Latest / Financial Survival Network / Beyond the Ballot: Exploring the Potential Long-term Effects of the Elections on the Global Stage - Professor Joel Litman #6127

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Beyond the Ballot: Exploring the Potential Long-term Effects of the Elections on the Global Stage - Professor Joel Litman #6127 · Financial Survival Network

0:00
Speaker 1: Of course, you know, the world realizes that with those
0:02
Speaker 1: two elections, you cannot trust the Redmond b and you
0:05
Speaker 1: cannot trust China, you cannot trust the Ruble of being
0:09
Speaker 1: any health, and you cannot trust Russia. And for that matter,
0:12
Speaker 1: the whole world is reorganizing, even more so around us
0:15
Speaker 1: in every way, and the US is going to benefit
0:17
Speaker 1: from that a big way. And I bring those two
0:19
Speaker 1: elections because I'm arguing that the way the biggest countries
0:22
Speaker 1: in the US, whether it's the sp five hundred, Russell
0:24
Speaker 1: three thousand, are taking advantage of that global reorganization.
0:29
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0:56
Speaker 3: And welcome you are listening to and watching the Financial
1:00
Speaker 3: Survival Network. I'm Carrie lust your host, and with us
1:04
Speaker 3: today is somebody I'd met at a Rick Rule symposium
1:08
Speaker 3: and you're going to like him a lot. His name
1:13
Speaker 3: is Professor Joel Littman, and he is chief investment strategist
1:19
Speaker 3: at Altimetry, which.
1:20
Speaker 4: I'd like that name, by the way.
1:22
Speaker 3: That is great branding, gives you a really good feel
1:25
Speaker 3: of what you do. And well, he's got some views
1:30
Speaker 3: on what's happening now on investing. He's a visionary, a
1:34
Speaker 3: forward thinker. Joel. We were talking pre call about the
1:40
Speaker 3: Internet boom and your view was, hey, in five years,
1:46
Speaker 3: if you're not a dot com, you're dead. And here
1:50
Speaker 3: we are twenty years later, everybody's a dot com. So
1:55
Speaker 3: with that introduction, great to have you on. Tell us
2:00
Speaker 3: first election is on everybody's brain that you and I've
2:04
Speaker 3: been through a lot of election cycles. You know, it's
2:07
Speaker 3: kind of like that joke you just told me. If
2:10
Speaker 3: two lawyers jump off the cliff, one's personal injury and
2:14
Speaker 3: one's a corporate lawyer, you know who's going to win.
2:19
Speaker 3: And the answer is, you know everybody. Well, the case
2:24
Speaker 3: the political campaigns, you want to pick a loser. The
2:27
Speaker 3: American public has consistently been the loser in every election cycle,
2:32
Speaker 3: with maybe one exception during Reagan, since I've been voting.
2:36
Speaker 3: So that with that word cautionary statement, what is going
2:43
Speaker 3: on with the election and the markets. I don't care
2:46
Speaker 3: about the particular candidates, their positions whatever. All I care
2:50
Speaker 3: about is impact upon the market at present and.
2:54
Speaker 4: In the future.
2:55
Speaker 1: Well, I would say the two most important elections for
3:01
Speaker 1: the health of the US economy and the U stock
3:04
Speaker 1: market already happened. Preston was gigiping for life in China
3:09
Speaker 1: and the second was putent for life in Russia. With that,
3:12
Speaker 1: it solidified that you cannot trust Russia or China as
3:16
Speaker 1: doing business. Everyone knows, and you're looking at a re
3:20
Speaker 1: organizing and reglobalizing the world around US law, US sovereignty,
3:26
Speaker 1: US respect for other countries, sovereignty unlike China and Russia,
3:30
Speaker 1: respect for the almighty dollar, the protection shipping lanes, the
3:37
Speaker 1: financial system that for all its problems, and all these issues.
3:41
Speaker 1: Who would you rather do with or trust court of
3:43
Speaker 1: law and the United States or the court of law
3:45
Speaker 1: in China where no company outside China has ever won
3:48
Speaker 1: successfully sued a company inside China, with the exception of
3:52
Speaker 1: Michael Jordan, who I think won like fifty to sixty
3:55
Speaker 1: thousand dollars after they stole a billion dollars or more
3:59
Speaker 1: of revenues of Air Jordan without a single dime to
4:03
Speaker 1: him for use. And so the court was like, you win.
4:06
Speaker 1: They call out a Pyeric victory. Yeah, you're talking about
4:08
Speaker 1: a peric victory.
4:10
Speaker 5: Of course.
4:10
Speaker 1: You know, the world realizes that with those two elections,
4:13
Speaker 1: you cannot trust the Redmond b and you cannot trust China,
4:16
Speaker 1: you cannot trust the Ruble of being any health, and
4:19
Speaker 1: you cannot trust Russia. And for that matter, the whole
4:22
Speaker 1: world is reorganizing, even more so around us in every way,
4:26
Speaker 1: and the US is going to benefit from that in
4:27
Speaker 1: a big way. And I bring those two elections because
4:30
Speaker 1: I'm arguing that the way the biggest countries in the US,
4:33
Speaker 1: whether it's the SP five hundred, Russell Tree thousand, are
4:35
Speaker 1: taking advantage of that global reorganization, the speed with which
4:40
Speaker 1: they've become less on China and non dependent on Russia.
