't blow that off and say, well, that's just a it's a narrow sample set. It's a very broad sample set, and it's in a three-month moving this three-month moving average is in a downtrend for the first time since November of 22. Remember, of course, that like I said at the outset, 2022 was a big headbi. If you remember this, David, in the first two quarters of 2022, it looked like a recession. They they were there were actually two negative sequential quarters. However, upon revision, it went the other way was actually revised up. So, there was not an official recession in 2022, but there was that profits recession, the industrial recession, which just keeps going on and on and on. So it's it's more than just some pockets of weakness. And if we look at an area which I think's got huge social implications, the unemployment rate for new entrance. So college grads trying to get a job is just spiking. And of course AI is not helping this. I'm sure you've seen some of the reports where companies are are reluctant to hire uh college grads because of AI. They're trying to do as much as they can without actually putting somebody on the payroll. So, I think what's fair to say about the economy is that you're not seeing a lot of firings yet, but you the hirings have really dried up. So, it's I say the market the jobs market is is in a bit of a kind of a fine balanced equilibrium, but it wouldn't take a whole lot of layoffs to start p forcing things the wrong way in the jobs market. This trend certainly is the economy's friend, but to be fair, and you were kind of alluding to this, July retail sales were strong. And this is despite the fact that actually if you listen to uh uh what's Anna Sue Sue from Bloomberg, uh >> Anna Wong from Bloomberg, it's the University of Michigan. I'm thinking of the wrong person. University of Michigan consumer sentiment survey, which is the most influential, and I think that is Joanna Sue, but do you know her exact name? Am I mangling it? So the this is the slide by the way that you drew up before we continue. The US unemployment new entrance um presented by Bloomberg. Huge spike in new entrance not being able to find a job and right now we don't have a pandemic locking down the entire country's economy. Um what does this huge spike signify in terms of uh the sentiment in the labor force and what consumers are able to spend going forward? So first of all maybe we can explain why this is happening. Well, I I think it's what I said earlier that businesses are, you know, there's a tremendous amount of uncertainty. All the uncertainty really readings are off the charts. Uh there's been so many changes to the the rules of the game that, you know, businesses when they they face that type of of uh you know, just it's it's a black hole. It's just unknown. And so they have a tendency to kind of freeze. They don't fire people. They don't hire people. And I think that's kind of what we're at. And you know, maybe you can say, well, I think all of a sudden there's going to be a surge in hiring as confidence gets better. And and maybe that's why this is just a slowdown as opposed to an actual recession. But as I say, a lot of these things you look at, the leading economic indicators are called the leading economic indicators for a reason. And they've been down for almost I think it's actually now over two years. They've been a long long downtrend. One of the worst downtrends ever. But as I said that uh you know you look at some of the consumer spending numbers look to be holding up pretty well. Now could that be uh you know like car sales so there's the EV tax credit that's going away. So EV sales are have had a surge even though their trend is is not really very favorable. That's a whole other story but different podcast will talk about that. Uh so you also have the uh just regular car sales for getting EVs that are also strong as you know you're trying to get ahead of tariffs. So it's it's really hard and we've never seen a situation like this where there's this and these are major factors that are unlike anything we've ever encountered. Uh so it's it's really hard I think to get a handle on what's happening with the economy. But I think getting back to the kind of the key point is when nobody's expecting a recession, then that's when you can have a very nasty surprise and an exaggerated market reaction. If that happens, let's talk about housing because I think housing, you know, housing is a big part of the economy. I mean it's you can say well housing home builders themselves are rather narrow slice of it but it has so many subindustries that relate to it and it I think we've got a a housing bare market of really significant proportions that's unfolding and if you look at permits both are down 20 starts and permits are down uh over 20% year-over-year and permits lead you can see they are looking extremely recessionary. Uh, we know affordability is terrible, but here's what's really fascinating. I'm not even sure you know this, but for the first time ever, new home prices are now significantly cheaper than existing home prices. Now, there was a brief time in 2005 where they kind of converge. You're going to see this on this visual, but now it's it's like $40,000 difference. So, a new home is $40,000 cheaper than an existing home. Again, your esteemed competitor had Melody Right on. She's a she's a leading housing expert and she said that it's actually more like 80,000 because the official prices that the builders are receiving or reporting don't include uh some of these special incentives that they're using to uh to get their homes uh sold like buying down mortgages or free appliances and other incentives like that. So, if she's right, it's really, let's say it's say 435, 435,000 for a median existing home versus 355 for a median new home. It's remarkable. And I think that's what's telling us where the market needs to be to actually move homes. So, I think you're going to see existing home prices come under a lot more pressure than is popularly believed. And could that have, you know, significant implications, you know, say for the banking industry? Don't know. I I don't think we're going to get the same kind of banking crisis that we had back in 0809. But it there are risks there that I think are underappreciated. Then if we look at this is pretty amazing when you look at the you know the cohort that's buying homes. How much of these home purchases are happening with the boomers and or even the silent generation. So you're basically looking at almost half of the home buying that goes on by the old folks. And you know one of the actually listen to Ivy Zelman. She's another expert on the housing industry. And she's very concerned about this kind of aging out of of the home market by people my age. You know, as we get into our 70s and 80s and we got these big homes that we really don't need anymore. And you know, who's going to buy those? Who can afford to buy those? And I I just think that this this housing adjustment that's coming is going to be a bit challenging. We are seeing new home sales uh breaking out to multi-year highs. So, if this was a stock chart, it would look pretty bullish. Uh same thing with existing. This one isn't as clear. It's more at a a critical support level or resistance level I should say, but it does look like it is going to be penetr have actually very little doubt that that's going to get penetrated to the upside quite decisively. If we look at combined uh new and existing clearly a series of higher highs and also breaking out to a multi-year new high. So, it's I I don't I don't see the In fact, what's amazing, David, is the homebuilders XHP, which is the home building ETF, is very close to its all-time high with these statistics. And you know, that's not even really getting into the affordability issue that is just atrocious. Uh I don't know if I have I I don't have I'll just throw it out there very quickly that Ivy Zelman made the point that the median home price uh for the median you know wage is at where it was in 1981 and that's when the mortgage rate was 16%. I mean the bottom line is homes are about as unaffordable as they've ever been with very few exceptions. Now, what this does show us is that a lot of this kind of like the stock market is because of the depreciation of the dollar. And if you'd actually had, let's say you were wise enough as a young person and maybe you had wealthy parents and grandparents were putting money aside for you in gold, gold coins 20, 25 years ago, you'd actually the home would be cheaper in terms of gold than it was uh 10 years ago. >> Yes. >> And of course, if it was in Bitcoin, if you had Bitcoin, it was drastically cheaper. So, some of this is the money illusion caused by the fiat currency, the US dollar being in such a, you know, a bare market, not necessarily relative to other currencies, though we'll talk about that coming up, but relative to what it can buy. What's really been keeping things going has been this tremendous amount of liquidity that's been floating through the coursing through the financial system globally, not just in the United States. Global money supply was recently growing at 12%. And in the US, it's about four 4%. So maybe that's why, as we'll see, these international markets are really starting to beat the pants off the US. For Darius Dale, >> 42 >> 42 macro, he sees global liquidity has slowed pretty dramatically from 11 to 15% to 4%. And I actually was surprised when I listened to his recent video how bearish he's become on the economy. He's pretty famous for being bullish on the economy, bullish on stocks with some tactical shifts. He got pretty defensive earlier in the year. Anyway, he's he's uh he thinks that we're in a in in a in a new paradigm where you're going to have such tremendous liquidity created by the government and we can talk about this in in a bit more detail coming up. I think stable coins are particularly fascinating in that regard, but that uh the risk assets can continue to be well bid, but he is pretty defensive on the economy currently and that did surprise me. But, you know, we're always hearing that there's this mountain of cash out there. And speaking of liquidity, but it really doesn't look like it. This is BFA's, you know, trillions of dollars that they have in their private client or collective portfolios. So, that's actually quite low. Fund manager uh also have low cash levels. So, the Treasury Secretary Scott Bessent wants to see 2.7 trillion go into stable coins. Why does he want to do that? And the