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The newly elected president, even before he was sworn in, threatened to take over Greenland, recapture the Panama Canal, and to make Canada the fifty first state. I'm Barry Riddolts, and on today's edition of At the Money, we're going to discuss whether the saber rattling has implications for your portfolio.
To help us understand all of this and its implications for your portfolio, let's bring in Jeff Hirsh, editor in chief of Stock Trader's Almanac, an author of twenty eleven's super Boom, Why the Dow Jones will hit thirty eight eight twenty and how you can profit from it and full disclosure. Jeff wrote a piece I want to say it was like twenty ten, talking about the upcoming super boom driven by the combination of war and inflation, and basically said the data suggests we should hit thirty nine
thousand by twenty twenty five. And I called him out on this nonsense. This is the single craziest thing I had and by the time you and I finished that conversation and you showed me that data was overwhelming. Not only did I you convince me, but I wrote the forward to that book that ended up coming out in twenty eleven. So let's discuss what war plus inflation means.
In the late nineteen seventies, your dad very famously said the combination of the Vietnam War and the oil embargo driven inflation was going to lead to a five hundred percent bull market, which kind of shocked everybody when he came out with it. But that analysis turned out to be exactly right. Explain the thinking behind this.
Yeah, we've still got some of the old thirty four to twenty T shirt. It's now thirty four to twenty T shirts, But yeah, that's right. In seventy six, founder of the Almanac, my late great father Yalehurst, discovered this amazing perennial pattern and how this phenomenon is based upon the exorbitant governance spending creates high inflation, and how the subsequent decline of purchasing power of the dollar drives the market to incredul this new heights. You yourself, you know,
were incredulous at the time. Cycles based on the previous moves from from World War One, World War two, and Vietnam, which is what Yale was keying on and the associated massive government spending and the inflation caused by it.
And then the subsequent version that you were writing about was Iraq and Afghanistan. And there was some surges of inflation during the financial crisis kind of eased back when when the FED took rates down to zero. Tell us a little bit about what you were looking at in ten that said, hey, we get to thirty nine thousand in fifteen years.
Yeah, I remember, you know what, I remember your actual post. I think the headline was WTF.
That's right, that's right. We were about ten thousand on the Dow at that time. You were calling for going from ten to almost forty. It felt like it was ridiculous.
I mean, we had Yale's work behind us. That amazing chart that that I redid of his where it shows the you know, it's the log chart of the Dow which shows the inflation, the CPI and the moves.
I mean, there's there was some you.
Know, people talk about these cycles with you know, the seventeen and a half year, the eighteen year sixty What did they talk about these sort of arbitrary lengths of time.
We looked at it, and what Yale discovered was that these events in history that create these these cycles, like Archduke Ferdinand getting assassinated in nineteen fourteen, the Germany sign of the Armistice in twenty eighteen, the Gulf of Tonkin resolution in sixty four, Saigon falling into seventy five, and then for us currently, what we were seeing, what we were seeing at twenty ten was this development of after nine to eleven, which was an act of war, and
ahead of the time we were looking, we had already gone into to Afghanistan. We were the whole saber rattling. There was a bye bye vibe we put out in twenty two when.
We in O two.
Excuse me when we went in there, But we were looking for the end of this huge military involvement overseas. US boots on the ground in massive numbers is what created this pattern, or initially created it, and we were looking for the end of the combat, you know, in Afghanistan, to sort of spark the end of the war, end of the secular bear market, and the beginning.
Of the of the boom, and I think we.
All kind of have looked back little heinsins around twenty thirteen. I think that little bear market bottom in fifteen and sixteen kind of you know, signifies the end of that secular bear not the ultimate bottom. I mean, we don't measure the secular bear market from seventy four to two thousand, measure eighty two.
Right, that was the new highs that were set, and arguably this cycle new heis was set in twenty thirteen that eclipsed seven and two thousand. So I recall early on in the COVID crisis and the first CARES Act, and I read a fascinating analysis that pointed out the fiscal stimulus of CARES Act one and two was about ten percent of GDP. I think was just Kars Act
one about ten percent of GDP. You had to go all the way back to World War II, and then after that the Marshall Plan to see ten percent of GDP as of fiscal stimulus, And I wonder how that equates to the equivalent of war plus the obvious subsequent inflation we experienced in one twenty three is the quote unquote war on COVID very parallel to what we've seen in the past.
One hundred percent very parallel and and that's something we've spoken about. And it's it's really about overall federal spending. I mean, the evolution of this pattern of federal spending. It's not just war but spikes like you just mentioned in federal spending like we had in COVID where it goes above trend. I mean this probably started to change a little bit going back to FDR with the New Deal ahead of World War Two, and then the federal highway you.
Know, spending the state highway system.
Yeah, that continued after World War Two. So it's it's really about you know, past federal spending driven by war conflicts and you know, but spending outside of the normal budget and COVID and the you know, Inflation Reduction Act, the CARES Act are prime examples of massive government spending driving inflation and superbooms.