4:44
Speaker 1: It's some black market stuff going on, but for the
4:46
Speaker 1: most part pulling out and saying I want to protect
4:48
Speaker 1: my IP, I want to protect our work. And then
4:50
Speaker 1: you look at the tariffs and the things that have
4:52
Speaker 1: been put in, not just a tariffs, but it was
4:54
Speaker 1: Trump that originally said no, no, we're not going to
4:57
Speaker 1: allow our best super chips to be able to oh,
5:00
Speaker 1: our best technology and chips.
5:01
Speaker 4: To go to China.
5:02
Speaker 1: And the truth is the Biden administration doubled down on it.
5:06
Speaker 1: Trump put in tariffs on China, and the Biden administration
5:09
Speaker 1: is doubled down on that.
5:10
Speaker 5: The administration at.
5:11
Speaker 1: The beginning they killed the Keystone Pipeline, but then they
5:14
Speaker 1: went and issued more construction and building permits for oil
5:17
Speaker 1: and gas related projects than even Trump did. So in
5:21
Speaker 1: many ways, you just have to say, well, if Trump wins,
5:24
Speaker 1: we know what his policies are and they're gonna be
5:27
Speaker 1: good for the US stock market, in US economy overrole.
5:29
Speaker 1: I think that's easy to understand it. On social topics
5:32
Speaker 1: or whatever else, that's a different story. You can vote
5:34
Speaker 1: who you want talking about what's good for the stock
5:37
Speaker 1: market and what's good for businesses.
5:39
Speaker 5: There's your answer right now.
5:41
Speaker 1: If Coplo wins, If she wins, and I don't think
5:43
Speaker 1: she will because the electoral if not forgetting about the polls.
5:46
Speaker 1: From an electoral map standpoint, she has a super majority
5:50
Speaker 1: in certain states, but not enough to carry so many
5:53
Speaker 1: of the states. And so let's say though that Kamalo wins.
5:56
Speaker 1: I think that she is so concerned with popularity and
5:59
Speaker 1: she's so starat of doing what will be right, that
6:02
Speaker 1: she will go center or at least will not have
6:04
Speaker 1: Congresses backing to continue to be left of Bernie Sanders,
6:08
Speaker 1: because she has been left of Bertie Sanders, let's face it,
6:10
Speaker 1: as a senator, right.
6:12
Speaker 5: But it doesn't get it any more left than that.
6:14
Speaker 4: Right. Right.
6:15
Speaker 1: But as part of the Biden administration in the last
6:17
Speaker 1: three three years, they have been they did not raise
6:20
Speaker 1: taxes like people thought they would. They we still have
6:23
Speaker 1: the corporate tax cuts in place, which have been a
6:25
Speaker 1: big boon. The US was one of the highest corporate
6:27
Speaker 1: tax payers, which the laugh of curve, that's very, very bad.
6:31
Speaker 1: They were the business and you bring it down to something,
6:34
Speaker 1: you know, almost half at least forty percent cut you know,
6:37
Speaker 1: from thirty something to twenty twenty one percent, and you
6:40
Speaker 1: have a situation with US companies that they can compete,
6:43
Speaker 1: you know, in a much much bigger level, not just compete,
6:46
Speaker 1: but dominate because once you have that, all the US
6:48
Speaker 1: innovation and the R and D that's going on, which
6:51
Speaker 1: is bigger than.
6:51
Speaker 5: The rest of the world combined.
6:53
Speaker 4: Right.
6:54
Speaker 1: So when you think of these things, I don't know
6:56
Speaker 1: that this election given I don't believe Kamalair can go
7:00
Speaker 1: anywhere near as left as she has been as a center,
7:04
Speaker 1: and Trump, we know, will be very pro US economy.
7:07
Speaker 1: US markets would be very good either way. I think
7:12
Speaker 1: the S top five hundred is still going to continue well.
7:13
Speaker 1: I think it'll do, you know, better under Trump than
7:16
Speaker 1: I wouldn't Kamala arisp simply because the uncertainty of what
7:19
Speaker 1: kamal Airis might do. But the end of the day,
7:21
Speaker 1: my guess is she probably goes more center and even
7:24
Speaker 1: center right the way Biden has on somebody China, Tariff's
7:28
Speaker 1: economic policy, whatever else.
7:29
Speaker 4: That.
7:30
Speaker 1: No, I think you're going to find a very very
7:32
Speaker 1: healthy US stock market over the next four or five
7:34
Speaker 1: ten years, and still a good place to, you know,
7:37
Speaker 1: for a passive investor to say, if I don't want
7:39
Speaker 1: to spend any time, I'll just put all my money
7:41
Speaker 1: the S top five hundred that I won't need for
7:43
Speaker 1: five or ten years, all my four one K and
7:45
Speaker 1: the sp FI under all my ir in THISB five hundred.