reason he wants to do that is because that is extremely lowcost financing for the US government. Uh particularly if they can drive short-term interest rates down. Right now uh you know it's costing 4% for the government to raise money through T bills. But if they get what they want, which I think is a big part of uh this liquidity matrix that we're looking at, uh we're going to see uh much lower interest rates even though inflation is still running above the Fed's target. But they clearly want to do something with the stable coin market, uh which could actually pull a lot of money. This is actually courtesy of Luke Groman. I think this is a very interesting point to pull money from the Euro dollar market. So there's 11 trillion over in Europe in in dollars. Uh but they're outside of the US banking system. So they're uninsured. Uh that they're viewed as being, you know, almost like a deacto obligation of the government. But it it sounds pretty clear that they want to get that money back to the US and in something which either pays no interest or very low interest rate. So there's still this positive liquidity cycle that we're in which is supportive to the market. It's supportive to asset prices. Uh, I was listening to Michael How, who have you ever had him on your show, David? Michael How? >> Michael How? I don't um I don't recall. >> He's considered to be the foremost expert on global liquidity and he's very very arid, very articulate and he does these longwave studies of liquidity cycles and at this point it's still positive although it does look to be getting late in this particular cycle. But he he said at this point uh you really want to be looking at commodities. He's also thinking that China, which has already done a major stimulus 1.5 trillion of stimulus, is going to do another 1.5 trillion. So there's a very tight correlation between commodity prices, which are already starting to really to move. You know, it's kind of depends on which one, but certainly the precious metals have been. We'll talk more about this coming up, but clearly hard assets should be winners with all this >> free flowing liquidity that we've got. And of course, where has it been more free flowing than from the federal government? It's just unbelievable the amount of stimulus that continues to come in. We had the Doge thing. There were fears that there's going to be this massive spending cut, which of course it turned out to be just a drop in the bucket. And through the first 10 months of this fiscal year, the federal government's fiscal year ends in September. The first 10 months, it's actually up. The deficit's up 7.4%. Interest alone estimated to hit 1.2 trillion more than defense spending. So this has been I think the number one reason we haven't had a recession because we've been running these $2 trillion deficits for several years even after co. So all that stimulus makes it very very difficult for the economy to slow down. And there was a belief that early in Trump's term he would do what Malay did in Argentina and really bite the bullet and and they were making a lot of noises about that. But then clearly when the markets had their their big riot back in the late winter, early spring, the Trump administration basically reversed gears in a big way. So they seem to be going fullon for growth right now. Run the economy hot. get interest rates down even with the inflation well above the Fed's target. So, it's there's just no sign of of fiscal drag. And this gets to the some of the quotes from Bessent recently about what he wants to do with stable coins. And you know, I think if you're a Bitcoin bull, you'd probably go, "Yeah, this is great. I we want to see these stable coins, you know, get 2.7 trillion in them." I think there's four or 500 billion in right now. It could be a little bit. It might be a little less than that. Tether's the number one. I don't know what circles the other, but they could uh well, for one thing, I think the government's unlikely to let those guys continue to make the kind of money that they're making right now. It's just a gold mine uh for these guys when they're paying nothing. As you're probably aware, David, if you have an account with Tether in stable code, you don't get any interest. So, they take your money to turn around and buy treasuries, they're making 4% with no risk, and you know, their overhead is almost non-existent. So, I' I've heard rumors that they're one of the most profitable if if they ever disclose their their financials. They've never had an audit. Uh it's a quite the story. But my point is I think the US government's going to try to disintermediate them, try to get them out of there and actually control the stable coin market and capture that, you know, that free money. So, if you know, where's that money going to come from? I do think it makes sense that it the eur Euro dollar market is the likely target and uh a lot of folks I've listened to over the years think the euro euro dollar market is very important. So if there's a major exodus of capital out of that could it be destabilizing? It could. I don't know what the implications are. This is really something I've just started really thinking about thanks to Luke Roman here recently but I think it could be a big deal and I don't think most people are talking about it or thinking about it. We look at commodities as I think you know we flagged a breakout last year when gold broke above 200 and then this year silver we were pounding the table on silver and it has uh it did break a series of breaks. >> Okay let's just back up for a minute David. So you were talking about how you think there's more room to go for silver. Uh let's talk about the precious metals right now. Gold and silver today as we're speaking on the 3rd of September. Gold has reached yet a new all-time high above $3,600. 3635 is the latest price. Unprecedented level. Uh this comes as both stocks and Bitcoin have also risen. I wonder how much of this is just anticipation for what the Fed's about to do in a couple weeks, which is potentially lower rates. But I'll let you comment on why gold in particular has been just outperforming. It's it's nearing 4,000. I mean, that's the next level people are talking about now. >> Right. And as you remember, we actually brought up the breakout, highlighted the breakout that gold made early last year when it went above 2,000. We thought that was very decisive and was going to lead to much higher gold prices. Frankly, I didn't think they go up as much as they did. But what's been a huge factor driving gold prices has been central bank accumulation. Uh so what's happening is basically the foreign these big foreign banks, government sovereign banks have been buying gold instead of treasuries. So gold has become the reserve, not the reserve currency, but the reserve asset of choice for these big central banks. Silver hasn't had that hasn't had that driver. Uh but now it is it it did have a a critical breakout which we also highlighted and we said we thought it was going to keep running. In fact, I used the term coiled spring earlier this year and it's now we touched 40 briefly backed off and now it's breaking up above 40 and historically silver does lag gold when gold run has these big bull markets but then it tends to uh actually kick the afterburners in and outperform. So we think there is further to go for silver and and probably for gold. So, one of the things with gold is that that there is this belief that the federal government wants to revalue gold substantially higher. Fact, Duneberg is out, you know, the famous Doomberg with a piece saying it could be as high as 20,000. He's not saying it will be, but it could be as high as 20,000. So, that the the gold that the United States owns, which may be increasing, it could be that there's some big stealth buys going on by the, you know, the some agencies of the federal government. Uh there's huge amounts of gold and silver flowing from London into America. But regardless, there could be this move to mark up gold dramatically and then use that windfall gain uh that the Treasury would have with their existing gold reserves and maybe these, as I said, would have been added to to use that profit to buy back government bonds or maybe collateral life. You got Judy Shelton talking about having something that I've discussed for quite a while, which is a two-tier bond market where you have some parts of the Treasury market that are actually backed by gold and would theoretically have a very very low interest rate. And that's a big part of what the government's trying to do is to get these interest rates down drastically one way or the other and and that would be a pretty effective way to do it. But clearly there's there's been a major shift uh in the precious metals market. But we'll talk about some of the other commodities here as well because there's could be better opportunities in some of those that are less well known. But here is one that is getting really no press at all. Uh we talked about this before we started with Foring and even you were not aware that they're up this much. GDX, the senior gold miner ETF, is up like 95% this year. GDXJ, the junior gold mining ETF is up about. >> These are just enormous moves and there's no press. Nobody's paying attention to them until recently. There's been outflows out of these funds. So, lots and lots of catching up to do by these guys. Now, they they've had a heck of a run. We're actually going to advise doing a little profit taking and I think that's a good idea. I'm doing that personally, but just in case that there is this major revision, a major, you know, kind of a step change to the price of gold, even if it's 5,000, 6,000, 7,000, uh, the gold miners would obviously keep running because they, you know, their their costs really don't go up as the price goes up. So, there's tremendous operating leverage. But, it's just amazing that they have attracted so little attention. But if you look, this is another warning sign I would say that you might want to do a little bit of profit harvesting on the gold miners. When you look at the gold miners bullish percentage index, it's just Fred Hickey, who's one of the best gold mining investors on the planet, ran this uh just this week, pointing out that whenever you've had it at this level before, you've had a a pretty sharp correction. So, I would say for those few people that listen to us and did buy into this area, uh, you know, take 20 30% off the table. Uh, silver, you can see the big breakout here. And this is what we