Canada’s Economy Is ‘Dying’, Will Markets Follow? — Jim Thorne

[00:00:00] Speaker 1: American economy is just going to run hot and it's going to be the place to be. Canada is dying of cancer. There's going to be no growth for two years. We have neglected our foundations and our competitive advantage for a period of time. Canada came out of the global financial crisis unscathed and they were lucky. And they did not understand that their position that they had was of luck and they've wasted the lead. [00:00:30] Speaker 2: I'm pleased to welcome back to the show, Jim Thorne, Chief Market Strategist at Wellington Alta's Private Wealth. Jim's been a fan favorite on the show and today we'll be covering Canada, Bitcoin, gold and markets. Welcome back, Jim. Good to see you. [00:00:44] Speaker 1: David, it's been too long. [00:00:46] Speaker 2: Yes, it's felt like yesterday since we had you on the show. Check out Jim's last interview, the link down below. But it hasn't been yesterday. It has been too long, Jim. Today we're going to be talking about the two consecutive quarters of negative GDP that Canada experienced. The only G7 country, I believe, that has experienced a technical recession, which the government doesn't want to admit we're in. But we'll talk about that. First, let's talk about why Bitcoin has been diverging so much from the S&P 500. If you take a look at my screen right now, I will pull it up for you. And this has some equities investors worried as well, even if they're not fully invested in Bitcoin. Because the narrative, or one of the narratives has been that Bitcoin has been leading the S&P 500. Now, whether or not you believe that, we can certainly observe that on an intraday basis. Whenever I look at Sunday night's Bitcoin moves, it usually is a good leading indicator of how futures for the stock market are going to open Monday morning. But maybe we can extrapolate that to a longer time frame. Why do you think Bitcoin has been breaking down and not following the rest of the market? [00:01:53] Speaker 1: I just think, you know, we're in this period of time where the Bitcoin maxis are upset at each other. There's a disbelief that there's going to be penetration within our society. People are impatient. The Bitcoin tourists have gone and started trading the parabolic stocks in Korea or in memory or in semis. You know, David, I look at this as a generational buying opportunity. Nothing has changed. In fact, you know, the way I look at it, it's funny. When it was 123 to 125K, when it's about to break out, Scott Bessent went on TV in the United States and said that there was not going to be a Bitcoin strategic reserve. And that instantaneously broke the momentum and started down on this trajectory. It's funny that last week he was in Washington saying that they're working towards a Bitcoin strategic reserve. So, you know, short term, short term volatility, sure, infinite, infinite asset class. Yes. But I still suggest it's a significant portion. It should be a part of everybody's portfolio. And if you cannot see the opportunity at 60, then please don't buy it at 250 or 300K because it's going to correct back down. And we're going to you and I will have the same conversation. But Bitcoin will be at 150K, not 60K, which is the same conversation we had when it was 15K and the same conversation we had when it was 5K. Bitcoin's going to zero is, you know, I don't believe. And I think all of the bear thesis really don't hold any water. And so we're in this period of time where people are very nervous. The market is what the market is. But I have this old saying, narrative follows price. We're at the 200 week moving average, upward sloping. I think it's a good time to buy. And then, you know, as we move forward, realize that it's still an infinite industry in commodity and it will have a high degree of volatility going forward. [00:04:14] Speaker 2: Do you believe the narrative or follow the narrative that Bitcoin leads the equities? [00:04:21] Speaker 1: It did. But you know what? You know, when you check correlations change over time and one of the most important things is that if we were running a quant fund would be the variance covariance matrix and be able to go in there and change the polarities from positives to negatives to in the size of the relationship. So the relationship is broken. That doesn't mean that the asset class is over and done with. So, no, I am still bullish on the share in the stock market. I think $8,000 to $8,400. And, you know, I think people are getting weary of President Trump negotiating with the Iranians over X. And, you know, people are exhausted. And when people are exhausted, I don't think people do objective research. And there, too, lies the advantage. I mean, look at what happened with MicroStrategy when Saylor sells, you know, 32 Bitcoin. And if you did an analysis of, you know, what the S&P said about their perpetual preferred, right? In their analysis, they talked about the fact that unless Saylor is willing to sell Bitcoin, we're not going to give him credit for the Bitcoin holdings on the balance sheet. So he sells it. It proves its capital for the S&P. Everybody thinks he's going to sell it all. So, you know, in these short-term periods of time when you've got the kamikaze traders whipping