7:47
Speaker 1: That is a very very smart move for anybody now,
7:50
Speaker 1: regardless of what happens with the these elections.
7:52
Speaker 3: Living so interestingly talking about markets, to me, I think
7:57
Speaker 3: the market has already put in it's uh, it's prediction
8:02
Speaker 3: that Trump.
8:03
Speaker 4: Is going to win. I don't know who's going to win.
8:05
Speaker 3: Honestly, I called twenty sixteen, I called twenty twenty this one.
8:11
Speaker 3: You know, my gut says Trump.
8:13
Speaker 4: But I really.
8:14
Speaker 3: Don't know, and I don't know in the in the
8:18
Speaker 3: scheme of things. Yeah, I think there's definitely important differences.
8:24
Speaker 3: But so we had this little mini crash three weeks ago,
8:29
Speaker 3: and you know, like my portfolio was still ahead even
8:33
Speaker 3: after the crash finished. As of today, I'm right back
8:37
Speaker 3: exactly where it started from.
8:39
Speaker 5: And so what was the significance, if any.
8:44
Speaker 3: Of that little crash and the direction from a lot
8:47
Speaker 3: of you out there, So I'm not minimizing it.
8:50
Speaker 1: Well, I mean, if you were, you know, sitting on
8:52
Speaker 1: you know, video and a bunch of the other names,
8:54
Speaker 1: then you really got hit hard. But if you're buying
8:57
Speaker 1: you know, the S and P five hundred being long
8:59
Speaker 1: this P five hundred, you're right, You're still up seventeen
9:00
Speaker 1: plus percent for the year, even including the quote unquote
9:04
Speaker 1: crash we experienced. The fact of the matter is US
9:08
Speaker 1: corporate earnings on a uniform basis and not the gap
9:11
Speaker 1: accounting You cannot trust the as reported numbers of this
9:14
Speaker 1: stuff on CNBC or Bloomberg all day. Those numbers are nonsense.
9:17
Speaker 1: But if you convert to uniform accounting the way the
9:19
Speaker 1: biggest investors, the way my clients, right, my readers, two
9:22
Speaker 1: hundred and thirty of the biggest three hundred money managers
9:25
Speaker 1: in the world look at things. They say, well, I'm
9:27
Speaker 1: going to look at those gap accounting numbers. I'm going
9:28
Speaker 1: to convert to uniform. You do see that uniform earnings
9:32
Speaker 1: this year it is, you know, again getting to record highs,
9:35
Speaker 1: and people say, well, the stock market is the record high.
9:38
Speaker 1: I'm like, well, earnings is a record high. So don't
9:41
Speaker 1: they go together?
9:42
Speaker 4: Right?
9:42
Speaker 1: The expectation of earnings will continue to grow into twenty
9:44
Speaker 1: twenty five. Again for the SP five hundred is very
9:47
Speaker 1: very strong bro sup board. I don't see any reason
9:49
Speaker 1: not believe that. So the stock market may take corrections.
9:53
Speaker 1: But to have thought that this is a bear market,
9:55
Speaker 1: it was just not supportable by any bear market we've
10:00
Speaker 1: ever experienced in history. Valuational loan never sends a market
10:04
Speaker 1: to a bear market. True bear markets occur because of
10:07
Speaker 1: ce prices. It's always been that way. You can go
10:10
Speaker 1: back hundreds and hundreds of years. And while there are
10:13
Speaker 1: credit issues going on with the banks right now, right
10:17
Speaker 1: and we have had a few bank failures and what
10:18
Speaker 1: have you, We're probably gonna have a few more. Given
10:21
Speaker 1: what's happening with commercial real estate and how family banks
10:23
Speaker 1: are loaned, you know, our loaning money or have loan
10:26
Speaker 1: in the.
10:27
Speaker 5: Commercial real estate.
10:28
Speaker 1: We're going to still have some particular office right it
10:30
Speaker 1: is going to still be very very very bad. But
10:33
Speaker 1: if you can access public debt markets, it's a very
10:36
Speaker 1: very very healthy environment. And you've never had a long
10:40
Speaker 1: term deep equity bear market in the United States and
10:44
Speaker 1: in most of the developed world without an accompanying balance
10:47
Speaker 1: scheet crisis in terms of the debt on the books
10:50
Speaker 1: of the companies, it does not exist. So any rollover
10:53
Speaker 1: in the market is a correction. We have to keep
10:56
Speaker 1: looking to say, is there are there any fish in credit?
10:59
Speaker 1: But right now, for the biggest companies in the US,
11:02
Speaker 1: and so the biggest companies have a correction, that's a
11:04
Speaker 1: buying opportunity, right And we'd still be very very bullish
11:08
Speaker 1: five to ten years for the S and P five hundred.
