AIA Free Email 8.13.24

MacroVoices #440 Louis-Vincent Gave: What Just Happened?

Louis-Vincent Gave is one of my favorite commentators in this interview by Macrovoices Eric Townsend. They discuss the following:

• Market Correction & Bear Market Potential

• AI Bubble Bursting & Its Impact on The Market

• Gold Prices & Emerging Markets

• Uranium & Copper Markets

• China’s Energy Superiority

• FED Rate Cuts 

Buy The Dip? Or Embrace The Rotation?

Back in 2000, when technology stocks hit the wall, one of Gavekal’s first clients told us: “It’s OK. Bear markets serve an important purpose: they return capital to its rightful owners.” Behind this cynicism lies an inherent truth. Bear markets do tend to shake out “weak hands,” clean out retail investors, and punish those who operate with too much leverage. Another key function of bear markets is to transfer leadership from one country or sector or asset class to another.

This brings us to today’s single most important question: is the current shakedown in the Nasdaq, Nikkei, and US dollar an opportunity to buy more of these assets on the dip? Or is it now time for investors to look for new stories?

The answer to this all-important question might well be provided by the Federal Reserve. Unsurprisingly given the recent market action, the clamor for the Fed to cut interest rates is now as loud as a pair of Justin Trudeau’s socks. But what would a cut mean for asset prices?

I like to sell popular stock themes and buy unloved sectors, companies, and countries that have some catalyst that will cause the market to revalue the story higher.

For several decades, the US has moved from an economy that actually produced goods to a service-based financialized economy. Ignoring investments in real, tangible assets is now coming home and biting us in the backside. I believe trillions will need to be spent to fix this situation. This is one of my major themes for the next several years.

What happens if you buy whenever CNBC has a “Markets in Turmoil” special

The percent of the time you would experience positive returns: 100%

The average 1-year return: 40%

I understand this isn't very objective, as it only goes back to 2010. Nevertheless, I find it a fascinating item. I did not realize CNBC had this many “Markets in Turmoil” specials. However, I don’t watch financial TV unless it is on at the gym. I have always considered it more financial entertainment than news anyway.

Another reason why so many countries want to join BRICS?

"The US is imposing sanctions at a record-setting pace again this year, with more than 60% of all low-income countries now under some form of financial penalty, according to a WaPo analysis."

The US has lost the plot. Everyone is now open to sanctions. No value is placed on pragmatism or finding mutually beneficial outcomes. The US thinks it is the lone “hyper-power,” so do what you are told or else. We don’t have that kind of power anymore.

No wonder so many countries are petitioning to join BRICS. This is not a great way to conduct late empire realpolitik, especially when we have outsourced so much of our economic needs to others. We also need foreign buyers for our trillion-dollar-per-year deficits.

It is just part and parcel of the decline of the American Empire.

That is it for this week. Thanks for checking AIA out.

To your investing success,

John Polomny

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