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 [Music] [Music] I'm Charlotte McLoud with investing news.com and here today with me is Mackie penberg partner at on gers thank you so much for being here great to have you back once again it's great to be back Charlotte looking forward to it yeah really looking forward to catching up our last conversation was a year ago at this same show so so much has happened and you were bullish on gold at that time as well as the markets as the Fed was due to start easing which we saw so now that the FED is actually started

cutting what's what's your outlook for markets in 2025 yeah I mean I had to kind of hold my nose last year and be risk on um despite kind of having fundamental problems with this market bubble but the Fed was clearly signaling a doish 2025 and my simplistic uh reduction of how markets work is when a central bank is doish markets tend to rise and when a central bank is hawkish they tend to retract and last year at this time it was fairly obvious from November all the way into December and

January we met here that Powell was uh throwing in the towel on raid hikes and going into cuts which is precisely what happened in 2025 it wasn't 2024 it wasn't until later in the year but it was already signaling and the market again being pavlovian just the the carrot dangling of a rate cut got markets galvanic and hopeful and it was a tailwind and we saw a pretty decent year in the S&P as expected um but again rate cuts to me were a sign that despite not hitting Target inflation and not

beating the inflation um taining it that rate Cuts Were A desperate move at the same time so it was kind of bipolar but it certainly was a Tailwind for the markets but rate Cuts were also a Tailwind for gold and um and so obviously Gold's pit nominal High in many currencies including the US dollar it's over 27% and in the Euro Zone Ryme it's over 33% and the Swiss frank 36 so obviously a very good year for gold again that wasn't just Market genius I wasn't alone in that I certainly was bullish for both which is

ironic because usually I'm very cynical I still am cynical about markets and we could talk about this year but um you know again with gold and we'll get into more detail for gold it's always simple because debt never changes and there is a debt collapse driven by sovereign debt crisis not just in the US but globally and gold doesn't rise because it's in a bull market it rises because Fiat money is in a bare market and that you know just simply isn't going to change it hasn't changed certainly hasn't changed

yet and um so 2024 was again totally easy to see but fairly accurate um and to your question now um on 2025 on the markets U I'm less bullish um again not just the pavlovian see what the FED does already uh Powell it is fascinating by the way that we have to spend so much time talking about a central bank to discuss markets because technically ideally we should have natural supply and demand free market Discovery fundamentals balance sheets Price to Book price to earning a basic Benjamin Graham Buffet

analysis of markets but what we're really talking about first is the central bank and again as in this year um Powell is still doish but moderately doish you know he's talking about rate Cuts but throwing out the possibility of less rate Cuts or even a potential rate hike just that kind of moderate language as opposed to strongly doish language that is already a signal that the markets are a little curious or concerned again it's not the only Factor the other thing that's really amazing

after this year with the S&P and again the contrast of the market with the real economy is appalling and we could talk about those recession indicators but regardless of the Main Street economy which is just a Working Poor disaster in a lot of ways stressed by years of high for longer but regardless of the the economy being poor there are certain basic indicators that are gravity defiant for only so long again they're simple stupid but the buffet indicator market cap to GDP I mean S&P to uh GDP

That's a classic indicator and it's at all-time highs and that's just the indicator itself at 204 208 that you know that those come in rare moments and usually those Peaks are followed by significant selloff so the potential for gravity and mean reversion reasserting itself in the markets is more real this year than it was a year ago the fact even that Buffett himself is so heavily Into Cash is a leading indicator of risk off too it's different from last year there's another indicator that I used or

I used to use certainly when I was trading risk assets is the S&P to currency and issue and that's another ratio you can find the charts it's also nearing all-time highs these are kind of large scale obvious simple stupid I'd say indicators that this Market is is really really overvalued the other thing about this Market that's changed dramatically and gotten worse since last year is the narrowness of the market um you know in the 70s I wasn't trading but when I grew up we had the nifty50 and

that was considered kind of unique then we had the the the the you know the the Magnificent 7 or the Fabulous Five or now the triumphant Trio it just keeps getting more and more narrow Nvidia again not saying it's a bad company overvalue company like I saw in the dotcom bubble I saw companies like lucd and Microsoft and Qualcomm all good compan Cisco good companies just gross grossly overvalued and they took significant hits once the net income margins went down Nidia is the classic example this year of an overvalued but

