Transcription
I am very alone. I think out there in saying the lows in 2021 in terms of rates getting down to point four on the 10-year, and so, in most people's mind, that was the top of the bond market. I think there's one more higher high. I think the 10-year will go to zero. I think the 30-year will go to a quarter or a half. Short rates will probably go negative in this country, but I think it's very short-lived. It's probably the end of next year at the bottom of the bust or early 2027, and then I believe you'll see the tenure go from zero to very high teens by early 2030s because of inflation.
I've said all along here, people are, you know, always worried about what the Fed's going to do. I go, you know, the bond market's going to lead, the Fed will follow. And so I don't really worry about what the Fed does meeting to meeting. Ultimately, the bond market is going to recognize the economy slowing and inflation's going towards, you know, their targeting below. And so it'll happen in stages, but I think we're very close to another bond rally here that'll take, you know, the 10-year [music] probably towards 3%, maybe below 3%, and then from 3% to zero during the bust.
Well, keep in mind, my view is not by any means a consensus view or or the institutional view. So, and there'll be a shortage of yield, there'll be a shortage of returns. I'm also calling as an accompaniment to the bust an 80% bare market. So if the stock market's going down 80% [music] and short rates are going, you know, negative, you're going to be glad to get 2% or 1% on your tenure because you have no return anywhere else. Not to mention the biggest reason we'll get to zero is [music] to get 20 trillion, whatever the number is, into the system. The Fed will be buying every bond. So they'll be the buyer of last resort. I have kind of [music] laughed at all the worries about where's the foreign buying and what's going to happen when China doesn't buy our bonds and etc. You know, that may be an issue down the road, but it's certainly not going to be an issue next year.
I'm calling for a dollar down to 82, but I think most of that happens pre-bust or in the early stages of the bust. I think we'll see the traditional run to the safety of the dollar during the worst part of the bust because don't forget, we're not printing in a vacuum. Every central bank's going to be printing proportionally similar. So the dollar I think goes to 82 first, but then goes from 82 to 120 in a slight safety. And then post-bust, you know, dollar I think could go to 50, you know, over 10 years or over seven or eight years. So I'm not at all long-term bulling the dollar. I think what we're doing is, you know, we're going to be troubled and we are the biggest out there in terms of we're the ones have to bail everybody else out, or the Fed does more than anybody else. All that's fine in the short term, but ultimately it's going to lead to us having the biggest problems, too.
I am very bullish precious metals as we speak. I think the sharp pullback we had is over. And I think silver can go to 100 tier pre-bust. Gold can go to 5,000 pre-bust. And I think I'm probably conservative there. During the bust, I think almost all assets in treasuries get hit. So, you have to be careful that you're not standing on the south rim of the Grand Canyon looking across the north rim and thinking you can just hold these things right through, cuz there's a canyon in between. But post-bust, I'm going for 20,000 gold and [music] 500 silver, probably in the early 2030s. You know, if inflation does what I expect, you know, precious metals are going to be the top game in town.
By the way, I'm also calling for $500 oil by that time. So that's another reason why this is going to be a secular peak in the stock market. If it goes to 9,500 or 10,000 or 9,000, wherever that peak is, I think that peak will stand for decades. I'm calling for $30 oil in the bust, and we'll go from 30 in the bust to 500 by the early 2030s. When you print $20 trillion, you will have a recovery cycle. That's the important point. That's why they will be bailing us out. We will have, but it will not be a recovery cycle like the last 30 or 40 years, which was disinflationary. It will be an inflationary, commodity-driven, industrially driven cycle. We'll be reshoring. There'll still be a lot of that going on, bringing back manufacturing to this country. When you have to reindustrialize, that requires a lot of commodities. We've spent the last 40 years rationalizing down our capacity because industry, at least in this country, had, you know, gone away. So everything got to just-in-time inventories, and it was harder to find the resources, and companies got more careful about return on investment, etc. So we don't have nearly the capacity to meet what's going to be, you know, sharply higher demand, cuz when you print that much money and the activity is going to be focused on the industry, there's going to be a demand for all commodities, tin, steel, copper, and oil. And, you know, the demand goes up fast because you print the money in over the course of 12 or 18 months. And within, you know, with some lag, that pushes demand fast and will push it year by year by year through the cycle. You can't build capacity. It takes, you know, 10 years or more to build new fields, new oil fields, and all of that. I mean, they'll be able to expand some the capacity, but the demand will far outstrip the ability to meet it, and the only thing it can give is price.