this stuff around, I get it. But in the long term, the fundamentals are very constructive for Bitcoin going forward. [00:06:00] Speaker 2: So the fact that Bitcoin is at $61,000, bottom line, does it signal to you that the equities are about to have a similar correction? [00:06:08] Speaker 1: No. [00:06:09] Speaker 2: No. They're separate narratives at this point. Okay. [00:06:12] Speaker 1: But David, like a 5% to 10%, 8% correction, it can happen at any time and for any reason, right? So now everything's selling off because of some comment President Trump made, okay? But look, I mean, let's be honest, and I'm sure we'll talk about it. But look, the world does not have enough compute. And folks, you know, the game is shifted to where memory is really the most important thing. And if you've missed Micron in the re-rating of the memory stocks, and you don't take this as an opportunity to position it, shame on you. [00:06:48] Speaker 2: Before we continue with the video, let's take a quick look at a platform designed for investors who want more control over how they trade. Our sponsor today, Webull Canada, offers $0 commissions on U.S. and Canadian stocks and ETFs, along with a range of tools built for both newer and more experienced investors. One thing that stands out is a promotion right now that allows you to access three months of free real-time market data upon deposit, including Level 2 quotes and options data, which are often paid features on other platforms. Webull also provides a full trading interface with technical indicators, charting tools, and customizable alerts. Whether you're using mobile or desktop, these are all available. If you want to test strategies first, there's also a paper trading feature that lets you practice without using real money. And right now, they're offering a welcome bonus of up to $250 in cashback for eligible users. That's $250 that you could use to invest more, build your portfolio, or get started sooner. You can go to the link in the description down below or scan the QR code here to learn more and get started. Let's come back to the markets. There's a lot to talk about. I have a bunch of questions for you on the bond market in particular. I want to come back to Canada first and talk about Canada's latest GDP numbers. So let me just play for you, Pierre Poilier, leader of the opposition's response to the latest numbers and what he said during a press conference, and we'll start there. And then we'll break down the economy by GDP. Take a listen. [00:08:27] Speaker 3: The economy grew at an annualized rate by 2.6%. We have economists saying that today's numbers are so nominal they could be forecasted away and revised away. So aren't you jumping the gun a little bit, calling this a full-blown recession? [00:08:39] Speaker 4: Right. So I know that there's a lot of excuses being made for Mark Carney today, and I'm not surprised. By the way, which outlet are you with? [00:08:47] Speaker 3: Hilltimes. Is 2.6% economy growth an excuse, or is that just the numbers? [00:08:52] Speaker 4: It's actually, there's no 2.6% economic growth. If I could, if I could. So you're having to go back? How many quarters are you having to go back now? So you're having to go back. Okay, so let's get this straight. There's been four quarters since Mark Carney became prime minister. The economy shrunk in three of those four quarters. Canada is the only G7 country for which that is the case. There's now been an entire year of Mark Carney that is recorded in economic data, and the GDP is smaller today than when he took office. That is only true of Canada among G7 countries, and now there are two back-to-back quarters where the economy shrunk, which is the literal definition of a recession. And by the way, it's not just that our economy is shrinking quarter after quarter. It's that we have the second highest unemployment in the G7. You think that the 120,000 people that lost their jobs since the beginning of this year call this just a technical recession? No, they call this real job loss. And then you have the delinquency rate that is up 32% year-over-year at 17-year highs. We have the highest household debt of any country in the G7, the worst housing costs of any country in the G7. And for most of the last year, the worst food price inflation of any country in the G7. So, yes, you are making excuses and trying to hide from the reality that Mark Carney has given Canada the worst economy in the G7. And it's time to stop making excuses, not for political reasons. It's time to stop making those excuses because this is people's lives. [00:10:29] Speaker 2: Okay, let's stop here. Let's just evaluate first the stats he cited. Household debt, cost of living, and job losses are among the main concerns he cited. Your response? [00:10:41] Speaker 1: Yes, let's add productivity. Let's add negative productivity growth. Let's add declining per capita GDP. I think the through line in the narrative, David, and where I get a little bit frustrated coming back here, is the fact that Canada is in denial that the foundations of its economy have been weakened over decades. You and I could argue whether or not one year of Mark Carney being in power is enough to blame him. But the fact of the matter is, is that as a country, as an economy, we