St strong company but the fact that its market cap I mean Rose so quickly and you know Nvidia market cap is you could 12% of US GDP so even the fact that this Rising ripping Market is so narrow or that the NASDAQ has a PE of 49 now the Bulls would say yeah these narrow you know very overvalued stocks they have higher pees but the rest of the S&P 494 have PES of 16 or less or more fair valuation but the problem is when a market is this narrowly led when the big boys sink and they all do they don't die

they just sink they don't necessarily drown they just get re-evaluated when that happens All Ships go down in a lower tide they take them with them so the narrowness the broader indicators um these things are are very interesting and again it's not just a gold bug trying to be negative I'm going be relatively agnostic on the markets they will affect the gold price but it's you know Dr and Mueller um Jeremy Grantham Paul tutor Jones goodl in the bond market um most of the portfolio

managers that I know in the city or in New York or in London are going more and more to cash because it's just starting to feel that this is getting to the point again can't be timed just on Instinct but it's starting to look frothy and so all these combinations matter and then the Classics you know Benjamin Graham valuation still matters Charlie McKay on The Madness of crowd just starting to feel a little more maddening didn't even it did last year last year was so obvious because Paul

was giving you a red I mean a green light and you know I think even the mostly forgotten Robert frell that all markets mean revert unless of course the FED decides to nationalize essentially the markets and produce liquidity they probably will but it won't be until there's an uhoh moment and then the fire hoses and the Bazooka and the QE comes out for for a long time the FED has been focusing on rates to manage they only have two tools right rate cuts and balance sheet so every problem when you

when all you have is a hammer every looks like everything looks like a nail for now they've been working with rates Powell's kind of flip-flopping a little bit on that or text not being completely clear which is typical of pow but um the only other option they have if things really hit the fan is you know QE I think at some point uh we'll see QE to the moon but that's very hard to predict but for those stock Pickers out there what I would look at when you look at the markets one thing I've learned from

good portfolio managers I'll say it again look at the leading the leading stocks driving the S&P and the NASDAQ look at their net income margins they're Rising now when they start to go flat that's fine when they actually start to go negative and consistently negative that's when you can call close to a top and even when they fall it won't be in a straight line but right now there's still liquidity through the TGA through the reverse repo is drying up TGA has about 650 billion but there's always the

opportunity to Mouse click money out a thing if Powell's compliant and supportive or if he lets markets have natural price Discovery um it'll be very interesting but no matter what short long answer a short question not nearly as bullish as I was last year on the markets yeah yeah I think that's it's nice to have the long answer and then the succinct way was summing it up so it covered a lot of ground there and including I was going to definitely ask you about fed activities in 2025 which I

think you did a good job going over there I was reading a piece that you wrote kind of on your outlook for 2025 and you kind of explained there what people really need to pay attention to right now is the bond market and you point out that the feds real mandate is making sure that the bond market doesn't die so what would that look like in 2025 what's the state of the bond market right now yeah I keep saying in a lot of Articles and I I'll maybe for years kind of a play on shakes but the bond market

is the thing the bond market is the thing and really what is the bond market it's about credit credit is about debt and when you you understand that it doesn't take a lot of thought once you understand the fundamentals of it it really helps you understand all other asset classes and sectors and areas and topics because debt is the key stone for the ripple effect on everything we could talk about whether it's currencies whether it's the bond market whether it's fed policy whether it's the

precious metals Market whether it's currency risk it all comes from this debt collapse it's not Sensational anymore and this debt collapse is driven by sovereign debt that's gone too far clear in the US at 36.2 trillion in racing that's a sovereign debt problem the US is the home World Reserve currency in the 10year treasury so the US sovereign debt problem is a critical problem but you obviously have the same problem in Europe you have the same problem in Canada you have the same

problem in many countries ironically not in Russia as much as in China or other countries Russia has much less debt ironically but when you understand okay there's a sovereign debt crisis that they're over their skis and debt and that debt isn't sustainable and again 36 trillion is appalling does even include the 200 trillion unfunded liabilities so it's clearly unsustainable debt level and if productivity GDP or tax receipts are there well then you have a problem you have a Delta you have a gap and