So it's a new era, it's a new presidency. There has been emphasis on things like military spending, energy production, spacel like exploration. Uh, they're carrying over the previous emphasis on AI and data center builds. How do you look at that? How does federal policy and spending in those areas seem parallel to pass military spendings. How does that affect your projections?
I mean it's quite parallel, but it's part of my projections. I mean, we've updated our super forecast. I think we've got some further upside to you know, sixty two thousand and change, which I've written about probably by you know, average ten percent game of year, probably by twenty thirty. And that's all now based because it was what starts on. But right now, you know, it's about tech. It's all about tech. Ukraine and Israel have shown us and proven
that the conflict is all about tech. Now, got drones and cyber wars. You know, i'd expect the US military to be spending and ramping up tech. So all that military spending you may find its way into technology. I mean, let's call it defense tech.
And you see that in companies like Pallenteer and Lockheed not just drones but single jamming and there's just an endless.
Array of security.
Yeah, it's clearly causing a big boom and fiscal spending. But let's bring this back to the newly elected president Trump. Canada, Greenland, Panama, Canada. I keep I can't believe we're talking about Canada take off, so that sort of saber rattling. Do you need a hot war for the same thing to take effect or do you just need the government's fiscal spending and the threat of war to lead this to the same sort of cycle.
I think it's not so much the threat of war. It's overall federal spending and you know, saber rattling. Yet it's saber rattling. You know, I'm not convinced anything is going to happen there per se, But it's really about the spending in general. And if we're going to be doing deals with Greenland, UH for security and raw materials that would be beneficial. We've got you know, China doing
deals in Africa and around the world. There's there's there's definitely a new push for for global you know, security and global dominance, and we've got to play in that field. And and Trump's kind of showing doing a show of strength,
but he's a deal maker. Whether you know you like the man or not, or voted for him or not, He's going to try to do everything in his power to leave a legacy, like we spoke about previously, of you know, a prosperous economy, a raging bull market, and you know, global peace and security is what he's going to try to do, and that's going to help our economy. All the spending, whether it's stargate or military otherwise, is
going to create jobs and keep the economy going. I mean, uh, it's really all about the economy, is Jim Carvel likes to say.
It's the economy stupid? Of course. So so let's look at sectors. We've mentioned defense, what about energy? What about consumer staples? Is there any specific sector effect to this warplus inflation long term cycle.
I think it's tech. I really think it's too tech.
I mean you're talking about uh, you know, drones, robotics, AI energy for sure, because we've got to power everything. I actually currently have a position in the gas and energy. Uh, you know, explorers and producers, the the equipment people there, the x C S XOLE is the seasonal trading for us as well.
I'm not sure.
Staples is the uh the place to be, but you know, uh, general retail and buying a thing is up. But I think energy and tech and all this new technology that is that we're fighting wars with that we're operating everything on is where it's at.
I mean, you got to own the cues basically.
Right the cues. There's a black rock ETF run by the guy who's run their technology group for a long time. I want to say it's their Artificial intelligence ETF. The symbol is b AI, and I don't know, some crazy chunk of it is in Nvidia, Microsoft and then everybody else in that space. And it's sort of like a cues on steroids. It's like two XQUS.
And then there's the healthcare AI.
We just heard you know, Allman and Ellison talking about it, you know, in the White House with Trump there.
It's hopefully it'll help.
Us Sam Allman from Open AI and Larry Ellison from Oracle.
Yeah, how we could cure cancer and do disease analysis. There's a small microcapstock I have that's trying to do medical you know AI to better diagnose and get you better proper treatments and identify things with all your numbers.
You know.
Medical data, as you know is still analog huge, but it's not quite digitized enough yet.
So that's I think there's some future there.
So add that to the list of technologies is you know medical and healthcare AI.
So to wrap up, we have a massive shift from just monetary policy in the twenty tens following the financial crisis to the COVID spend, the military build up, the AI build up, the energy build up. These are all policies and sectors of the economy that have been running
fairly hot for the past five or so years. The new administration is expected to really supercharge this and if historical patterns hold up, according to Jeff Hearst of This Stock Trader's Almanac, we could see this market continuing to rally for the rest of the decade, somewhere in the high single digits, low double digits. If is that a fair way to describe your perspective?
For sure?
Think about AI and all the related tech, about where we were in like ninety two to ninety five with Windows ninety.
Five, right, you know, early Internet days.
Early Internet days.
Look, my view is that we're kind of at that period of time in this technological boom. I remember the other part of the supermom equation that I added to it, on top of warrant inflation and peace was the culturally enabling paradigm shifting technology which AI and all of its related ancillary items that we that we spoke about are part of and I think we're at that, you know, early mid nineties timeframe.
So to wrap up, if you're a long term investor and you are constructive about both the economy and the market, you should be looking at sectors like defense and energy and technology, and you should not be surprised that the current BOOL market might have a whole lot further to run. I'm Barry Rittolts, and this is Bloomberg's at the Money