Here's The Latest Outlook From Lacy Hunt, Stephanie Pomboy, Michael Pento + A Dozen Other Experts
What this covers
BUY THE REPLAY of the full Thoughtful Money conference here at https://thoughtfulmoney.com/conference
Well, the first-ever Thoughtful Money conference was held online this past weekend and I’m delighted to say the event was a real success.
That was due primarily to the amazing line-up of speakers who presented and took live audience Q&A throughout the insight-packed 9 hour day.
Lacy Hunt delivered the keynote, followed by Stephanie Pomboy, Michael Pento, Ted Oakley, Michael Lebowitz, Danielle DiMartino Booth, Tom McClellan, Brent Johnson, Melody Wright, Rick Rule, Matt Piepenburg and Mark Moss.
For those of you who didn’t attend, I thought you’d enjoy hearing some of the conference highlights.
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The thoughtful money conference presented a consensus view among leading financial analysts that the US economy faces significant headwinds from negative net savings, tightening monetary policy lag effects, extreme asset valuations, and liquidity risks, with a hard landing recession and major market corrections likely in the near to medium term.
- Negative net national savings indicate the economy is living beyond its means and constraining production capacity
- Fed policy tightening effects are arriving with a lag and threatening to trigger recession while rate cuts remain delayed
- Stock market valuations at 185% of GDP exceed even pre-2008 crisis levels, indicating 40% overvaluation and bubble conditions
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America's negative net savings is a perilous economic state indicating the economy collectively is living beyond its means and represents a constraint on the production function
“however with negative net National saving uh we are at a more perilous State it's it's an indication that the economy collectively is is living beyond its means and there is now a constraint on the production function”
Cisco was the equivalent tech-darling of its era as Nvidia is today, trading at $82 per share in Q1 2000 before declining approximately 90%, illustrating how perceived paradigm-shifting technologies can experience severe corrections
“it's a new paradigm and this whole thing's off just like AI is now and uh and and in the end it didn't work out that way but everybody thought it would Cisco was the Nvidia what Nvidia is today Cisco was then of course it had $82 a share in that first quarter of 2000 and went down about 90%”
The yield curve inversion correctly predicted recession but observers misunderstand the timing mechanism: there is a 15-month lag between yield curve inversion signal and actual recession onset, which is why recession hasn't materialized despite the inversion signal
“nothing's wrong with the the the indication from the yield curve except for the misunderstanding of a lot of people of how it's supposed to work that we were promised a recession and it hasn't shown up yet well it wasn't supposed to you got to wait for the 15-month lag time to go by”
Those who think the current AI-driven runup in markets is different this time are repeating the same mistakes seen in prior market bubbles, as demographic composition of the market (older investors all-in) mirrors 1999-2000 dot-com bubble conditions
“in the 70s the late 70s you couldn't give a stock away hardly um we're the reverse end of that right now I've just got this graph last week that showed that over 55 years old of people anybody over 55 they have the most stock now they've ever had in the history of keeping records and so they're all in the market right now much like they were 99 2000 you couldn't you couldn't sober people up then”
Investors in precious metals and natural resources generally go broke over multi-decade periods because performance is not equitably distributed; success requires being both a stock picker and a contrarian, buying when sectors are out of favor and selling when they return to favor
“investors who invest in the sector be it precious metals or natural resources generally over a couple of decades probably go broke because performance is not equitably distributed you have to be a stick a stock picker in this business and you also have to be a contrarian in this business uh in capital intensive cyclical businesses the variability in share prices is extraordinary which means that you have to buy Subs sectors when they're out of favor and you have to have the discipline to remember to sell them when they come back into favor”
Rate cuts when they come may not arrive early enough to arrest the unfolding recession, as fiscal stimulus effectiveness is declining and monetary pivot is being pushed further into the year
“the question really is um do rate cuts when they come arrive early enough to arrest what I think is an unfolding recession um right now...obviously on the monetary side uh this pivot that everyone was Finding for uh seems to be getting pushed farther and farther into the the backup of the year”
Stock market valuations are on 'Fantasy Island' with the price-to-sales ratio at 2.8 (median historical average is 1.5) and total market cap as percentage of GDP at 185%, exceeding pre-Great Depression 1929 (117%), dot-com bubble 2000 (142%), and global financial crisis 2007 (104%) levels
“well stock market valuations I believe are on Fantasy Island so the price to sales ratio is is now 2.8 the median the average of that uh figure is 1.5 my favorite metric is the total market cap of equities as a percentage of of GDP that that is greater than it was headed into the Great Depression of 1929 the NASDAQ bubble and the global financial crisis so in 1929 it was 100 117% total market cap of equities as a percentage of G GDP 117% in 2000 it was 142% in 2007 it was 104% today is 185% of GDP”
The delayed lag effect of the Fed's tighter monetary policies is finally arriving and threatening to throw the economy into a hard landing recession, as the consumer engine of US economic activity is stretched and reaching its limits
“I still expect a hard Landing um I am not in the soft to no Landing camp at all and uh the economic data that I look at um really rein forces the idea that things are clearly decelerating that the consumer that is the engine of US economic activity is really stretched and you know reaching his limits”
There are rising risks of a liquidity squeeze in bond markets; the precise trigger point is uncertain (could occur at $300 billion reserves or two months after reserves reach zero) because it depends on banks' willingness to lend and deploy reserves rather than on reserve quantities alone