were talking about earlier in the year. And >> take 20%, sorry, take 20% off the table for gold miners. Is that what you're saying? >> Yep. 20 to 30% off of for your gold miners at this point, which means you still have a lot of exposure. But I I just don't think you want to be greedy. I mean it's you look at these charts and they are very very extended >> and then that you know the bullish percentage index we just looked at that's that's a that's a pretty good warning sign too. So silver I think is if you wanted to to play and stay involved with I think some of the silver miners uh first majestic is one of my favorites uh and it it looks good technically so there you know maybe it's a time to redeploy cash in a little bit of gold and put it in some of the other commodities that have lagged. We'll look at some other ones as well. And uh this is just the index itself, the CRV. And you can see that it really has been in a quite a downtrend since 2022. So that's this far left little mountain here. That was the invasion of Ukraine when a lot of commodities went ballistic. And then the air has been coming out and now it does seem like there is an attempted breakout above the resistance that goes back to uh 2022 toward later in 2022. So I I do think that commodities in general are a very good place to be when you've got this kind of liquidity around the world and where you've got a the Trump administration so intent on weakening the dollar and they want to see the dollar down a lot which is very pro commodities. Uh they're trying to drive interest rates down a lot which is pro commodities and they're also interfering with dependence which is you know smacks of inflationary maneuvering. So, excuse me. Other commodities that are worth a look. Copper has come down, come down hard. You've got quite low supply. >> Copper, you may know this, David. Copper spiked to $6, broke out above five, which had been the prior resistance, pulled all the way back down to $440, something like that. Looks like it's stabilizing there. But the uh pretty much with all these commodities, we're looking at constricted supplies and rapidly increasing demand. That's even more true with the uranium. We've played the uranium ETF out very well, as I think you might know. When it's been up, we've suggested taking some profits and then when it got hit, which it did even this summer, we advised coming back in and now it's running again. And of course, oil and natural gas, they're very out of favor. And yet, you know, this whole AI boom, as I heard Stephanie Ponboy say recently, if you love AI, you got to love energy because the AI boom is extremely energy intensive. Yet you've got oil trading basically at its cost of production in the United States around 65 and natural gas is trading in the kind of 260 270 range currently and you know in Europe it trades more like for you know $9 to $10 per million British thermal units. Uh so anyway it's energy is I we'll see some more data coming up here. I think it's one of the great opportunities. We touted platinum earlier in the year at a thousand. It's up 36%. It may be, you know, maybe you don't want to chase that, but again, very attractive uh supply demand setup, but Valer is be leading platinum miners and that's one you can buy the symbol as agpy. And I think that one's got tremendous upside. So, what you typically see with these things is the metals move, the miners kind of lag, and then they take off. And I think that's a situation that we're looking at with platinum. David, let's take a look at the uh the stock markets and uh bond markets before we close off. This is a this is an article from CNBC. Let me just share my screen here. Uh we were talking about this earlier. The jobs numbers are looking weaker and the jobs openings in particular being uh very very weak. Uh it's now job openings now tick down to levels rarely seen since the pandemic. Now, uh, according to economists quoted in this article, this is a turning point for the labor market. This is yet another data point underscoring how this labor market is frozen and it's difficult for anyone to get a job right now. The point I'm trying to make, David, is if this is a turning point for the labor market, when can we expect turning point or what can trigger a turning point for the markets? No one's really talking about turning points for stock markets and risk assets right now. As I pointed to earlier, uh stock markets as as well as gold have been reaching new all-time highs ahead of the Fed meeting in September. And so I I wonder what you as an investor are doing right now with all this information is I kind of the broad question I'm asking besides besides commodities that we just talked about, if somebody were to think about either rotating capital um or get into the markets now, what should they do? Well, I've obviously given you some some ideas here that I think make sense, but you know, I think what doesn't make sense is the traditional reaction. So, normally, and let's just assume that the consensus is wrong and we do get a recession. >> And I'm not saying that's going to happen, but as we talked about earlier, the problem is that it's so unexpected currently. And yet, there's an awful lot of data out there that is supportive of a downturn coming relatively soon. And so if it does happen, you know, kind of the is some people call it the Pavlovian response is to buy long-term treasuries, but that and they could work for a short period of time and probably would, but you look at what's going on with bond markets around the world and these yields are actually going up on the very long end even with weak economic data. But you just saw I think was from Luke Roman once again that if you look at countries where industrial production is falling, which is quite a few of them, long-term yields are rising. That's a classic scenario that used to happen in emerging markets only. And it's and it's telling you that there are, you know, there's there's fear in the bond market that the central banks of of these countries are not they're not the inflation stewards or inflation hawks that they once were. So what you're getting in a situation is basically fiscal dominance where the bond markets are being viewed as a a financing vehicle for the governments. And even if that creates some inflation, if that creates some disruption, so be it. And you're going to have the Fed intervening, the Treasury intervening, using yield curve control as the US did after World War II to suppress those interest rates. It's a very bizarre situation, David. And right now, all this this fake money that's been created has created a lot of economic activity. It's created a lot of froth in the financial markets. But I guess maybe I'm just too old. I think there's going to be a price deb. I keep looking how do you hedge yourself if you're an investor and I don't think you hedge yourself with Magnificent 7 and I don't think you hedge yourself with long-term treasuries. I think some of these things that are off the radar of most most investors but clearly benefit from the way things are trending for how you want to position your portfolio and frankly a lot of these are working. I mean gold miners up 95%. That's I call that a win. >> So let's say the Fed doesn't cut as much as anticipated this year. Would that move markets? Would that move the needle? Or is fiscal policy more important right now? >> It might help. I think what would not be as wellreceived would be a series of aggressive rate cuts as opposed to kind of a oneand done or two and done because I think that would indicate I mean that's part of the history of the Fed's rate easing cycles is if they ease kind of slowly, you know, methodically that's kind of bullish. If they if they ease frantically like they did in 20 2002 and 2008 2009 actually starting 2007 that's bearish because they're aware that there's a problem going on and also with this inflation being a lot stickier than what we were led to believe a major easing cycle when you got inflation running at three and you know wage inflation is still running north of four that would be a recipe for you know really a 1970s kind of persistent inflation outbreak and what did really well in the 70s commodities what did very poorly in the 70s stocks and bonds. I don't know if we have time to look at anything any visuals on the stock market, but I think you got to be if you're just looking at this objectively, you got to say there's a lot of lot of excesses, a lot of speculative overenthusiasm. What Greenspan called it irrational exuberance back in 1996 and it's really irrational right now. >> Well, yeah, by all means. Um, and I like to talk about the dollar as well. Uh, the dollar has been falling all year, 2025. It's just been a weak year for the dollar. I I wonder if this is a pivotal point for not just the labor market, but also the US dollar. Are are we seeing the beginning of a an an uptrend anytime soon? >> So, here's the dollar index. And to me, this looks like a pretty important break. So, this is we we think threeyear uh either support or resistance is important. This is 5 years. The longer it is, the more important it is. Uh so this is I think a sign that the dollar is in a structural downtrend and it's also overvalued and beyond that you want an administr you have an administration that wants to get the dollar down significantly. So it that's why I think you should be looking at things that benefit from a weaker dollar. Why fight it? You know we've seen how these trends once they get in place really they last for years and they go further than you think. So there's a lot of investment sectors and asset classes that do well in a weak dollar environment, but they're not the ones that have done well over the last 10 years. We talked about commodities plenty, so I won't go more into that, but if you look at some of these emerging markets, I mean, do you know the number one performance market this year in US dollars is Brazil? Not many people know that it's up 33% or so. And that's market is still only trading for, you know, like eight nine times earnings. If you look at some of these emerging market bonds and bond funds, uh, one of our favorites is ED, the Morgan Stanley uh, domestic emerging market bond fund, which yields 9% and it's I've got a chart here at the end. It's just a thing of I'll skip to that so you can see what I'm talking about. And by the way, if you look at one of their holdings is Brazilian bonds. Brazilian bonds yield 14%. Their inflation rate is about five. So, it's about a 