typically central banks fill that Gap either directly through QE or taking from the treasury general account or exploiting the reverse repo markets or other mechanis of indirect QE but that is running dry in in the reverse repo and the TGA only has so much as I said and the other thing is you can issue more debt and float it the problem is for a number of reasons less and less buyers for those treasury auctions exist for two key reasons one again whether you agree with the bricks narrative or not there is a dollarization process

it's not overnight it's not going to destroy the dollar it's not going to replace the dollar but that process is taking demand away from the dollar and there's less demand for US Treasury so foreigners are buying less of them China and Japan in particular are key traditionally are two number one buyers of us treasuries are net sellers this year so the weaponization and not just the weaponization that's made other nations particularly the bricks nations less interested in our IOU our us 10year

the fact that our country is in so much debt makes us a less appealing IOU in terms of real or inflation adjusted returns for foreign investors too so this these factors all mean there's less demand for that bond market so when there's less demand bond prices go down and people need to understand this isn't rocket science when bond prices go down yields go up and Rising yields are like shark fins to the economy because Rising yields are the real interest rates it's not the FED funds rate it's not what the

fed or po tells you it's what the bond market tells you when the yield on the 10 year or these bonds start Rising those are like shark fins and they scare away a lot of things they hurt the S&P because the S&P is driven by companies that borrow and Rising yields are the price of debt the cost of borrowing so when they go higher that slows things down bond prices go down when bond prices are under threat when yields are rising stocks tend to go down obviously the rising cost of debt hurts households

and businesses and individuals uh it hurts mortgage it hurts real estate so I mean I think mortgage applications are down 63% this year in the US that's back to 1995 levels so again they're all connected from this topic of debt the purchasing of that debt lack of demand for that debt Rising yields are the sharks that are chewing on the hope of all these different sectors that's not Sensational that's actually happening now and that'll be a big challenge for any uh fed official or any incoming

president to try and control those yields and if they can't control them through GDP taxes treasury auctions foreign demand all of which are not as strong as they were years ago they're going to have to create liquidity or synthetic liquidity and that is currency debasing and of course that ties to gold too so again when you when you talk about debt you're really hitting every major area sector or talking point and it makes it fairly easy to track once you understand how terrifying Rising

yields are to just about everything in the economy accept the US dollar because Rising yields help the dollar uh and then the only real strong thing is the dollar everything else goes down but uh what's interesting about gold we can talk about is despite a rising Dixie dxy or Rising dollar gold is just decoupled it's still Rising so that's an interesting thing as well yeah yeah definitely we want to make it over to Gold I think I've got one more point to bring out before we go there and it's

you mentioned we've got a we've got a new incoming president in the US so I do want to get your thoughts I I know this is a big topic on how he plays into this and it's a little tricky to talk about right now because literally inauguration day is tomorrow so so but what what can you say about that because when we were in the leadup to the election I kept hearing well nobody's talking about the debt well it doesn't make a difference who's going to be president we do have Trump coming in with his efficiency

ideas so so what are we looking at there I mean it's a really important topic it's extremely hard to synthesize in three to four minutes um but it's very relevant obviously as you said tomorrow is there's many things you can say about Trump he typically does what he says whether it's whether what he does is successful is a very different thing again it's not meant to be denigrating him he has certainly more energy in Trump than there was in the last Administration whether the energy is for

good for bad Sublime ridiculous that's to be determined there is a sense that there's some sense that at least there's action um Trump has a few key themes the tariffs uh this department of government efficiency which we can talk about which again I'll just say the short answer is those are inflationary policies and he said he was going to beat inflation I think he may not uh said that disingenous I think he miss under or underestimates that I don't know if that's condescending I think he does um

and he he has this desire to be inflation he has this desire to cut spending he has this desire for tariffs and this government efficiency and before you can even look at all of those things which I think are going to be inflationary at the top of the Pyramid of that discussion is the key to him succeeding is to get debt to GDP down and the problem is with debt and whether it's him or I've said Santa Claus or Papa Smurf that's going to be hard for anyone so um I don't blame him in of