have chosen and put people in power over decades that have ignored our competitive advantage. Okay? And that's a fact. Now, the key on whether it's a recession or not, you know, this goes back to, and I'll clarify this, is look at a person can die many different ways. And an economy can die many different ways. The way that the CD Howe Institute measures or says a recession is more like a heart attack. And I would say that Canada is dying of cancer and rot, that we have neglected our foundations and our competitive advantage for a period of time. And so what I would just say is that we need to, and I blame Bay Street, I blame the Bank of Canada. And, you know, we can give, you know, and let's be fair, and I get pushback on this. You know, you can give Carney a little bit, you know, he's been in a year. The stuff that we're dealing with, the cement was poured last decade. And so what are you seeing from Mark Carney? And what are you seeing from Ontario Premier Doug Ford? Fortress North America. They're pivoting. And this was the label or the framing that Alberta Premier Smith used when Trump got in. They recognized the fact that we need to figure out how we are going to work and grow within the new American system that President Trump has implemented. And that's where we are. I think the most frustrating point for me is the fact that the Bank of Canada isn't lowering rates further. And I'll give you a couple of examples why that is. Economists use this thing called the neutral rate of interest, right, R-star. It was developed by a guy named Newt Wixell. Canada has negative immigration and Canada has negative productivity growth. In those types of environment, R-star declines. So by the Bank of Canada doing nothing, they're tightening. And the Bank of Canada should be ashamed of not being much more proactive and recognizing that supply shocks. First, it was tariffs. And now it's the straighter Hormuz. Supply shocks change the relative price level. They're not inflationary. And if you look at the inflation data, David, there's no inflation. So we've got a level of incompetence up here in Canada that is stark and generational. And there's enough blame to go around. What we need to do is have an honest conversation with ourselves that we need to put in place. We need to do policies that are pro-growth. We need to deregulate. And we need to stop fighting President Trump. Last point I want to make, too, about for investors. You know, we have an extreme case of Trump derangement syndrome up here in Canada. And that, I am saying, is manifesting in its extreme home bias that Canadians have in investing in Canadian stocks. The example I will use is Royal Bank of Canada, which is a very, it's a world-class bank, very well managed. David, it's trading at 3.6 times price to tangible book. Bank of America, which is also a very good bank, 1.6 times. So, look, the Canadians have to open their minds. They've got to recognize that this isn't Donald Trump's problem. And they also have to take a look at their portfolios and really suggest, and, you know, the former governor of the Bank of Canada, Mr. Dodge, came out and said, look, there's going to be no growth for two years. Right? You know, earnings growth is really a relationship between NGDP and the earnings in the economy. So, look, even though we put structural changes in right now, it's going to take time. So, let's stop complaining. Let's stop laying blame. And let's get on with it. [00:15:39] Speaker 2: Tiff Macklem, speaking of the Bank of Canada, has said that the U.S. trade conflict has diminished Canada's economic prospects. This was in a press conference. I won't play the entire video for you. But those were his words. So, the government, and to a certain extent, the Bank of Canada, has placed blame on tariffs for what's been happening. What do you think? [00:15:58] Speaker 1: I think they're trying to deflect and project. It's not Donald Trump's fault. Canada was sick even with the tariff positioned. Canada does not have a competitive advantage in advanced manufacturing. There's too much regulation. Right? We've embraced green virtue as a basis of our industrial policy. So, Tiff Macklem, as far as I'm concerned, he's trying to deflect from his incompetency. And I think the Bank of Canada, along with the Fed, and I finally come up with a turn, is it's Keynesian brain rot. These guys have to start thinking about raising rates has got to be the prime example of an individual who has lost the plot. [00:16:54] Speaker 2: But is he trying to match U.S. inflation expectations, you think? [00:16:59] Speaker 1: U.S., U.S., look, the U.S. is going to, the Americans are deregulating fast. They have recognized the fact that they need to grow out of the debt and they recognize the fact that decades upon which the public sector has started to crowd out the private sector needs to be rolled back. So, you are setting in place forces that cannot, that will detrimentally affect the economy for decades and centuries to come. It's right out of the Scottish Enlightenment and Edward Gibbons and, you know, the rise and fall of the Roman Empire. And why do I say that? Because Besant, the Secretary of the Treasury, taught history of economic thought at Yale. This is classic stuff. Why Tiff Macklin and the Canadians