11:10
Speaker 3: So in my forty some odd years of investing. There's
11:14
Speaker 3: one rule that I have found to be a virtual
11:18
Speaker 3: absolute truth. I've never seen it not work, and that
11:23
Speaker 3: is stocks lie on a wall of worry.
11:26
Speaker 1: Yes, yes, always, always, yeah, coming out of a If
11:31
Speaker 1: you remember in two thousand and nine early to the
11:34
Speaker 1: single probably best time to invest in the stock market,
11:37
Speaker 1: welle of the three best times, at least in my lifetime,
11:40
Speaker 1: at you know, fifty five years old, probably the three
11:42
Speaker 1: best time invest in the stock market was March tw
11:46
Speaker 1: and April two thousand and nine, and the headlines then
11:49
Speaker 1: kind of a Wall Street Journal and everyone else was
11:51
Speaker 1: the stock market has fallen forty fifty percent, it could
11:54
Speaker 1: fall another forty fifty percent, and exactly the time.
11:57
Speaker 5: He could have been buying. And it stayed that way
12:00
Speaker 5: for the next two or three years.
12:01
Speaker 1: Like, oh no, it's gonna rest financial arm again, and
12:04
Speaker 1: we're still not out of the woods that wall of worry.
12:07
Speaker 1: And the stock market recovered in what two and are years,
12:09
Speaker 1: all the losses from the peak of seven to two
12:11
Speaker 1: thousand and nine recovered just two and a half years.
12:13
Speaker 1: And then had you held on another form for six years,
12:16
Speaker 1: you had already been doing, you know, unbelievably better than
12:19
Speaker 1: you would have thought was a purely passive investment strategy
12:21
Speaker 1: of just by five hundred.
12:24
Speaker 3: What about April of this year, Nobody everybody's saying recession, recession,
12:30
Speaker 3: recession at the and you know it takes off again
12:37
Speaker 3: and every yeah, right.
12:39
Speaker 1: Well, at the end of the day, you're buying the
12:41
Speaker 1: S and P five hundred, You're not buying the US
12:44
Speaker 1: economy and the idea that stock market the US economy
12:47
Speaker 1: are the same. Thing is how many investors lose money
12:49
Speaker 1: and stay out when they should it. Almost half of
12:52
Speaker 1: the revenue of the SB five hundred is non US,
12:57
Speaker 1: and the US management teams have been very smart picking
12:59
Speaker 1: and choosing where to go around the world to generate
13:03
Speaker 1: that extra forty to fifty percent of revenue on top
13:06
Speaker 1: of the revenue they generate like locally in domestic markets.
13:09
Speaker 1: The other thing that they've been very good of but
13:11
Speaker 1: is saying we're going to keep our balance sheets safe.
13:13
Speaker 1: The balance sheets of the SP five and are unbelievably
13:15
Speaker 1: well built, meaning yes, they have more debt than ever
13:19
Speaker 1: a structure of their payment and the low interest rates
13:22
Speaker 1: they have it at over the last three, four or
13:23
Speaker 1: five years.
13:24
Speaker 5: Is so low that even when they refy. It call
13:26
Speaker 5: it five percent.
13:28
Speaker 1: It's still some of the cheapest rates in all of
13:30
Speaker 1: his to be perfectly honest, which means they're safe companies,
13:34
Speaker 1: which means no chance of a massive bear market. I
13:37
Speaker 1: was saying earlier that even in two thousand, when people say, well,
13:41
Speaker 1: what about the tech bubble, I don't know if people
13:43
Speaker 1: realize there was a massive credit crisis in two thousand.
13:46
Speaker 1: The private markets were dried up completely, right, banks were
13:50
Speaker 1: in trouble, but no one reports that. They said, oh,
13:51
Speaker 1: it's a tech bubble that bursts related. No, it was
13:54
Speaker 1: a tech bubble. Yes, it was expensive. However, with a
13:58
Speaker 1: massive credit price is on the ballance sheets of US
14:01
Speaker 1: corporation and that's when you get to bear markets. So, yes,
14:05
Speaker 1: we could have a recession in the United States. We
14:07
Speaker 1: might be in one right now.
14:08
Speaker 4: We don't know.
14:08
Speaker 1: The p SSAM rule, you know, and looking at unemployment
14:11
Speaker 1: would say we're probably you know, unemployment versus average is
14:14
Speaker 1: sahm SAM rule would say we're probably in a recession
14:17
Speaker 1: right now.
14:18
Speaker 5: It's possible.
14:18
Speaker 1: That doesn't mean that US companies can't still produce record
14:22
Speaker 1: profits and people won't still around the world invest in
14:26
Speaker 1: those companies regardless of what's happening if there is some
14:29
Speaker 1: kind of rolling recession or pockets or recession or an outright.
14:33
Speaker 5: Two quarters of negative GDP in the United States.
14:36
Speaker 4: Yeah, yeah, I couldn't agree with you more.
14:39
Speaker 3: And yeah, it's just interesting that people have never accepted
14:46
Speaker 3: that truism because what it says is go against your emotions.