9% real return. And that's that's like what we had with uh here in America under Paul Vulker. So, here's the chart of ED, which you can see here's it's been in this range for the last several years, but it's clearly breaking out above prior resistance and it yields 9% and that's a name that your your viewers can easily buy. So there's definitely opportunities out there, but I think you have to think differently and and really just acknowledge the environment that we're in, which is going to be higher inflation and a weaker dollar. And that isn't to say that if you you can't have a recession. If you have a recession, that's going to bring interest rates down. It's going to bring inflation, but it's also going to bring a policy response that's likely to be even more inflationary. So any bond rallies that you get, I think, are to be traded, to be rented, not owned, as they like to say on Wall Street. Is the yield curve going to continue to steepen, David? >> Absolutely. That's a great glad you glad you brought that up because I think it's just that is going to happen is a steeper yield curve and there are areas where you can benefit from a steeper yield curve. One of the ones that we've been writing up is the the mortgage rates, the M rates. So, uh there is an ETF of those, but there's my favorite individual play there is AGNC which yields about four cycles. they actually tend to raise their dividend so it could be paying more than 14% over the next two to three years. So yes, great point to bring up. Thank you, David. Okay, excellent. Uh so finally, uh let's say asset allocation, uh if we're to um position ourselves into 2026, what would you favor? What would you disfavor? right now. >> I just I'm not a a fan of the long-term bond market as I mentioned to you and and yet I realize that there's a lot of negativity on it right now. There could be a rally. So, I I wouldn't say, you know, don't don't preclude that possibility. That could definitely happen. But if it happens, don't stay there too long. In other words, if you get a a decline in the 10ear from 430 to 350, take your money and run. Uh but in general, I think if you're looking for yield, you want to look at ideas like this or at some of the uh midstream energy names. We love Energ enter Enterprise Products, which yields 7 12%. They raise their dividend or distribution almost every quarter, certainly every year, only trading for about 11 times earnings. U that's likely to be I think that's going to beat the pants off the stock market over the balance of the decade. So, I would be allocated to things that benefit from the weaker dollar, benefit from the steeper yield curve. I'd be avoiding those that are counting on uh a sustainable decline in in long-term interest rates. I think there's really a problem brewing with these bond markets around the world. It's not getting very much press. So, uh, I I think you just don't rely on the traditional 60/40 portfolio, 60%, you know, large cap US stocks and 40% long-term US treasuries or a ladder portfolio. The short end should be fine. But, you know, the unfortunate part of it is that this tea bill and chill thing that's worked pretty well for the last few years. I mean, if if the Trump administration gets what they want, and I think they will, that 4% is more likely to go to one to two, which gets to your whole point about how do you play a steeping yield curve. >> Okay, I understand. Uh, David, excellent. Um, any other closing thoughts on trades that we've missed so far? Uh, before we go, we've talked about commodities at length, um, indicators for equity, uh, draw downs or capital rotation. We've talked about bonds. We've talked about real estate. We've mentioned uh I think investors really just want to know what to do right now given so many conflicting economic data, some of which we've addressed today. Uh this looks like a pivotal time for not just the economy, but but also for markets. The Fed looks like they're about to cut rates and like we've talked about earlier, the labor market is showing crack after crack month after month. Uh any other trade ideas that may point to a pivot? Well, I would just say again with that labor market to be fair, realize that yes, the hiring is really drying up, but there hasn't been an explosion of firing. So, I think that's something to really watch is what's what happens with the layoffs. And so, for right now, I'd say it's it's not a terrifying jobs market. It's just something that looks a little bit worrisome. But, you know, I think having look look at Buffett. He's got $340 billion in cash. So having C even if you know that your rates likely to go down on your cash, you're not going to lose money on it and there's this this kind of environment. Plus we're in the time of the year when the market often hits an air pocket. So it' be nice to have cash on the sidelines and I'll give you some ideas where we might want to be doing some profit harvesting. I think particularly some of these momentum stocks in the US market that are just off the charts in terms of valuation. uh you know cashing in some of those gains would be advisable and just you know putting that into cash and and just you know I'd say be humble and you know I think right now unfortunately Buffett's always saying you want to be greedy when others are fearful and fearful when others are greedy. Well there's a lot of greed in the market right now. So I think to be on the fearful side of things and and and realize as I said earlier this is a set of circumstances we've never seen before and whether it's me or anybody that you you know even Warren Buffett he's never seen anything like this so uh you know invest accordingly which I think means investly and carefully. >> Okay excellent. Let's close it here. David tell us where we can find you read your work and get more ideas from you. Well, we're on Substack, so you can find Haymaker at Substack. I think maybe an underscore in there somewhere, but uh we should be really easy to find there. And we do put out a daily that is uh you know, even if you're not a paying subscriber, of course, we really would like to see more paying subscribers like anybody, but we do put out a fair amount of content that is free. uh there's a payw wall that you know really protects our best ideas and particularly this trade specific ideas which we we generate a lot of those and we have kind of a focus on yield unlike most of our competitors so and I think frankly a lot of your listeners if they're anywhere in my age group you know yield should be your number one objective and along with preservation of capital so I I think we could be a very good resource for people that that do need cash flow to live on. Yeah, absolutely. All right, fantastic. Thank you. And make sure to follow David Haye on his Substack down below. We'll talk next time, David. I appreciate you coming on this week. Take care. >> Thank you, David. Enjoy your vacation. Get some time off now. >> I will appreciate it. And thank you for watching. Don't forget to like and subscribe.
‘Nasty Surprise’ To Hit Economy, Markets, No One Is Ready | David Hay
Summary
Transcript
The senior gold miner ETF is up like 95% this year. GDXJ, these are just enormous moves and there's no press. Nobody's paying attention to them. When nobody's expecting a recession, then that's when you can have a very nasty surprise and an exaggerated market reaction. If that happens, it's a very bizarre situation, David. And right now, all this this fake money that's been created has created a lot of economic activity. It's created a lot of froth in the financial markets. But I guess maybe I'm just too old. I think there's going to be a price tan. >> The economy is showing signs of a hidden recession. There are some very important indicators we need to be aware of as not just investors but people who observe the economy. Consumer sentiment is strong but spending is down. That's a leading indicator. What should we look at for the fast uh approaching slowdown that our next guest is warning us about? What should we do for the last quarter of 2025? David Haye joins us once more. He is a co-CIO or former co-CIO rather of Evergreen Gavacol. He is the author of the Haymaker publications and he's been an industry veteran for more than four decades um in the investment industry. So David's a regular on my show. It's always a pleasure to have him even though I'm on vacation this week which is why I'm not in a suit. Uh but um always a pleasure to speak with David in any capacity. Welcome back to the show David. Good to see you again. Great to be back, David. And I am happy that you getting some time off even though you're working on your vacation. I guess that just is, you know, you're just you get the work ethic that wish more people have. It's pretty pretty amazing. So, congratulations on how well your channel is doing, by the way. >> I appreciate it. Thank you. I I just enjoy speaking with you. So, right after this, we're going to go surfing, but uh this is this talking to you feels like feels like a nice vacation in itself. So, uh thank you for being back. Let's start with some of the leading indicators you were telling me offline about a potential recession. Now, David, you and I and many of my other guests have been talking about a recession for a long time. So, let's just take a step back before we even get to the indicators and the details. A lot of the viewers are wondering why do we even care about this topic anymore? The topic of a recession has kind of slowed down a bit in terms of interest. It's died down in the media. As you know, stock markets, risk assets, gold have all hit new all-time highs this year. No one's really concerned about an imminent slowdown, but yet here we are. That's our first topic. Why are we talking about this today? >> Well, I think you kind of hit the nail on the head there, which is if everybody is expecting a recession, then uh the impact when one arrives is muted because typically you have depressed asset prices, if if there's really a discounting of a looming recession, we don't have that. Now, 2022 is a different story. Uh you know, that's when the expectations went off the charts. It was like a, you know, a sure thing. I was with the consensus. I thought the odds favored a recession back then, though. I did say that it made me uncomfortable to be with the consensus. That was the my number one reason for thinking maybe one wouldn't happen. But I did say I thought we'd have a profits recession, industrial recession. We did have both of those, but we haven't