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