14:50
Speaker 3: And you know, like Warren Buffett, when there's blood in
14:54
Speaker 3: the streets, that's when you want to be out there.
14:57
Speaker 4: And then when times.
14:58
Speaker 3: Are really good, everything it can ever be bad again,
15:01
Speaker 3: that's when.
15:02
Speaker 4: You want to get out right right.
15:04
Speaker 1: Well, that plus a credit crisis. So euphoria by itself
15:08
Speaker 1: does not tell you when to sell the market. It's
15:10
Speaker 1: euphoria plus a credit crisis on the balance sheets of
15:14
Speaker 1: the companies that you're buying. You can have a credit
15:16
Speaker 1: crisis and souder loans, right, you can have a credit
15:19
Speaker 1: crisis of the US debt. That's not the same thing
15:21
Speaker 1: as yet. But you're not buying the US stocks. You're
15:24
Speaker 1: buying the US companies who are making money all over
15:27
Speaker 1: the world, and in so doing right, the earnings that
15:30
Speaker 1: you're getting there attracts global investors from all over the world.
15:33
Speaker 1: It still does the US market cap is more than
15:37
Speaker 1: the entire rest of the world combined, and rightly so,
15:40
Speaker 1: because US corporate profits. I have the uniform accounting you know,
15:44
Speaker 1: you know, we have a database of thirty two thousand
15:45
Speaker 1: companies globally.
15:47
Speaker 5: They all have different accounting regimes.
15:48
Speaker 1: Chinese accounting standards are different from from German accounting stands
15:51
Speaker 1: are different from UK accounting standards. We put them all
15:54
Speaker 1: in the same playing field, all thirty two thousand companies,
15:57
Speaker 1: so you get it through apples to apples comparison and
16:01
Speaker 1: US companies. The United States corporations generate more in corporate
16:05
Speaker 1: profit than the entire rest of the world's companies combined,
16:08
Speaker 1: which is why US stock market is bigger than the
16:11
Speaker 1: entire rest.
16:12
Speaker 4: Of the world combined. They line up.
16:14
Speaker 1: It's not a bubble, it's not a oh my goodness. Now,
16:16
Speaker 1: if there's a correction, all right, there could be, right,
16:18
Speaker 1: there could be. I'm just saying that I'd probably be
16:20
Speaker 1: a buyer, right if we see another decent correction.
16:23
Speaker 3: Yeah, yeah, I'm thinking. You know, corrections are just normal
16:28
Speaker 3: for the most part, Joel. What causes a correction.
16:31
Speaker 1: Well, it's you know, enough bad news and the things
16:35
Speaker 1: that it caused this one right where trouble with the
16:38
Speaker 1: I mean the current president dropping out of the race
16:40
Speaker 1: or being outright sick or getting COVID and then a
16:43
Speaker 1: horrible assassination attempt on truck that you know is still
16:47
Speaker 1: you know, people are still learning what on earth happened
16:50
Speaker 1: there and what's really going on?
16:52
Speaker 4: Right?
16:52
Speaker 5: And could there be more of these issues?
16:54
Speaker 1: Meaning is the safety anything like that of course is
16:57
Speaker 1: going to cause give you a reason when the stock
16:59
Speaker 1: market it had reached such highs and such mo metal,
17:02
Speaker 1: but calling five percent is just enough for people to go,
17:05
Speaker 1: oh yeah, but let me go buy back in because
17:06
Speaker 1: at the end of the day, the corporate earnings are
17:08
Speaker 1: not rolling over and as long as those earnings that
17:10
Speaker 1: keep going up, well, why want the stocks? Right and
17:13
Speaker 1: with very very sick balance sheets from a credit standpoint,
17:16
Speaker 1: unbelievably safe, really amazing that the c OUs for that.
17:20
Speaker 3: One thing I learned in you know, in my investing,
17:24
Speaker 3: is that you may love or hate big companies, but
17:28
Speaker 3: big companies are always, in the long run way more
17:32
Speaker 3: stable than smaller companies. And I've had these magical small caps,
17:37
Speaker 3: some of them have done really well, but a lot
17:40
Speaker 3: of them, I should say not most a lot have
17:42
Speaker 3: blowed up. It's unusual for a company and the S
17:46
Speaker 3: and P five hundred to just walk in one day
17:48
Speaker 3: and the thing blows up for no reason that anyone
17:51
Speaker 3: could figure out.
17:53
Speaker 1: Yes, and the size of the companies, their ability to
17:59
Speaker 1: access capital from a number of different places that a
18:02
Speaker 1: small five million, ten million, one hundred million dollar business can't, right,
18:06
Speaker 1: the ability to access to public debt markets and to
18:08
Speaker 1: get investors in debt from all over the world. Not
18:11
Speaker 1: just inequity gives flexibility to large companies that does allow
18:16
Speaker 1: them to one of the storms in a way. And
18:18
Speaker 1: so again for purely passive investing, S and P five hundred,
18:22
Speaker 1: next five ten years are going to do very.