think that they are somehow immune to extreme levels of debt and inefficiency and having an economy where the public sector has crowded out the private sector is beyond me. And history will not look upon Mr. Macklin and Mr. Trudeau. Well, you are, but let me be clear, you are starting to see Carney and Ford pivot. You're also seeing Tony Blair pivot. And listen, you're also seeing Jamie Dimon pivot. There is a movement towards people recognizing that maybe what Trump and Besant are talking about, that the U.S. cannot afford this anymore, and they need to focus on their own economy is actually prudent. And for people to stop, should stop complaining about it and realize that the rules of the game have changed and Canada specifically. [00:18:58] Speaker 2: Let's talk about Canada's competitive advantage. You use those words earlier. You said we should focus on competitive advantages of Canada. I wonder what that is. Now, let me show you StatsCan's own summary of the GDP breakdown by industry. Now, I asked Chad GBT to organize this in a visually appealing manner so we can follow it. And this is a pie chart breaking down the main industries to see which one is the largest. You think Canada being a resource-rich country is probably mostly mining and natural resource extraction. No. Finance and insurance at 7.7%. Mining and oil and gas at only 5.1%. And you have real estate at 13.2%. Real estate is more than double mining in terms of GDP output. Now, let's break down the growth. This is, I asked Chad GBT to organize this by lowest to highest in terms of annualized growth from last year to this year. You have here management of companies. I'm not sure what that means as a sector, but that's what StatsCan has. Negative 22%. And then you have manufacturing, industrial production, basically anything that's heavy, industries, goods production, and negative growth. Utilities also at negative growth. What's at positive growth? You have financial services, arts and recreation, finance and insurance at the top. Real estate also near the top as well in positive territory. So, you look at this and you ask yourself, what is our competitive advantage? How would you answer that just looking at these data points here? [00:20:41] Speaker 1: Well, we've lost the way. David, you proved the point, right? Picture says more than a thousand words, right? It should be mining and it should be energy. That's where our competitive advantage is, right? I think that the point I would like to make is Candace got away from itself and is very reliant on real estate. And my whole point is, you know, when I came back here from the States is, look, somebody made that decision decades ago that real estate was going to be a massive positioning of GDP. And my whole point is this. To me, it's folly to think that you want to, and I get this, you want to structurally adjust away from real estate. I get it. But the way you do that is you grow other sectors as opposed to shrinking and attacking real estate, which is what Macklin is doing. In an environment where Trump and the Americans are adjusting, we are going through this structural adjustment period, which Macklin wants us to wean off of real estate at the same time. It's insane. [00:21:54] Speaker ?: It's insane. [00:21:54] Speaker 1: It's as insane as what John Crowe did at the end of the 1980s. The Bank of Canada has completely lost the plot, but let's let's think about this though. We got to we got to get pipelines. We've got to go do oil extractions. We've got to do LNG that is going we have to open up minds. We have to build infrastructure. Those are all great that that takes time, David, right? Think about a Canada cut a deal with Germany, okay, to buy LNG there. You know, Dave, Dave, you're you're in Vancouver. They're buying it off of your coast. Think about that. Germany is buying LNG and getting it, you know, their tankers filled off of the Pacific, not we don't have anything and, you know, Newfoundland or, you know, in the Maritimes. This is insanity. And this is where I push back on Paulia to sit there and go, this has been taken. This has been done by for decades. Canada came out of the global financial crisis unscathed and the and they were lucky. And they did not understand that their position that they had was of luck and they've wasted the lead. Now they have to go through five years, a painful adjustment. And I would say to you, it's starting, but the chart that you showed is just yes. So the more profound question I would say to you is, why do we hear what we do here out of Bay Street? Right. Or Ottawa, like, why is there a denial? Why does Canada live in a post factual world? Why am I the only one saying this stuff? Right. It seems that it's it's it's it's absolutely crazy. [00:23:55] Speaker 2: It seems that Carney and Ford are walking back their anti-America stance. At least for now, this is from the F.T. Just yesterday on the 8th of June, Canada has pivoted from a from defiance to a fortress North America sales pitch. OK, so this I'll just read the second paragraph here. It says here, Prime Minister Carney and Ontario Premier Doug Ford, who have been prominent critics of Trump's trade policies, are promoting the benefits of regional economic integration ahead of a July 1st deadline to revise the