The miners in bull markets usually outperform the metals, and I think that will hold true in the post-bust period. So if silver goes from, you know, let's say it goes to 100 pre-bust, goes down to maybe 40 [music] or 30 in the bust, and then goes to 500. So it's, you know, a 15-fold increase. Let's say miners probably have a bigger increase in that, at least the good miners. So, there'll be plenty of opportunities in stocks, but the broad indexes like the S&P and the NASDAQ and the Russell, etc. Keep in mind how the math works at the top. They're heavily weighted in this cycle's winners, right? So, technologies heavily weighted. Energy's 3% of the index or whatever. So coming out of it, you'll still have the heaviest weightings in the sectors that were last cycles winners and the lowest weightings in the things you should own. So that means if you're a passive investor, your portfolio is upside down. You're buying the wrong things. By the end of the cycle, it'll be flipped, and energy will be the top of the index, you know, will be the heaviest weighted, or commodities will be, industrials will be heavily weighted. Technology will probably be somewhere in between because we'll still be seeing AI and other, you know, technological things [music] winning. But overall, growth stocks will be hurt very badly by rising interest rates. Consumers are not going to be in good shape after getting hit hard in the bust and then facing inflation. Real estate's not going to be doing all that well because mortgage rates are going to go through the roof. So, price of your homes are probably going to be down, etc. So, utilities probably won't be doing well because they're more tied to their dividends. So you go across the board, and basically, as I've known through my 52 years of doing this, every cycle has different leadership, and if you stay with the old leadership, you end up regretting it.
From the mid-80s, financial institutions, as a financial industry, recognize you got the rat going through the snake. You know, you've got the baby boomers who are now beginning to accumulate assets, starting to think about retirement. And so right around then is when they said, "We've got to change our industry." It used to be turn 'em till you burn 'em. You know, stock broker dials you up and says, "Hey, I got a good idea for you." And they went to asset accumulation. It's time in the market, not timing the market. And if you listen to them from the, you know, mid-80s till now, you know, index funds typically outperform most active managers. It was great advice. It worked well. Now, we're coming to a period within months where it is timing the market because if you just ride this through, you're going to be devastated. You know, first of all, if your index goes down 80%, and I don't have a crystal ball, so it may not be 80, it might be 70 or what have you, but it's going to be a big decline. If it goes down 80%, you have to do a lot. Like, you can quadruple coming out of the bottom, and you're not getting back to where you were. So, it is really an important understanding that the advice that got you here was great, but it's not going to be the good advice going forward. And then secondly, is that question of coming out of the bottom, index funds will have a triple, quadruple, but if my numbers are right, it's still going to fall thousands of points short of the S&P top. So you can have a big, it's not that this is the end. There is money-making opportunities on the other side, but understanding that the leadership's changing and understanding how an index is made up. It really makes sense then to become more focused on the leaders of the next cycle early on and set yourself up so that in the ensuing five or six or seven years, you've been able to accumulate assets that may be the difference between you being able to survive what's coming after that or being just hopelessly lost.
Because if I'm right about a collapse of the system, not to be gloom and doom, but if I'm right about that in the mid-30s, that means we could have 50% unemployment, no unemployment system, no welfare to speak of, limited Medicaid or Social Security, if any Medicaid, and, you know, people just desperate and not being able to turn to a government for help. Maybe that's dire, maybe that's extreme, but whether it's to that degree or not, that's where we're headed. And so you really have less than a decade now, probably seven or eight years to make the right moves to set yourself up to at least have a fighting chance after that. Certainly the worst case doesn't have to happen. It's my forecast. Putting all those pieces together. You know, we could have a recession without a bust, and the stock market could fall 30 or 40 or 50% instead. I think more towards 50 is likely given how extreme we are now. The Trump policies could maybe offset some of my worries and, you know, surprisingly have all this capital flowing in here and things help offset and soften some of that blow. Maybe I'm wrong that the banks are as leveraged as they are overseas and that, you know, we can avoid some of that. Japan's a worry. I mean, they've defied logic in basically printing money or, you know, buying up all the bonds and keeping zero interest rate policy there for so long. To me, I'm a more or less a monetarist. At some point inflation breaks out, and you can't hold those rates down, and they're very, you know, dependent on that. So, I think they're a wild card in the bust, but, you know, Trump's progrowth policies and deregulation and all those things may soften the downside and things, but again, I'm calling for global bust, and Europe's not in good shape. Canada's not in good shape. China's not in good shape. Emerging market economies are not in good shape. And I just think, you know, cycles have not been done away with. You're going to have down cycles. And again, I go back to kind of a simple logic that when we're this leveraged, the downturns get more exaggerated by that. So, it's unusual because normally if you have something like we had in 2008-9, that's a once in a generation thing, and you kind of come out of that, and it's not, you don't see something worse. But I just think we didn't fix problems in 2008-9. And in fact, leverage is far higher today than it was in 2008. So, we really are in worse shape, not better shape.