“I think it was Lori Logan from the Dallas fed I could be mistaken but I think it was her just said we don't know when there's amp ample is the word they use ample liquidity ample reserves so it could be when it gets to 300 billion it could be two months after it gets to zero we don't know where it is and a lot of it is just depends on the banks and their willingness to lend their willingness to use reserves if banks are unwilling to use their reserves it doesn't matter that there are excess reserves in the system there's no liquidity because Banks provide the liquidity”
Bitcoin timeframe analysis is critical: if the timeframe is 60-80 years, Bitcoin reaching $43 million per coin is likely not too late, but if timeframe is 60-90 days, a pullback may mean it is too late, requiring explicit timeframe specification before evaluating any investment thesis
“so the question always Adam I think you know you and I we both speak at a lot of conferences and a lot of times on panels you hear people disagreeing up on stage that this guy's saying bonds is good this guy saying bonds is bad and typically it comes down to time frame this guy is thinking short time frame this guy is thinking long so we have to that's always first question I try to ask everybody over what time frame so when is it too late for Bitcoin over what time frame uh I think that Bitcoin gets to 43 million dollars per Bitcoin in the next 60 to 80 years so if you're looking that far out it's not going to happen in my lifetime but if I'm looking that far out then it's certainly not too late”
Recession and new bear market appear likely soon but may not manifest immediately; current indications from LOF numbers, consumer credit, and other metrics show deterioration that suggests worse conditions are coming
“so um nothing's wrong with the the the indication from the yield curve except for the misunderstanding of a lot of people of how it's supposed to work...we're starting to see that uh it's going to get worse and uh don't shoot the messenger uh for being the bearer of bad Tidings so what does that mean for the stock market well there's trouble ahead but not not quite yet”
Based on total market cap as percentage of GDP metric alone, the stock market is 40% overvalued relative to historical averages
“these are numbers are off the charts in my estimation the stock market is 40% overvalued based on that metric alone”
Dollar strengthening alongside capital inflows to the United States as a relative safe haven creates an 'imperial circle' where the dollar continues to strengthen as assets flow in and US markets outperform globally, sustaining dollar strength even as it has declined 10% from its high while remaining elevated versus COVID levels
“I think it's possible again know for sure what we I think it's possible and perhaps even likely that we get this Imperial Circle where the dollar strengthens alongside the capital flows coming into the United States as kind of a relative Safe Haven to the rest of the world trade and so you know I I think we're largely seeing that now um you know ask assets continue to come into the United States the United States markets continue to outperform the rest of the world the dollar is you know 10% off it's high from a year and a half ago but it's still higher than it was at its highest point during covid”
The Fed and US Treasury are increasingly working at odds against one another, with Federal Reserve chair Powell taking a cautious, day-by-day approach to avoid appearing political and pivoting monetary policy around political events, which does not bode well for smooth policy execution
“because he is taking it one day at a time and trying to buy as much time as he is he is not Janet yellen's sandbox BFF ain't happening does not want to help her in her Mission does not like Donald Trump does not like Joe Biden and he wants to do as little as he can to appear political he pivoted on December the 14th to get it head of the Iowa caucuses”
Current gold price rise to all-time highs in dollar terms is not historically extreme because in real inflation-adjusted terms the true high was 1980 at $850 per ounce, which when adjusted for inflation at that time would equal approximately $3,000; gold is likely to reach $3,000 and beyond
“uh the current rise in the gold price again you'd think we'd be super excited we are we're not surprised in fact looking at it just in terms of dollar terms yes it's at all-time highs in terms of US dollar denominated terms but really in terms of real terms or inflation dusted terms the real high for gold was way back in 1980 when it was 850 because at the inflation rate that time if you adjusted for inflation you'd have a gold price of around 3,000 and we certainly see gold hitting 3,000 and then some”
Housing market has turned the corner with clear path forward; demand will increasingly focus on million-plus homes with lower-price home demand petering out, leading to slow housing market in coming year with prices declining 4 to 5 percent by year end
“so I believe that we have sort of turned the corner uh the path is very clear to me um even if rates go down we're going to get interest this is the spring buying season so people will be out there transacting but what we can see is that a lot of the transactions are for the million plus homes uh like higher price homes not as much lower price homes and I think that as that demand sort of Peters out plus the typical death divorce you know the dod default demand um we're going to have a pretty slow housing market this year and I believe we're going to end the year down in prices between four to five%”
Several natural resource sectors are at valuation lows that Rick Rule has never seen exceeded in his career, indicating exceptional current opportunity despite historical sector challenges
“mercifully for me several sectors that I feel are relatively attractive are on valuation metrics uh at lows that I have never seen exceeded in my career”
Bitcoin could experience pullback in 60-90 day timeframe making entry too late in the short term, but this does not contradict long-term appreciation thesis
“if I'm if you know if my time frame is I want to sell it in the next 60 to 90 days I mean we might have a pullback and it might be too late right the day then”
The thoughtful money conference event was perceived by attendees as providing high-value actionable insights with multiple positive feedback comments describing it as 'boatload of insight', 'wonderful day', and 'well worth time'
“this day has been a boatload of insight many thanks great conference today my brain is absolutely full wonderful day well worth my time wonderful information pack conference today and what a day thanks Adam and all the guest speakers”