itself um it's going to be very hard unless he cuts severely into entitlements and military spending because entitlements military spending and interest on debt are 75% of the budget there's not a lot of room to play so if he really wants to take the debt part of the debt the GDP ratio down he's going to have to make a revolu AR change in entitlements or military that's very politically difficult to do the department of government efficiency and the pink slipping of 75% of the fat and

bureaucracy of DC is wonderfully Optics it's very good is love of waste and DC bureaucracy just like there is in any bureaucracy but 25% of GDP comes from government so if you just pink slip the Department of Education and a lot of waste on the Beltway in DC that has great Optics politically may even be necessary but you don't want to do that with a strong dollar because you're going to be letting a lot of people out there's going to be a decline decline in GDP just by the nature of government

spending and even with Elon Musk and Vic uh doing that again these are these are complex topics they take more than a few minutes but the question is does he even have the Mandate for that he has the mandate to raise tariffs through executive order DC is very embedded very full of political I hate to say the word prostitutes they they'll do whatever their lobbyists tell them they'll do what Their embedded structure is so they will sacrifice of values for the country they have for the good of their lobbyist

the question is with the majority in the Senate the house Etc can Trump really get vivec and musk to have full Reign to do the kind of things and get the support from the legislator we'll see um but again to to do the cutting of the fat in DC uh I understand that that will have an effect on GDP though and necessarily when you lay off L people when you have a strong dollar you put them into a levered economy you know 70% of GDP comes from the consumer if you've got less consumer strength that actually

makes GDP worse so he's battling a lot of moving Parts not saying he'll fail but it is certainly going to be important to do that with a weaker dollar and that's another topic but the other big topic of course is tariffs and and there's there's a there's a there's two ways to look at the tariffs on the positive side clearly for example I live in France the French have a 25% tariff on American wines I live in Bordeaux you can't find American wine in a French restaurant it's a simple example so you

can say heroically Trump is saying we've got to make changes there's imbalances in trade we got to play hard ball and this is how we're going to do it that's the positive side the extremes um 45% T to can 100% to breaks the trade outside that these are these are very dangerous things they're very inflationary things and I think um despite all the good intentions to reorganized fair trade which I understand and again this could be 30 minutes on this but I'll try and simplify one one small example of how

this you know history doesn't repeat itself but it Rhymes we did try tariffs in the 19 1930 under Hoover was called the Smoot Hall T Tariff Act blow the dust off the history um again it's not exactly the same situation but it's close and um the long and short it was when they did those tariffs it was a disaster first of all coover didn't get reelected both Smoot and Holly the Senators that it was named after didn't get their seats back it led to a massive amount of retaliation and Export

declines from us the Tariff you know the Tariff the wall maker so there's there's going to be reaction tit fortat and the question question is who can who can hold their breath the longest on this how much instability will it create how much inflation will it create how much um stress will put on our economy what the prot Trump Camp would say is yeah those are possible risks but the only way to bring to reshore manufacturing is frankly to punish American cios and companies offshore in Asia in South

America getting cheaper labor putting a huge you know pain on their products coming in so if they really want to have an American buyer an American Camp an American demand they better bring their manufacturing Bank to avoid those tariffs and I can understand the opposite of that so again there's a lot of if but if but going on Trump will definitely do what he says again whether that's efficient whether everyone cooperates whether the West will cooperates whether GDP cooperates but the bottom line is unless he gets the G

the debt to GDP ratio down he can't succeed because historically when debt to GDP crosses is the Rubicon of 100% we're at 125 I mean this is going back to Classic economics certainly to David Hume growth stalls by 13d and you need to get growth you need to get productivity in the GDP deregulation that Trump is going to offer that's helpful um but again that will not be enough he's going to have to really cut the debt side and the spending cuts that the Doge Camp will create isn't nearly

enough frankly fire a lot of people in DC it's a lot of jobs he can save 25 billion interest spens this by cut interest rates by 25 BBS so it'd be actually easier if fed If the Fed cooperates with Trump and that's a whole other issue too will the FED be accommodative to Trump if he is that what he wants he's king of debt as he says he's going to need rates cut and money printed to inflate his way out of this debt crisis we'll see we we will see and appreciate you taking this

