In Episode 131, we welcome economist David Rosenberg.
We jump right into David’s view of the current economic landscape. David talks about the global economy, especially the US looking classically late cycle, as the economy is running low on skilled workers, and states “If next year is not a recession, it’s going to feel like it.”
Meb asks about the indicators he relies on. David discusses that there are 15 equally weighted indicators he’s looking at, 14 are screaming late cycle, and two stand out the most. ??? Two of the most important indicators for the US are the lack of skilled workers, with a lot of growth coming from people with no better than a high school education, and an immigration policy that has decreased the pool of labor.
This leads into a discussion about inflationary pressures. While the strong dollar has been deflationary, more and more companies are passing on costs to customers. Services, which dominates the consumer spending pie, is sensitive to labor costs, and the inflation we will see going forward will be from wages.
Meb then asks David about his thoughts on how this plays out for investors given the nature of the late cycle. David tells us that historically, the S&P has annualized an average of 17% per year in bull market conditions, however, this time around, it has done so with nearly half the typical economic growth rate to back that up. He suggests investors be defensive, focus on liquidity, have some cash on hand, and emphasize quality. For fixed income investors, be mindful of duration, and if focused on credit, be thoughtful of upcoming refinancing risks.
The conversation then turns to sentiment. David draws parallels to the dotcom bubble, with FAANGM making up 17% of the S&P 500 market cap at September highs, which is similar to the late 1990s when there was a concentration of about six stocks making up a large chunk of the S&P 500 market cap.
Next, Meb asks about David’s views on corporate bonds. David sees this in two lights. First, corporate balance sheets are the weakest they have ever been. The BBB component, which is a downgrade away from being rated “junk,” has grown from 30% of issuance to 50%. The alternative, more positive view is that companies are anticipating a lack of bond issuance coming up.
Meb then asks about the health of the Canadian economy. David explains it is meandering; the oil price has been a drag and has traded at a significant discount to WTI due to a glut of production, and lack of pipeline capacity. In addition, an overinflated housing market that is deflating, and overextended household balance sheets serve as big impediments. Provinces are tending toward a pro-business direction politically, so that could serve to be a positive going forward. As a strategist, he is seeing much of the bad news priced into financial assets as the TSX is trading down to a 13 multiple, in line with emerging markets, and a discount that has been seen only 5% of the time historically.
All this and more in Episode 131.
Phil Bak, Armada ETFs - Masterclass in (Liquid) Real Estate Investing | #496
Mohnish Pabrai on Cloning & Compounding | #495
Stephanie Pomboy on the Corporate Credit Crunch | #494
Michael Batnick & Ben Carlson – What’s Your Favorite Diversifier? PLUS: Future Proof! | #493
Anthony Zhang, Vinovest - From Barrel to Bank: How to Invest in Whiskey | #492
JD Gardner - Bridging the Behavior Gap | #491
Bill Bernstein on Financial History, Star Managers & The 4 Pillars of Investing | #490
Steve Klinsky, New Mountain Capital – Private Equity Titan | #489
Blake Street – Financial Advisor to New Media: From Tik Tok to E-Sports & OnlyFans | #488
Dr. Gio Valiante on Peak Performance: From Tiger Woods to Steve Cohen | #487
Ben Inker & Tom Hancock, GMO – The Value and Quality Opportunity | #486
Dan Niles on Big Tech Stocks and the AI Revolution | #485
Rodrigo Gordillo & Corey Hoffstein - Instagram Frauds, Inflation Volatility, Tech Crisis, & Return Stacking | #484
Burton Malkiel - Applying 'A Random Walk' to the World Today | #483
Meketa's Steve McCourt & Primark's Michael Bell - Democratizing Private Equity | #482
Sarah Stanley Fallaw - The Psychology of the Millionaire Next Door | #481
Craig Wichner, Farmland LP - Cultivating Wealth with Sustainable Farmland Investing | #480
Jim Chanos & Bethany McLean on Lessons from Enron, Financial Fraud Throughout History, and the Fall of FTX, SVB & Wirecard | #479
Sam Zell - The Grave Dancer on Private REITs, the Macro Landscape, & Timeless Investing Wisdom | #478
Richard Thaler & Cade Massey on the NFL Draft, Misbehaving GM's, & Exploiting Inefficiencies | #477
Create your
podcast in
minutes
It is Free
The Commercial Edge: Unleash the Power of People
The emPOWERed Half Hour
U.S Property Podcast
Aligned Money Show
Dubai Property Podcast
The Ramsey Show
The Clark Howard Podcast