18:23
Speaker 5: Very very very well, right, very well.
18:25
Speaker 3: So a while ago, basically the SEC kind of banned
18:29
Speaker 3: the Chinese companies from our stock markets.
18:32
Speaker 5: Why would they do such a thing, j'all? Well, I
18:34
Speaker 5: think there were like five years late in doing it.
18:36
Speaker 1: Eight years really never unallowed, right, It's because we have
18:40
Speaker 1: an intertional data base. One of the things we saw
18:42
Speaker 1: was companies in China that were filing financials with the
18:46
Speaker 1: New York Stock Exchange or the NASDAQ or whatever, or
18:49
Speaker 1: with the SC filing with the SEC, and the numbers
18:53
Speaker 1: were different than the numbers that they're filing with SEIC,
18:57
Speaker 1: the SEC of China. So one thing we found this
19:00
Speaker 1: so interesting is that Chinese companies are perfectly willing to
19:03
Speaker 1: lie through their teeth about their revenues, their profits, you
19:06
Speaker 1: name it, when they file with the US, but they
19:09
Speaker 1: are unbelievably scared of filing in Chinese with a Chinese
19:14
Speaker 1: authority because they're worried about getting disappeared, disappeared for the
19:17
Speaker 1: rest of their lives. So there is because you do
19:20
Speaker 1: have these anti corruption campaigns within China that sweep through
19:23
Speaker 1: and suddenly people just go missing. And so when you
19:26
Speaker 1: get the financials directly from China from the SAIC and
19:30
Speaker 1: you start looking at those numbers and adding them up,
19:34
Speaker 1: you find that that one one out of three companies
19:37
Speaker 1: in China public listed companies is at risk through bankruptcy
19:44
Speaker 1: or default on their loans and balance.
19:45
Speaker 5: Sheets that are uglier than anything you.
19:47
Speaker 1: Saw in the nineteen thirties in the United States. What
19:50
Speaker 1: China is going to go through the next two decades
19:51
Speaker 1: is worse than the Great Depression. And yeah, and yeah,
19:54
Speaker 1: in the US, I'd say if we looked at the
19:57
Speaker 1: six thousand companies you cover in the US, maybe one
20:00
Speaker 1: percent have a risk of default one, whereas in China
20:04
Speaker 1: it's of six thousand companies we cover in China, thirty
20:07
Speaker 1: three percent thirty four percent have horrible ballot sheets. So
20:11
Speaker 1: it's not just the Chinese government, municipalities, the individual Chinese
20:15
Speaker 1: companies have greatly overlovered unbelievably. So it's going to be
20:18
Speaker 1: very very bad for the Chinese accounty for the next
20:21
Speaker 1: twenty years, twenty years, twenty years. That's why debt is
20:25
Speaker 1: a four letter word, because eventually all debts have to
20:29
Speaker 1: be have to be handled, paid off, defaulted, liquidated, forgiven, renegotiated,
20:35
Speaker 1: whatever it is, Yeah, deal with them and the world.
20:39
Speaker 1: And foreign direct investment has collapsed to zero, if not
20:42
Speaker 1: negative at this point in China, meaning not only is
20:44
Speaker 1: the net new investment falling that there's enough divestitures telling
20:48
Speaker 1: that you could argue foreign direct investment in China is
20:50
Speaker 1: now negative. So where are they going to get the
20:52
Speaker 1: extra money to do what you said, to renegotiate, to
20:54
Speaker 1: bail out to whatever they got one place to go
20:56
Speaker 1: in as Chinese government, and even the Chinese government doesn't
20:59
Speaker 1: kind of money to bail out a third of Chinese companies,
21:03
Speaker 1: which is what our data is showing at this point.
21:05
Speaker 3: And it's terrible, and that's part of the reason why
21:08
Speaker 3: markets in the US have been so good to that
21:11
Speaker 3: flight capital. Like I realized the Chinese scan when I
21:15
Speaker 3: went to the Bahamas and they were building this huge
21:18
Speaker 3: new development all of Chinese money in Nassau, and I
21:22
Speaker 3: realized they weren't building They said they were building it
21:25
Speaker 3: for Chinese gamblers to come visit. And I said, there
21:27
Speaker 3: is no way that Chinese gamblers are coming to the Bahamas.
21:31
Speaker 3: They're not into like beach vacation. Yes, they go to
21:35
Speaker 3: a casino, they stay in the casino and you never
21:37
Speaker 3: see them until you carry them out and you send
21:41
Speaker 3: them home. And I said, Oh, the beauty here is
21:44
Speaker 3: they're going to lose money. This place will never make money.
21:47
Speaker 3: And it's a way to drag money, to legitimately launder
21:52
Speaker 3: money out of China into the West so they can
21:55
Speaker 3: yeah and yes done. That's the whole belt I've been
22:00
Speaker 3: rape initiative. It is all about taking money out of China,
22:04
Speaker 3: getting it out because you'd never safe there. Eye up
22:08
Speaker 3: in the government and the economy you are bring it
22:10
Speaker 3: to the US and and find a safe place for
22:14
Speaker 3: it relatively.