massive topic and trying to break it down in this very short time and at a at a key turning point right now so hopefully maybe we give Trump a few months in office and bring you back and and try to work out in a in a longer conversation but for now so we want to get back to gold and I'll I'll finish on the note of gold because that's always important to our audience and I think this gives great context so for you I know you see gold this is a tool for wealth preservation uh and I think many of our

audience will see it that way as well but what is your outlook for gold in under these circumstances in 2025 yeah it was like a broken record but sad gold isn't it's easy for me because the rest of the world just keeps continuing to make the same mistakes and governments continue to make the same desperate mistakes hopefully there'll be a change at some point a Tipping Point but as long as the world and governments continue to to run deficits like they do and right now we've already we're we're

the fiscal quarter or the fiscal calendar for America starts in October and so we have October and November numbers we're already 690 billion in deficit in this and this is the fiscal year that Trump's inheriting I mean that is insanity that's where we were at covid so we're spending a deficit SP as if we we're in World War II at the same inflation adjusted currency adjusted numbers but we're not at War the reason we're running deficits is we simply up the GDP in the tax receipts so we're

going to monetize that um with liquidity fake liquidity which is inherently inflationary so your question about gold this is just an example of the debt disaster that our budget is in regardless of Elon regardless of vac regardless of campaign rhetoric those numbers are those are facts you can have your own opinions but those are facts and those facts tell me that we're going to need to synthetically support this broken debt Market again everything starts with the bond market it all comes back to debt and unfortunately the

policies to do that are going to be currency debasing policies so again gold doesn't rise Fiat gets weaker um it's certainly true even in the home of the world Reserve currency that's going to be true in all major currencies and so since 1971 all the major currencies have lost 99% when measured against gold so for me it's not that gold Rises Fiat money gets weaker it's not sexy it preserves money I look at dollars Canadian American South African Australian they're just ice cubes

beautiful ice cubes that are slowly melting whereas gold boring not so sexy holds its value and actually can go up in price appreciation optionality in this kind of market like we've seen this year it's outperformed the S&P which was had a blowout year and it's still outperformed but again are you not entertaining Gold's not doing enough it's it's a very misunderstood asset but we who understand gold for preservation purposes are certainly happy to see the speculation benefit or the price

appreciation benefit but we're not speculators um and it sounds very smug and I know for a lot of people that are worried about getting through the month this doesn't help them because they're trying to get growth and they're trying to get return the vast majority of my clients or our clients are in the stay Rich Camp not the get rich you can take your risk elsewhere you can take in crypto you can take in videoid you can take in Tech you can ride the roller coaster volatility and stomach churning

B I mean uh or go long some tech thesis but it's for for gold in our clients in 90 countries I never get a phone call ask about the price because we just know not smugly gold just sits there and holds its value well Fiat money is very busy losing its purchasing power so uh yeah we're very very strong on the preservation Camp speculating in gold is very difficult in the future is the options you know you have to be pretty good at that you can and but we're not and because we're not speculators we're

almost too confident you know gold of course isn't going a straight line of course not but we do know it outperforms Fiat money in the long term without exception just because central banks are our best friends they're trapped they're stupid there's no way out of this as Paul tutor Jones said all roads lead to inflation eventually um you know I would change my tune if we cut that GDP down significantly if a new Administration came in and played real hard ball with the military and with entitlements yeah

and honestly that would be what is necessary now it's just and you know Trump doesn't need to get reelected he can really do things now for the country without having to worry about reelection whatever he does he has to do it fast he's got two years till the midterm he's got a majority in the house this is the time and he's going to come out whatever you think of him and again subl ridiculous he's going to come out running with the boxing gloves on and he'll probably break a few plates in the

china shop when he does that but uh we're getting starting tomorrow and then this coming week we're going to see some pretty drastic changes yeah yeah undoubtedly I think that's maybe the one thing you can say with certainty heading into this year yeah okay so so we got through a lot still a lot that we couldn't put on the table this time but I think we'll we'll wrap it up here and and again I do hope maybe we can have a longer discussion in the future but great to have you here today thank you

thank you very much this is my pleasure thank you of course and once again I'm Charlotte McLoud with investing.com and this is Matthew penberg thank you for watching if you like this video make sure you hit the like button and subscribe to our Channel we'd also love to hear your thoughts so leave us a comment below [Music]