had an actual recession. And because a lot of these indicators, these warnings have been flashing orange, yellow, even red for quite a while, there's a tendency to just say, well, it's not going to happen. Kind of the little boy that cried wolf. And so the, you know, kind of forget the rest of the story that the wolf did eventually show up. But I actually think that if you look at some of this data that's coming out, but there's more evidence of a of a true slowdown, which may or may not tip into recession. It's I mean, to be clear, I'm I'm confused just like the Fed is confused. They've got very different forecasts for uh the second quarter from the Atlanta Fed versus St. Louis Fed. Uh there's definitely some positive factors that we'll look at that may prevent a recession, but I do think that the weaker consumers, the lower income, lower net worth consumers are really struggling. I think that's hard to argue with. So, we look at the jobs market and that that was a big deal uh last month. It was was a supposed surprise when the jobs number jobs numbers for July came in a lot weaker than anticipated. I had done another podcast with one of your uh esteemed rivals back at the end of July and he and I both were saying those June numbers which were superficially strong just didn't make sense. There were so so many flaws in that report and that's something that I've been on for you know almost 2 years that you know look at the revisions. don't look at the, you know, spontaneously reported jobs numbers because they're almost always significantly revised lower and that really hit home uh with that July release. But it's not just that. I mean, this is a pattern that's been going on. And when we look at this, which is a, you know, number of payroll industries that are seeing declines month over month, you know, in terms of their uh, you know, their workers uh, you know, compensation, it's it looks like a recession. It's really at a level that's only been hit during past recessions. If we look at the two-month payroll net revisions, same story there. In fact, it's actually worse now than where it's been in some of the past recessions. So, it it's pretty clear and we've got some other evidence here that jobs market is is suffering. But the other point is if you just look at how infrequent recessions have become, it's it is different. And and you got to say I have to concede that we're not getting recessions as frequently as we used to get them. We've had 34 going back over the last 170 years. We really haven't had a true recession since 2008 2009. There was that flash crash you know back in during co but that was you know obviously uh artificially induced and you know quite shortlived. So, you know, just from the standpoint of are we due for them? You know, maybe we've taken away the cyclicality of the economy and certainly we'll talk about a factor a huge factor behind that which is the federal deficits. Uh we got that coming up. I don't want to spend too much time on it. But let's see the other warnings. Las Vegas is looks to be struggling. Uh some of some experts out there like David Rosenberg, Doug Cass, the Gabelli team thinks that Las Vegas is actually a very good leading indicator for the economy. And as we hear from this visual, uh it was bad in the first four months of the year. It's gotten worse since. So it's uh that's not, you know, maybe that's an anomaly, but here's what's not an anomaly. And that's the Chicago Natural Activity Index. It's got 85 different components. So you can't blow that off and say, well, that's just a it's a narrow sample set. It's a very broad sample set, and it's in a three-month moving this three-month moving average is in a downtrend for the first time since November of 22. Remember, of course, that like I said at the outset, 2022 was a big headbi. If you remember this, David, in the first two quarters of 2022, it looked like a recession. They they were there were actually two negative sequential quarters. However, upon revision, it went the other way was actually revised up. So, there was not an official recession in 2022, but there was that profits recession, the industrial recession, which just keeps going on and on and on. So it's it's more than just some pockets of weakness. And if we look at an area which I think's got huge social implications, the unemployment rate for new entrance. So college grads trying to get a job is just spiking. And of course AI is not helping this. I'm sure you've seen some of the reports where companies are are reluctant to hire uh college grads because of AI. They're trying to do as much as they can without actually putting somebody on the payroll. So, I think what's fair to say about the economy is that you're not seeing a lot of firings yet, but you the hirings have really dried up. So, it's I say the market the jobs market is is in a bit of a kind of a fine balanced equilibrium, but it wouldn't take a whole lot of layoffs to start p forcing things the wrong way in the jobs market. This trend certainly is the economy's friend, but to be fair, and you were kind of alluding to this, July retail sales were strong. And this is despite the fact that actually if you listen to uh uh what's Anna Sue Sue from Bloomberg, uh >> Anna Wong from Bloomberg, it's the University of Michigan. I'm thinking of the wrong person. University of Michigan consumer sentiment survey, which is the most influential, and I think that is Joanna Sue, but do you know her exact name? Am I mangling it? So the this is the slide by the way that you drew up before we continue. The US unemployment new entrance um presented by Bloomberg. Huge spike in new entrance not being able to find a job and right now we don't have a pandemic locking down the entire country's economy. Um what does this huge spike signify in terms of uh the sentiment in the labor force and what consumers are able to spend going forward? So first of all maybe we can explain why this is happening. Well, I I think it's what I said earlier that businesses are, you know, there's a tremendous amount of uncertainty. All the uncertainty really readings are off the charts. Uh there's been so many changes to the the rules of the game that, you know, businesses when they they face that type of of uh you know, just it's it's a black hole. It's just unknown. And so they have a tendency to kind of freeze. They don't fire people. They don't hire people. And I think that's kind of what we're at. And you know, maybe you can say, well, I think all of a sudden there's going to be a surge in hiring as confidence gets better. And and maybe that's why this is just a slowdown as opposed to an actual recession. But as I say, a lot of these things you look at, the leading economic indicators are called the leading economic indicators for a reason. And they've been down for almost I think it's actually now over two years. They've been a long long downtrend. One of the worst downtrends ever. But as I said that uh you know you look at some of the consumer spending numbers look to be holding up pretty well. Now could that be uh you know like car sales so there's the EV tax credit that's going away. So EV sales are have had a surge even though their trend is is not really very favorable. That's a whole other story but different podcast will talk about that. Uh so you also have the uh just regular car sales for getting EVs that are also strong as you know you're trying to get ahead of tariffs. So it's it's really hard and we've never seen a situation like this where there's this and these are major factors that are unlike anything we've ever encountered. Uh so it's it's really hard I think to get a handle on what's happening with the economy. But I think getting back to the kind of the key point is when nobody's expecting a recession, then that's when you can have a very nasty surprise and an exaggerated market reaction. If that happens, let's talk about housing because I think housing, you know, housing is a big part of the economy. I mean it's you can say well housing home builders themselves are rather narrow slice of it but it has so many subindustries that relate to it and it I think we've got a a housing bare market of really significant proportions that's unfolding and if you look at permits both are down 20 starts and permits are down uh over 20% year-over-year and permits lead you can see they are looking extremely recessionary. Uh, we know affordability is terrible, but here's what's really fascinating. I'm not even sure you know this, but for the first time ever, new home prices are now significantly cheaper than existing home prices. Now, there was a brief time in 2005 where they kind of converge. You're going to see this on this visual, but now it's it's like $40,000 difference. So, a new home is $40,000 cheaper than an existing home. Again, your esteemed competitor had Melody Right on. She's a she's a leading housing expert and she said that it's actually more like 80,000 because the official prices that the builders are receiving or reporting don't include uh some of these special incentives that they're using to uh to get their homes uh sold like buying down mortgages or free appliances and other incentives like that. So, if she's right, it's really, let's say it's say 435, 435,000 for a median existing home versus 355 for a median new home. It's remarkable. And I think that's what's telling us where the market needs to be to actually move homes. So, I think you're going to see existing home prices come under a lot more pressure than is popularly believed. And could that have, you know, significant implications, you know, say for the banking industry? Don't know. I I don't think we're going to get the same kind of banking crisis that we had back in 0809. But it there are risks there that I think are underappreciated. Then if we look at this is pretty amazing when you look at the you know the cohort that's buying homes. How much of these home purchases are happening with the boomers and or even the silent generation. So you're basically looking at almost half of the home buying that goes on by the old folks. And you know one of the actually listen to Ivy Zelman. She's another expert on the housing industry. And she's very concerned about this kind of aging out of of the home market by people my age. You know, as we get into our 70s and 80s and we got these big homes that we really don't need anymore. And you know, who's going to buy those? Who can afford to buy those? And I I just think that this this housing adjustment that's coming is going to be a bit