22:15
Speaker 1: And if you if you lose twenty to fifty percent
22:17
Speaker 1: and moving it, fine, that's the cost of movingness. And
22:21
Speaker 1: so you can have the companies, these Chinese companies do
22:24
Speaker 1: those things and be losing money, but they're like, no,
22:27
Speaker 1: I'm not really losing because I've moved it out of
22:29
Speaker 1: Redmond b which is what every wealthy Chinese person is
22:32
Speaker 1: trying to do right now. One of the works that
22:36
Speaker 1: the Henley Partners did was that right now, thirteen thousand
22:40
Speaker 1: multi millionaire families are leaving China every year, thirteen thousand.
22:45
Speaker 1: So when you think of that and say, what's the
22:47
Speaker 1: average networks of you Chinese families five million to twenty
22:50
Speaker 1: million times thirteen thousand a year right flying out of
22:55
Speaker 1: there because they're like, we do not want to stay
22:56
Speaker 1: for how bad it's going to be. That is one
22:59
Speaker 1: of the designs. And where they're going. They're going to
23:01
Speaker 1: the US, They're going to Australia, They're going to Dubai
23:03
Speaker 1: if they can, They're going to Canada, right, some to Portugal,
23:09
Speaker 1: Greece right explain, oh we'll take them and anywhere they
23:12
Speaker 1: get a golden visa right anywhere they can get golden
23:15
Speaker 1: visa and and get out because they know that they
23:17
Speaker 1: got to get out while the getting is good, right,
23:19
Speaker 1: because it's going to be a bad twenty years for
23:21
Speaker 1: China's economy.
23:21
Speaker 4: Shot.
23:22
Speaker 3: Yeah, for the next ten years, you just put your
23:27
Speaker 3: money in the S and P and let it ride.
23:29
Speaker 5: We're purely passive investor.
23:31
Speaker 4: Yeah.
23:31
Speaker 1: I mean, if you if you want to just sleep
23:33
Speaker 1: at night and do nothing, well, keep taking that one
23:36
Speaker 1: thousand dollars every month out of your four one in
23:38
Speaker 1: your four to one k and put it one hundred
23:40
Speaker 1: percent into the SEP five hundre.
23:41
Speaker 5: There's no reason to be.
23:43
Speaker 1: Fifty to fifty bonds or sixty forty or some crazy
23:45
Speaker 1: thing like that. Not if you're not going to touch
23:47
Speaker 1: that money for five to ten years. There's plenty of
23:49
Speaker 1: time to benefit from the volatility of the S and P,
23:54
Speaker 1: like losing five percent or eight percent or twenty percent
23:58
Speaker 1: right during the pandemic and then watch it recover. People
24:01
Speaker 1: are rea isly in twenty twenty. The stock market was
24:03
Speaker 1: net up right. In twenty twenty proper the calendar year,
24:06
Speaker 1: the stock market was up right, And people are like, oh,
24:09
Speaker 1: but there was a pandemic shutdown like and still just
24:12
Speaker 1: to be five hundred and then they had a banner
24:13
Speaker 1: year in twenty one, right, twenty two did well, twenty
24:18
Speaker 1: three a little bit softer market, and then this year gangbusters.
24:21
Speaker 1: So you know the idea that you can time which
24:25
Speaker 1: year that's tough, I could say nope, but to be
24:29
Speaker 1: able to say for the next five to ten years, yes,
24:31
Speaker 1: US equities all right, So one thing, like we talked
24:35
Speaker 1: the companies, the stock market's doing well, whether the country
24:39
Speaker 1: is doing well or not, a lot of their profits
24:42
Speaker 1: s and P five hundred and I remember thirty five
24:45
Speaker 1: forty percent comes from oversee some company sixty seventy percent.
24:49
Speaker 4: Yes.
24:50
Speaker 3: The death the US budget the term they did say
24:53
Speaker 3: it does that give you a pause for worry or concern.
24:56
Speaker 1: I mean it will if Congress can't get to handle themselves.
25:00
Speaker 1: But at this point right now, no, the US does
25:03
Speaker 1: not have a dead issue whatsoever.
25:05
Speaker 5: It's why that every time the.
25:06
Speaker 1: US says we're doing another round of treasuries, they get
25:09
Speaker 1: oversubscribed by people around the world who want dollar denominated
25:13
Speaker 1: triple a interest. The idea that I don't know, Fitch
25:15
Speaker 1: had the US government double A. I'm like, if the
25:18
Speaker 1: US isn't triple A, nobody is, so I even have
25:20
Speaker 1: the rating. No, the US is still triple A. And
25:23
Speaker 1: the reason is even at the higher interest rate levels,
25:26
Speaker 1: which are probably gonna get cut. But let's say they
25:28
Speaker 1: don't get cut. Right, we don't see even two rounds.
25:30
Speaker 1: So the US is beening what four.
25:31
Speaker 4: And a half percent?
