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David Rosenberg: We are Back in a Bull Market for Gold

David started his career on Bay Street in Toronto as a financial economist at the Bank of Nova Scotia on October 19, 1987, which was a rather auspicious day for one to begin their career. Black Monday taught him the difference between a bear market and just a correction and the importance of liquidity. Later, he went to work for Merrill Lynch eventually becoming their chief economist in New York. The key to success for him was to look at the macroeconomic picture and then to add a market call. He says, “You need to be able to see the whole field, and you can’t be stubborn.”

Assessing commodity valuations is far more difficult than evaluating the bond or equity markets. Sentiment is important, but commodities each respond to different factors. For example, precious metals respond differently from industrial commodities which rely on global growth.

He was surprised that American’s were using their houses as an ATM back in the early 2000s and the housing boom lasted far longer than he expected. This caused him to issue warning signs way too early and resulted in him missing out on most of the equity rally.

We have hit the peak on the interest rate cycle and the economic cycle and interest rates are going down from here. Since last fall 20% of global bonds have gone into negative territory. Gold is now in the early stages of a bull market. Central banks play a very important role in suppressing risk premia. This leads to a misallocation of resources, but as long as they are involved, they wield massive influence that should not be underestimated.

Time Stamp References:

0:45 – Davids surprising career start.
3:00 – Getting the macro view of the market.
5:10 – The difficulty in valuing precious metals.
6:30 – Central banks pivoting around the world.
8:45 – Market timing is tricky.
10:30 – Housing bubble and being too early.
13:00 – Globally leverage keeps increasing.
14:50 – Interest rate cycle and economies have peaked.
15:20 – Interest rates and bonds will decline.

Talking Points From This Week’s Episode
• The recent pivot by central banks is signaling a time to buy gold.
• 20% of the world’s bond market is now in negative rate territory.
• Central banks have massive influence over markets.
• The interest rate cycle is rolling over.

David Rosenberg is Chief Economist and Strategist for Gluskin Sheff + Associates Inc. He brings 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 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. David has offered a month trial to interested listeners of Palisade for his daily research piece. Click Here

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