U.S. Mexico, Canada trade agreement known as USMCA on Monday, Ford heads to Washington to meet U.S. officials to launch Fortress North America. This comes after, of course, a couple of months ago. You'll recall that Carney opened the doors to Chinese made EVs, which, by the way, just going on a tangent, the Democrats in the U.S. are pushing a bill to ban Chinese made EVs from Canada to enter the United States, even for a short term visit. Hasn't been passed yet, but I read that the other day. Anyway, your response to. A renewal of the USMCA and what should be done? [00:25:05] Speaker 1: Well, you know. Carney came clean at it with his speech at the at the New York Economic Club where he pivoted. Right. And we want a strong Canada to help America great again. Like I said to you, Smith has been talking about this. Ford is falling in line. You know, we have to be honest with ourselves that, you know, look at our our security is is guaranteed by the Americans. We live next to the largest market in the world. Yes, they are adjusting. We need to adjust with them and there will be a ton of prosperity for us. So we need to stop being this foil of the progressive left towards what President Trump is doing. And I think you're starting to see that with regards to the cars. This is where I think it's it's difficult because, look, it's forty nine thousand cars. But, David, do you drive a do you drive a Tesla? Because if you do it, because a lot of the cars that are coming in from China are Tesla's where we assume they're this other thing and they're forty nine thousand. You know, I understand. I understand the concern. And what I would suggest is that there is going to be a deal. I think cooler heads are going to prevail. And this is where I go back. You know, let's give let me just throw a fly in the ointment here. You know, Carney came in and he he he basically. To put it politely, he inherited a caucus that were Trudeau acolytes, right? With Guibo that were extreme far left progressive. You could even put them into the Abby Lewis NDP camp. So, I think, I think, you know, Canada and the Liberal Party went far left. And it's the irony of this is that, you know, Trudeau's father, Pierre Elliott Trudeau, warned against this and said, you need to be a centrist party. I think Carney is trying to move the Liberals back to the center, yet he doesn't have. Listen, look at in the media of all the strike that's coming out of this caucus. So he's trying to basically thread a needle here, I think, where he's got to keep all the Trudeau accolades in, you know, the true believers, as Pierre Elliott Trudeau would call, of green. And yet he doesn't have a strong coalition in the center. So I think he's doing as best as he can. He is pivoting. And I think we are going to cut a good deal. But at the same point in time, I think the Bank of Canada should be cutting rates another hundred basis points. And I think we need to expedite approval of pipelines, of expansions. I think we've got to expedite LNG. We've got to get going with these plans because I don't think the Canadian economy can survive much longer on these MOUs and PowerPoint presentations that the prime minister has been talking about. [00:28:07] Speaker 2: OK, I want to play for you a clip on social media just to highlight regional sentiment in China towards Canada. Take a listen. [00:28:16] Speaker 5: China loves Mark Carney so much so that they made a dish on the menu just for him. When I asked the owner why he loves Carney so much, he brought me to one of the largest seafood markets in China where his trusted seafood dealer showed me just how much fresh Canadian seafood is here. Over a billion dollars of Canadian seafood is bought by China every year. China is one of the biggest consumers of Canadian seafood. The seafood dealer gave me this gigantic Canadian lobster because I was super curious to try the carny dish. [00:28:43] Speaker 2: All right, the trade agreement between Canada and China, let's talk about that and then we'll go back to markets. Is that the future for Canadian growth to diversify away from the US? [00:28:54] Speaker 1: I think it's performative. I think they're trying to, you know, he's doing some things like with Europe and China. I think it's on the edges. Our economic future is with the United States and being embedded in the United States. And this is the same conversation we had, you know, in the 50s and 60s when it was Diefenbaker and Kennedy trying to figure out where Canada lies in a new industrial policy within the United States. It also came out of that negotiation process and also over time got to a point where Canadian suppliers of military were treated as domestic. You know, so if we have a company in Canada that is bidding for a US military contract on that contract, our bid, it's we are viewed as being domestic. So there's a lot of performative politics that is going on that I think is a remnant of the Trudeau NDP era and the extreme progressive left. Trump has brought it in, brought in, we have a new era. And I just think Canada needs to de-risk a little bit, not decoupled, just as the Americans. And the other profound point I would make to you is, look, I would suggest to you that the United States is more dependent on trade with China than Canada is. So all of