challenging. We are seeing new home sales uh breaking out to multi-year highs. So, if this was a stock chart, it would look pretty bullish. Uh same thing with existing. This one isn't as clear. It's more at a a critical support level or resistance level I should say, but it does look like it is going to be penetr have actually very little doubt that that's going to get penetrated to the upside quite decisively. If we look at combined uh new and existing clearly a series of higher highs and also breaking out to a multi-year new high. So, it's I I don't I don't see the In fact, what's amazing, David, is the homebuilders XHP, which is the home building ETF, is very close to its all-time high with these statistics. And you know, that's not even really getting into the affordability issue that is just atrocious. Uh I don't know if I have I I don't have I'll just throw it out there very quickly that Ivy Zelman made the point that the median home price uh for the median you know wage is at where it was in 1981 and that's when the mortgage rate was 16%. I mean the bottom line is homes are about as unaffordable as they've ever been with very few exceptions. Now, what this does show us is that a lot of this kind of like the stock market is because of the depreciation of the dollar. And if you'd actually had, let's say you were wise enough as a young person and maybe you had wealthy parents and grandparents were putting money aside for you in gold, gold coins 20, 25 years ago, you'd actually the home would be cheaper in terms of gold than it was uh 10 years ago. >> Yes. >> And of course, if it was in Bitcoin, if you had Bitcoin, it was drastically cheaper. So, some of this is the money illusion caused by the fiat currency, the US dollar being in such a, you know, a bare market, not necessarily relative to other currencies, though we'll talk about that coming up, but relative to what it can buy. What's really been keeping things going has been this tremendous amount of liquidity that's been floating through the coursing through the financial system globally, not just in the United States. Global money supply was recently growing at 12%. And in the US, it's about four 4%. So maybe that's why, as we'll see, these international markets are really starting to beat the pants off the US. For Darius Dale, >> 42 >> 42 macro, he sees global liquidity has slowed pretty dramatically from 11 to 15% to 4%. And I actually was surprised when I listened to his recent video how bearish he's become on the economy. He's pretty famous for being bullish on the economy, bullish on stocks with some tactical shifts. He got pretty defensive earlier in the year. Anyway, he's he's uh he thinks that we're in a in in a in a new paradigm where you're going to have such tremendous liquidity created by the government and we can talk about this in in a bit more detail coming up. I think stable coins are particularly fascinating in that regard, but that uh the risk assets can continue to be well bid, but he is pretty defensive on the economy currently and that did surprise me. But, you know, we're always hearing that there's this mountain of cash out there. And speaking of liquidity, but it really doesn't look like it. This is BFA's, you know, trillions of dollars that they have in their private client or collective portfolios. So, that's actually quite low. Fund manager uh also have low cash levels. So, the Treasury Secretary Scott Bessent wants to see 2.7 trillion go into stable coins. Why does he want to do that? And the reason he wants to do that is because that is extremely lowcost financing for the US government. Uh particularly if they can drive short-term interest rates down. Right now uh you know it's costing 4% for the government to raise money through T bills. But if they get what they want, which I think is a big part of uh this liquidity matrix that we're looking at, uh we're going to see uh much lower interest rates even though inflation is still running above the Fed's target. But they clearly want to do something with the stable coin market, uh which could actually pull a lot of money. This is actually courtesy of Luke Groman. I think this is a very interesting point to pull money from the Euro dollar market. So there's 11 trillion over in Europe in in dollars. Uh but they're outside of the US banking system. So they're uninsured. Uh that they're viewed as being, you know, almost like a deacto obligation of the government. But it it sounds pretty clear that they want to get that money back to the US and in something which either pays no interest or very low interest rate. So there's still this positive liquidity cycle that we're in which is supportive to the market. It's supportive to asset prices. Uh, I was listening to Michael How, who have you ever had him on your show, David? Michael How? >> Michael How? I don't um I don't recall. >> He's considered to be the foremost expert on global liquidity and he's very very arid, very articulate and he does these longwave studies of liquidity cycles and at this point it's still positive although it does look to be getting late in this particular cycle. But he he said at this point uh you really want to be looking at commodities. He's also thinking that China, which has already done a major stimulus 1.5 trillion of stimulus, is going to do another 1.5 trillion. So there's a very tight correlation between commodity prices, which are already starting to really to move. You know, it's kind of depends on which one, but certainly the precious metals have been. We'll talk more about this coming up, but clearly hard assets should be winners with all this >> free flowing liquidity that we've got. And of course, where has it been more free flowing than from the federal government? It's just unbelievable the amount of stimulus that continues to come in. We had the Doge thing. There were fears that there's going to be this massive spending cut, which of course it turned out to be just a drop in the bucket. And through the first 10 months of this fiscal year, the federal government's fiscal year ends in September. The first 10 months, it's actually up. The deficit's up 7.4%. Interest alone estimated to hit 1.2 trillion more than defense spending. So this has been I think the number one reason we haven't had a recession because we've been running these $2 trillion deficits for several years even after co. So all that stimulus makes it very very difficult for the economy to slow down. And there was a belief that early in Trump's term he would do what Malay did in Argentina and really bite the bullet and and they were making a lot of noises about that. But then clearly when the markets had their their big riot back in the late winter, early spring, the Trump administration basically reversed gears in a big way. So they seem to be going fullon for growth right now. Run the economy hot. get interest rates down even with the inflation well above the Fed's target. So, it's there's just no sign of of fiscal drag. And this gets to the some of the quotes from Bessent recently about what he wants to do with stable coins. And you know, I think if you're a Bitcoin bull, you'd probably go, "Yeah, this is great. I we want to see these stable coins, you know, get 2.7 trillion in them." I think there's four or 500 billion in right now. It could be a little bit. It might be a little less than that. Tether's the number one. I don't know what circles the other, but they could uh well, for one thing, I think the government's unlikely to let those guys continue to make the kind of money that they're making right now. It's just a gold mine uh for these guys when they're paying nothing. As you're probably aware, David, if you have an account with Tether in stable code, you don't get any interest. So, they take your money to turn around and buy treasuries, they're making 4% with no risk, and you know, their overhead is almost non-existent. So, I' I've heard rumors that they're one of the most profitable if if they ever disclose their their financials. They've never had an audit. Uh it's a quite the story. But my point is I think the US government's going to try to disintermediate them, try to get them out of there and actually control the stable coin market and capture that, you know, that free money. So, if you know, where's that money going to come from? I do think it makes sense that it the eur Euro dollar market is the likely target and uh a lot of folks I've listened to over the years think the euro euro dollar market is very important. So if there's a major exodus of capital out of that could it be destabilizing? It could. I don't know what the implications are. This is really something I've just started really thinking about thanks to Luke Roman here recently but I think it could be a big deal and I don't think most people are talking about it or thinking about it. We look at commodities as I think you know we flagged a breakout last year when gold broke above 200 and then this year silver we were pounding the table on silver and it has uh it did break a series of breaks. >> Okay let's just back up for a minute David. So you were talking about how you think there's more room to go for silver. Uh let's talk about the precious metals right now. Gold and silver today as we're speaking on the 3rd of September. Gold has reached yet a new all-time high above $3,600. 