David Rosenberg: The Financial Path We are on Will Make Gold Skyrocket
David feels that the yield curve is a critical forward-looking indicator to watch as it reflects sentiment in the bond market. Evidence of the onset of a recessionary period is all around us and is showing up in the housing markets as residential construction has entered a prolonged downturn. Tariffs persist and continue to cause economic damage and uncertainty for global trade and manufacturing.
The economy is like a bunch of stacked dominos, a shock to one part will have rippling effects into other areas. Until now, the consumer has been holding everything together, but when businesses cut capital spending, they invariably cut hiring. There is a vast divide today with political views around much of the world, and another U.S. election cycle is looming.
Recessionary risks are materially higher today than they were at any time in the past couple of years. Authorities will do everything they can to prevent these recessionary forces, but even they aren’t bigger than the business cycle. This is the most extended economic cycle in history, and inevitably, even the hubris of central bankers will be overcome.
David says, “Charts don’t lie, and the chart for gold looks fantastic.” Gold has rallied this year against every currency in the world. The Fed is peaking at lower and lower rate levels during each market cycle, and the implications are for negative interest rates, which means gold would skyrocket.
He likes to occasionally reread “Manias, Panics, and Crashes” by Charles Kindleberger, particularly during crisis periods. More recently he recommends, “The Rise and Fall of American Growth.” by Robert Gordon and “The Tragedy of Great Power Politics” by John Mearsheimer.
Time Stamp References:
0:40 – Recession and the yield curve.
3:50 – The economy and recession signs.
7:00 – Excellent outlook for gold.
12:40 – Books and the current financial landscape.
15:45 – Political polarization and hedging for a recession.
Talking Points From This Week’s Episode
• Investors should watch the yield curve.
• A high chance we are entering a recessionary period.
• Fantastic outlook for gold in a negative interest rate environment.
• Favorite books on current economics and history.
David Rosenberg is Chief Economist & Strategist for Gluskin Sheff + Associates Inc.
Mr. Rosenberg is the Firm’s Chief Economist & Strategist with a focus on providing a top-down perspective to the Firm’s investment process and Asset Mix Committee. Mr. Rosenberg received both a Bachelor of Arts and a Masters of Arts degree in Economics from the University of Toronto. Before joining Gluskin Sheff in the spring of 2009, Mr. Rosenberg was Chief North American Economist at Merrill Lynch in New York for seven years, during which he was consistently ranked in the Institutional Investor All-Star analyst rankings. Prior to that, he was Chief Economist and Strategist for Merrill Lynch Canada, based out of Toronto.
Mr. Rosenberg is also the author of Breakfast with Dave, a daily distillation of his economic and financial market insights. To subscribe to Breakfast with Dave, please click here.