25:32
Speaker 1: Oh, we can do the math, right, This'll do easy math.
25:35
Speaker 1: What's five percent of something trillion dollars. It's not hard
25:39
Speaker 1: to do that math and say, all right, a blend
25:41
Speaker 1: of five percent, some of it's still a two percent.
25:43
Speaker 1: Someone Still three percent is about a billion dollars a
25:46
Speaker 1: year in debt service. I better sorry, a trillion a
25:49
Speaker 1: year in debt serres for the US. Well, what is
25:52
Speaker 1: the US generating taxes every year? Because people are using
25:54
Speaker 1: this debt to GDP? And I'm like, why no government
25:57
Speaker 1: uses GDP. They can't just take the GDP and pay
26:00
Speaker 1: off their debts? Why is that TGDP the right measure?
26:02
Speaker 1: And this is an important point. The US, right, and
26:06
Speaker 1: every country in the world their main form of revenue taxes, right,
26:10
Speaker 1: they take their taxes. Sometimes there are one hundred percent,
26:12
Speaker 1: like Russia, right now is like one hundred percent tax.
26:15
Speaker 1: All profits of oil and gas go to Russia right
26:17
Speaker 1: at this point, So it's a it's effectively one hundred
26:19
Speaker 1: percent tax on that industry. China does that with some
26:22
Speaker 1: of their industries too, where the state right gets the
26:26
Speaker 1: bulk of whatever profits. But the fact is US companies
26:29
Speaker 1: are generating so much in profit. I mentioned that, And
26:32
Speaker 1: if the US companies can generate more profit than the
26:34
Speaker 1: rest of the world combined, that means the corporate tax revenue,
26:37
Speaker 1: even on a lower tax rate, right.
26:39
Speaker 4: Is more going out.
26:41
Speaker 1: Yeah, right, and so as that's coming in and at
26:43
Speaker 1: record levels. By the way, that Trump tax cuts at
26:46
Speaker 1: the New York Times and everyone said, oh, my goodness,
26:48
Speaker 1: Trump is just giving a tax break and whatever else.
26:51
Speaker 1: US companies today at a lower tax rate are paying
26:54
Speaker 1: more in taxes than they were at the higher tax
26:57
Speaker 1: rate just four or five years ago, right, Meaning the
27:00
Speaker 1: companies reinvested that money.
27:01
Speaker 5: They use it.
27:02
Speaker 1: It wasn't all dividends and share buybacks like the New
27:04
Speaker 1: York Times. If people saying, oh, this is just a
27:06
Speaker 1: handout to the rich. No, the companies using an R
27:08
Speaker 1: and D, they use an innovation, They use it to
27:10
Speaker 1: buy other firms they grew. They're now more profitable and
27:13
Speaker 1: paying far more in corporate tax day at a lower
27:15
Speaker 1: tax rate than they were to hire. So Art Laffer
27:18
Speaker 1: deserved the Presidential Medal of Honor that Trump gave him.
27:20
Speaker 1: He should get the Nobel Prize. But because it's so
27:22
Speaker 1: politically charged about taxation whatever, and the Europeans love taxes
27:27
Speaker 1: so much, right because of politicians, they're like all love
27:30
Speaker 1: their taxes, they're never going to give a Nobel Prize.
27:32
Speaker 1: And he deserves it in economics, like nobody in the
27:35
Speaker 1: last twenty years anyway. But all that together and you
27:39
Speaker 1: have the US generating more than what you call it
27:41
Speaker 1: next year five dollars of taxes and actullion dollars of
27:46
Speaker 1: debt service.
27:46
Speaker 5: That's a brainer. That's easy, all right.
27:50
Speaker 3: Okay, well, hey, we appreciate your views here, and I
27:54
Speaker 3: guess the best place to find you is altimetry dot com.
27:59
Speaker 3: They sir, sign for I just signed up myself on
28:02
Speaker 3: the list the show notes in the link rather than
28:05
Speaker 3: the show notes this interview on Financial Survival Network dot com.
28:10
Speaker 3: And if you're there, just sign up for a free newsletter. Professor.
28:15
Speaker 3: It was really an honor privilege Thank you Kerry. Great
28:18
Speaker 3: to talk to you. We'll definitely have you on again.
28:20
Speaker 3: Appreciate it.
28:21
Speaker 4: Great. Bye.
28:22
Speaker 1: Yeah we can talk some specific stock time and get
28:25
Speaker 1: it to some individual ideas.
28:26
Speaker 4: Was it just a macro? If you like? Whatever you like, man.
28:29
Speaker 3: I do, I do, and I'll have a list of
28:31
Speaker 3: them for you. Thanks again for coming on.
28:34
Speaker 2: Thank you Kerry, thanks for listening to Carrie Letz's Financial
28:37
Speaker 2: Survival Network, your solution to today's trying times. For the latest,
28:42
Speaker 2: go to Financial Survivalnetwork dot com. Financial Survival Network
28:48
Speaker 5: Now more than ever,