3635 is the latest price. Unprecedented level. Uh this comes as both stocks and Bitcoin have also risen. I wonder how much of this is just anticipation for what the Fed's about to do in a couple weeks, which is potentially lower rates. But I'll let you comment on why gold in particular has been just outperforming. It's it's nearing 4,000. I mean, that's the next level people are talking about now. >> Right. And as you remember, we actually brought up the breakout, highlighted the breakout that gold made early last year when it went above 2,000. We thought that was very decisive and was going to lead to much higher gold prices. Frankly, I didn't think they go up as much as they did. But what's been a huge factor driving gold prices has been central bank accumulation. Uh so what's happening is basically the foreign these big foreign banks, government sovereign banks have been buying gold instead of treasuries. So gold has become the reserve, not the reserve currency, but the reserve asset of choice for these big central banks. Silver hasn't had that hasn't had that driver. Uh but now it is it it did have a a critical breakout which we also highlighted and we said we thought it was going to keep running. In fact, I used the term coiled spring earlier this year and it's now we touched 40 briefly backed off and now it's breaking up above 40 and historically silver does lag gold when gold run has these big bull markets but then it tends to uh actually kick the afterburners in and outperform. So we think there is further to go for silver and and probably for gold. So, one of the things with gold is that that there is this belief that the federal government wants to revalue gold substantially higher. Fact, Duneberg is out, you know, the famous Doomberg with a piece saying it could be as high as 20,000. He's not saying it will be, but it could be as high as 20,000. So, that the the gold that the United States owns, which may be increasing, it could be that there's some big stealth buys going on by the, you know, the some agencies of the federal government. Uh there's huge amounts of gold and silver flowing from London into America. But regardless, there could be this move to mark up gold dramatically and then use that windfall gain uh that the Treasury would have with their existing gold reserves and maybe these, as I said, would have been added to to use that profit to buy back government bonds or maybe collateral life. You got Judy Shelton talking about having something that I've discussed for quite a while, which is a two-tier bond market where you have some parts of the Treasury market that are actually backed by gold and would theoretically have a very very low interest rate. And that's a big part of what the government's trying to do is to get these interest rates down drastically one way or the other and and that would be a pretty effective way to do it. But clearly there's there's been a major shift uh in the precious metals market. But we'll talk about some of the other commodities here as well because there's could be better opportunities in some of those that are less well known. But here is one that is getting really no press at all. Uh we talked about this before we started with Foring and even you were not aware that they're up this much. GDX, the senior gold miner ETF, is up like 95% this year. GDXJ, the junior gold mining ETF is up about. >> These are just enormous moves and there's no press. Nobody's paying attention to them until recently. There's been outflows out of these funds. So, lots and lots of catching up to do by these guys. Now, they they've had a heck of a run. We're actually going to advise doing a little profit taking and I think that's a good idea. I'm doing that personally, but just in case that there is this major revision, a major, you know, kind of a step change to the price of gold, even if it's 5,000, 6,000, 7,000, uh, the gold miners would obviously keep running because they, you know, their their costs really don't go up as the price goes up. So, there's tremendous operating leverage. But, it's just amazing that they have attracted so little attention. But if you look, this is another warning sign I would say that you might want to do a little bit of profit harvesting on the gold miners. When you look at the gold miners bullish percentage index, it's just Fred Hickey, who's one of the best gold mining investors on the planet, ran this uh just this week, pointing out that whenever you've had it at this level before, you've had a a pretty sharp correction. So, I would say for those few people that listen to us and did buy into this area, uh, you know, take 20 30% off the table. Uh, silver, you can see the big breakout here. And this is what we were talking about earlier in the year. And >> take 20%, sorry, take 20% off the table for gold miners. Is that what you're saying? >> Yep. 20 to 30% off of for your gold miners at this point, which means you still have a lot of exposure. But I I just don't think you want to be greedy. I mean it's you look at these charts and they are very very extended >> and then that you know the bullish percentage index we just looked at that's that's a that's a pretty good warning sign too. So silver I think is if you wanted to to play and stay involved with I think some of the silver miners uh first majestic is one of my favorites uh and it it looks good technically so there you know maybe it's a time to redeploy cash in a little bit of gold and put it in some of the other commodities that have lagged. We'll look at some other ones as well. And uh this is just the index itself, the CRV. And you can see that it really has been in a quite a downtrend since 2022. So that's this far left little mountain here. That was the invasion of Ukraine when a lot of commodities went ballistic. And then the air has been coming out and now it does seem like there is an attempted breakout above the resistance that goes back to uh 2022 toward later in 2022. So I I do think that commodities in general are a very good place to be when you've got this kind of liquidity around the world and where you've got a the Trump administration so intent on weakening the dollar and they want to see the dollar down a lot which is very pro commodities. Uh they're trying to drive interest rates down a lot which is pro commodities and they're also interfering with dependence which is you know smacks of inflationary maneuvering. So, excuse me. Other commodities that are worth a look. Copper has come down, come down hard. You've got quite low supply. >> Copper, you may know this, David. Copper spiked to $6, broke out above five, which had been the prior resistance, pulled all the way back down to $440, something like that. Looks like it's stabilizing there. But the uh pretty much with all these commodities, we're looking at constricted supplies and rapidly increasing demand. That's even more true with the uranium. We've played the uranium ETF out very well, as I think you might know. When it's been up, we've suggested taking some profits and then when it got hit, which it did even this summer, we advised coming back in and now it's running again. And of course, oil and natural gas, they're very out of favor. And yet, you know, this whole AI boom, as I heard Stephanie Ponboy say recently, if you love AI, you got to love energy because the AI boom is extremely energy intensive. Yet you've got oil trading basically at its cost of production in the United States around 65 and natural gas is trading in the kind of 260 270 range currently and you know in Europe it trades more like for you know $9 to $10 per million British thermal units. Uh so anyway it's energy is I we'll see some more data coming up here. I think it's one of the great opportunities. We touted platinum earlier in the year at a thousand. It's up 36%. It may be, you know, maybe you don't want to chase that, but again, very attractive uh supply demand setup, but Valer is be leading platinum miners and that's one you can buy the symbol as agpy. And I think that one's got tremendous upside. So, what you typically see with these things is the metals move, the miners kind of lag, and then they take off. And I think that's a situation that we're looking at with platinum. David, let's take a look at the uh the stock markets and uh bond markets before we close off. This is a this is an article from CNBC. Let me just share my screen here. Uh we were talking about this earlier. The jobs numbers are looking weaker and the jobs openings in particular being uh very very weak. Uh it's now job openings now tick down to levels rarely seen since the pandemic. Now, uh, according to economists quoted in this article, this is a turning point for the labor market. This is yet another data point underscoring how this labor market is frozen and it's difficult for anyone to get a job right now. The point I'm trying to make, David, is if this is a turning point for the labor market, when can we expect turning point or what can trigger a turning point for the markets? No one's really talking about turning points for stock markets and risk assets right now. As I pointed to earlier, uh stock markets as as well as gold have been reaching new all-time highs ahead of the Fed meeting in September. And so I I wonder what you as an investor are doing right now with all this information is I kind of the broad question I'm asking besides besides commodities that we just talked about, if somebody were to think about either rotating capital um or get into the markets now, what should they do? Well, I've obviously given you some some ideas here that I think make sense, but you know, I think what doesn't make sense is the traditional reaction. So, normally, and let's just assume that the consensus is wrong and we do get a recession. >> And I'm not saying that's going to happen, but as we talked about earlier, the problem is that it's so unexpected currently. And yet, there's an awful lot of data out there that is supportive of a downturn coming relatively soon. And so if it does happen, you know, kind of the is some people call it the Pavlovian response is to buy long-term treasuries, but that and they could work for a short period of time and probably would, but you look at what's going on with bond markets around the world and these yields are actually going up on the very long end even with weak economic data. But you just saw I think was from Luke Roman once again that if you look at countries where industrial production is falling, which is quite a few of them, long-term yields are rising. That's a classic scenario that used to happen in emerging markets only. And it's and it's telling you that there are, you know, there's there's fear in the bond market that the central banks of of these countries are not they're not the inflation stewards or inflation hawks that they once were. So what you're getting in a situation is basically fiscal dominance where the bond markets are being viewed as a a financing vehicle for the governments. And even if that creates some inflation, if that creates some disruption, so be it. And you're going to have the Fed intervening, the Treasury intervening, using yield curve control as the US did after World War II to suppress those interest rates. It's a very bizarre situation, David. And right now, all this this fake money that's been created has created a lot of economic activity. It's created a lot of froth in the financial markets. But I guess maybe I'm just too old. I think there's going to be a price deb. I keep looking how do you hedge yourself if you're an investor and I don't think you hedge yourself with Magnificent 7 and I don't think you hedge yourself with long-term treasuries. I think some of these things that are off the radar of most most