“Gold is a place you want to be. I think that it’s partly because its inversely correlated with interest rates. But it’s also an insurance policy when things go wrong,” David Rosenberg said. “There’s no such thing as a no-brainer, but this is close.”
Gold is off to a terrific start this year as strategists from Goldman Sachs to UBS Group AG called for 1,600 oz even before the Iranian crisis impacted global markets. The precious Yellow metal has gained about 33% since August 2018 and was trading around 1560 oz Monday.
Japan’s stock market is 1 that’s a “blind hold” for Mr. Rosenberg. Female participation rates have risen to levels higher than the OECD average and the nation has opened its doors to foreign labor. The country has also pushed companies to distribute dividends, introduce and/or expand share buybacks and have allowed for foreigners on corporate boards as shareholder activism picks up. “This is revolutionary in Japan.”
Bond-proxies in the stock market, or what Mr. Rosenberg calls “bonds in drag” are also good investments as the economy heads into a downturn. Utilities, REITs and pipelines, which he calls asset-backed cash flow generators, are worth holding.
“It’s really more about putting together a portfolio of stocks — non-cyclical, liquid, strong balance sheets, with not much of a refinancing calendar that have been able to increase their dividends,” he said.
“Downright cheap” energy stocks are also favored by Mr. Rosenberg. “Energy stocks are not priced for WTI where we are right now. They are priced for something that’s gotta be at least 20%-30% lower.”
Defense stocks are a cheaper way to boost exposure to tech as countries beef up military spending. “Defence is actually a technology. You can buy it at a lower multiple. Everybody is spending more money on military. The one thing that Trump has done, he’s done a lot of stuff, he has successfully pressured the NATO allies to spend more on military.”
The Fed’s asset purchases have created “so much liquidity” in global markets that it should be concerned, Mr. Rosenberg said. “There’ll be some other solution than just the Fed expanding its balance sheet in perpetuity,” he said. “Because that’s what’s creating this bubble.”
The US and Canadian economies will slow and central banks will cut interest rates. Eventually, the Fed will have to print money and the Treasury will have to distribute it to the public to stimulate growth, the so-called “helicopter drop” of money.
“There is going to be an end game and it is the magical money tree,” he said.
Editor’s Note: Mr. Rosenberg is the founder of Rosenberg Research and Associates Inc. after spending 10 + yrs as chief economist at Gluskin Sheff & Associates Inc.
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