investors but clearly benefit from the way things are trending for how you want to position your portfolio and frankly a lot of these are working. I mean gold miners up 95%. That's I call that a win. >> So let's say the Fed doesn't cut as much as anticipated this year. Would that move markets? Would that move the needle? Or is fiscal policy more important right now? >> It might help. I think what would not be as wellreceived would be a series of aggressive rate cuts as opposed to kind of a oneand done or two and done because I think that would indicate I mean that's part of the history of the Fed's rate easing cycles is if they ease kind of slowly, you know, methodically that's kind of bullish. If they if they ease frantically like they did in 20 2002 and 2008 2009 actually starting 2007 that's bearish because they're aware that there's a problem going on and also with this inflation being a lot stickier than what we were led to believe a major easing cycle when you got inflation running at three and you know wage inflation is still running north of four that would be a recipe for you know really a 1970s kind of persistent inflation outbreak and what did really well in the 70s commodities what did very poorly in the 70s stocks and bonds. I don't know if we have time to look at anything any visuals on the stock market, but I think you got to be if you're just looking at this objectively, you got to say there's a lot of lot of excesses, a lot of speculative overenthusiasm. What Greenspan called it irrational exuberance back in 1996 and it's really irrational right now. >> Well, yeah, by all means. Um, and I like to talk about the dollar as well. Uh, the dollar has been falling all year, 2025. It's just been a weak year for the dollar. I I wonder if this is a pivotal point for not just the labor market, but also the US dollar. Are are we seeing the beginning of a an an uptrend anytime soon? >> So, here's the dollar index. And to me, this looks like a pretty important break. So, this is we we think threeyear uh either support or resistance is important. This is 5 years. The longer it is, the more important it is. Uh so this is I think a sign that the dollar is in a structural downtrend and it's also overvalued and beyond that you want an administr you have an administration that wants to get the dollar down significantly. So it that's why I think you should be looking at things that benefit from a weaker dollar. Why fight it? You know we've seen how these trends once they get in place really they last for years and they go further than you think. So there's a lot of investment sectors and asset classes that do well in a weak dollar environment, but they're not the ones that have done well over the last 10 years. We talked about commodities plenty, so I won't go more into that, but if you look at some of these emerging markets, I mean, do you know the number one performance market this year in US dollars is Brazil? Not many people know that it's up 33% or so. And that's market is still only trading for, you know, like eight nine times earnings. If you look at some of these emerging market bonds and bond funds, uh, one of our favorites is ED, the Morgan Stanley uh, domestic emerging market bond fund, which yields 9% and it's I've got a chart here at the end. It's just a thing of I'll skip to that so you can see what I'm talking about. And by the way, if you look at one of their holdings is Brazilian bonds. Brazilian bonds yield 14%. Their inflation rate is about five. So, it's about a 9% real return. And that's that's like what we had with uh here in America under Paul Vulker. So, here's the chart of ED, which you can see here's it's been in this range for the last several years, but it's clearly breaking out above prior resistance and it yields 9% and that's a name that your your viewers can easily buy. So there's definitely opportunities out there, but I think you have to think differently and and really just acknowledge the environment that we're in, which is going to be higher inflation and a weaker dollar. And that isn't to say that if you you can't have a recession. If you have a recession, that's going to bring interest rates down. It's going to bring inflation, but it's also going to bring a policy response that's likely to be even more inflationary. So any bond rallies that you get, I think, are to be traded, to be rented, not owned, as they like to say on Wall Street. Is the yield curve going to continue to steepen, David? >> Absolutely. That's a great glad you glad you brought that up because I think it's just that is going to happen is a steeper yield curve and there are areas where you can benefit from a steeper yield curve. One of the ones that we've been writing up is the the mortgage rates, the M rates. So, uh there is an ETF of those, but there's my favorite individual play there is AGNC which yields about four cycles. they actually tend to raise their dividend so it could be paying more than 14% over the next two to three years. So yes, great point to bring up. Thank you, David. Okay, excellent. Uh so finally, uh let's say asset allocation, uh if we're to um position ourselves into 2026, what would you favor? What would you disfavor? right now. >> I just I'm not a a fan of the long-term bond market as I mentioned to you and and yet I realize that there's a lot of negativity on it right now. There could be a rally. So, I I wouldn't say, you know, don't don't preclude that possibility. That could definitely happen. But if it happens, don't stay there too long. In other words, if you get a a decline in the 10ear from 430 to 350, take your money and run. Uh but in general, I think if you're looking for yield, you want to look at ideas like this or at some of the uh midstream energy names. We love Energ enter Enterprise Products, which yields 7 12%. They raise their dividend or distribution almost every quarter, certainly every year, only trading for about 11 times earnings. U that's likely to be I think that's going to beat the pants off the stock market over the balance of the decade. So, I would be allocated to things that benefit from the weaker dollar, benefit from the steeper yield curve. I'd be avoiding those that are counting on uh a sustainable decline in in long-term interest rates. I think there's really a problem brewing with these bond markets around the world. It's not getting very much press. So, uh, I I think you just don't rely on the traditional 60/40 portfolio, 60%, you know, large cap US stocks and 40% long-term US treasuries or a ladder portfolio. The short end should be fine. But, you know, the unfortunate part of it is that this tea bill and chill thing that's worked pretty well for the last few years. I mean, if if the Trump administration gets what they want, and I think they will, that 4% is more likely to go to one to two, which gets to your whole point about how do you play a steeping yield curve. >> Okay, I understand. Uh, David, excellent. Um, any other closing thoughts on trades that we've missed so far? Uh, before we go, we've talked about commodities at length, um, indicators for equity, uh, draw downs or capital rotation. We've talked about bonds. We've talked about real estate. We've mentioned uh I think investors really just want to know what to do right now given so many conflicting economic data, some of which we've addressed today. Uh this looks like a pivotal time for not just the economy, but but also for markets. The Fed looks like they're about to cut rates and like we've talked about earlier, the labor market is showing crack after crack month after month. Uh any other trade ideas that may point to a pivot? Well, I would just say again with that labor market to be fair, realize that yes, the hiring is really drying up, but there hasn't been an explosion of firing. So, I think that's something to really watch is what's what happens with the layoffs. And so, for right now, I'd say it's it's not a terrifying jobs market. It's just something that looks a little bit worrisome. But, you know, I think having look look at Buffett. He's got $340 billion in cash. So having C even if you know that your rates likely to go down on your cash, you're not going to lose money on it and there's this this kind of environment. Plus we're in the time of the year when the market often hits an air pocket. So it' be nice to have cash on the sidelines and I'll give you some ideas where we might want to be doing some profit harvesting. I think particularly some of these momentum stocks in the US market that are just off the charts in terms of valuation. uh you know cashing in some of those gains would be advisable and just you know putting that into cash and and just you know I'd say be humble and you know I think right now unfortunately Buffett's always saying you want to be greedy when others are fearful and fearful when others are greedy. Well there's a lot of greed in the market right now. So I think to be on the fearful side of things and and and realize as I said earlier this is a set of circumstances we've never seen before and whether it's me or anybody that you you know even Warren Buffett he's never seen anything like this so uh you know invest accordingly which I think means investly and carefully. >> Okay excellent. Let's close it here. David tell us where we can find you read your work and get more ideas from you. Well, we're on Substack, so you can find Haymaker at Substack. I think maybe an underscore in there somewhere, but uh we should be really easy to find there. And we do put out a daily that is uh you know, even if you're not a paying subscriber, of course, we really would like to see more paying subscribers like anybody, but we do put out a fair amount of content that is free. uh there's a payw wall that you know really protects our best ideas and particularly this trade specific ideas which we we generate a lot of those and we have kind of a focus on yield unlike most of our competitors so and I think frankly a lot of your listeners if they're anywhere in my age group you know yield should be your number one objective and along with preservation of capital so I I think we could be a very good resource for people that that do need cash flow to live on. Yeah, absolutely. All right, fantastic. Thank you. And make sure to follow David Haye on his Substack down below. We'll talk next time, David. I appreciate you coming on this week. Take care. >> Thank you, David. Enjoy your vacation. Get some time off now. >> I will appreciate it. And thank you for watching. Don't forget to like and subscribe.