this is performative in terms of negotiating of NAFTA. We have to separate the signal from the noise. There is going to be a deal, but I do think, like, and let me be honest with you, I don't think the Canadian economy is going to be, Southern Ontario is going to manufacture 4 million cars. Maybe we're going to manufacture 650,000 to, you know, 700,000. We're going to get away from that. We've got to embrace natural resources. It's really that simple. [00:30:37] Speaker 2: Are you optimistic, at least, that the economy will turn around in the next couple quarters, especially after what it seems like McCartney and Ford and other premiers are walking back the line towards fighting the U.S. here? [00:30:48] Speaker 1: I think Canada has a, I agree with the former governor of the Bank of Canada, Mr. Dodge. I think we have a tough couple of years. And I understand, and I understand the view we need to wean ourselves off of real estate. But guess what? We're there. I'm sorry. And we shouldn't try to do that for Rob Peter to pay Paul. Bank of Canada has got to get it down. And if he would get the rates down, at least we could have a cushioning of the real estate market, not exacerbating the structural adjustment that we have right now. So, yes, but here's the point, David. Let's just pivot to the market. They're going to run the U.S. hot. Nominal GDP is going to be very strong in the United States. Supply-side economics is going to kick in. They've got productivity. We don't have AI up here. Earnings are going to grow 15% to 16%. By 16% this year and the S&P, 15% next year. By 2031, and why do I pick 31? That's where 100% tax deduction of CapEx ends. I can see $650 worth of earnings on the S&P 500. You put the multiple on that you want. I put on $25, $22 to $25. Trump gets a deal done with Iran, which I think we are going to get. Look at oil coming down. Another point, oil and gold are selling off, which have been anchors to the Canadian economy. Oil and gold are telling you there's going to be a deal. And when that happens, they're going to run it hot and grow their way out of the mess they're in. This is what Macklin and the Canadians should be doing, but we're doing the Keynesian way, which is completely missed. So what I would say to you is we are going to be dragged along by the Americans. So we're going to be a period of structural adjustment. We'll be okay. But I think you've got to sit there and think that the American economy is just going to run hot and it's going to be the place to be. [00:32:57] Speaker 2: The stock markets aren't really reflecting what you've just said, though, because the TSX has outperformed the S&P not only year-to-date, but also on a one-year basis. Tell us why. I think I know why, but tell us anyway. And, you know, can this continue? Can we expect it to be out of the performance? [00:33:15] Speaker 1: No, I think what you've got to do, Dave, is go back a little bit further when the United States was MAG-7. There, like when the United States was MAG-7, and they just hammered on a historical basis the performance of Canada. So what has Canada benefited from? Canada has benefited from a run-up in energy prices. That's going to stop. And also gold. We've had that re-rating in gold. That's wonderful, right? Gold should have been re-rated. I'm not arguing that. You know, but I think oil is going back down to $60. And what's holding up the TSX right now, like I alluded to before, is RBC and the banks trading at historical rich valuations, which have to be basically worked off. Either they have to grow book, okay, or they have to have a massive correction. And, you know, look, and I mean it, two times tangible book is expensive. Royal banks trading at $3.6. So the risk is in everybody piling in to the TSX and specifically the financial sector because they have Trump derangement syndrome. And thus we have an extreme amplification of home bias, which to me is very risky. [00:34:33] Speaker 2: The sector that you like the most right now, jurisdiction agnostic, could be U.S., could be Canada. What are they? [00:34:40] Speaker 1: It would be memory. We don't have enough compute. Memory is the way to go. I would be buying on this pullback right now. I would be buying memory. And you beg your pardon? [00:34:54] Speaker 2: Just on memory, last month, Micron went down after Google announced a new model that could reduce the amount of RAM needed for computing. If aren't you concerned that, you know, these kinds of risks could persist? [00:35:09] Speaker 1: I don't think people recognize how much compute we need. And I think it shows you where we are in the cycle, which I kind of am trying to get to with the Bitcoin. I don't think anybody's doing research. And I would suggest to you a white paper from Google, even though it's profound. When you listen to Elon Musk and some of the people that are, you know, right in the in the in the salt mines, you know, building it out. It's it's it's it's DRAM and there is a capacity constraint. And if we're right, that the cycle is longer than we think. I can get you a buck, one hundred and fifty dollars earnings for for Micron in twenty eight, twenty nine, put a twenty multiple on it. That's a three thousand dollar stock. Right. It's still trading at a specific discount. But like I said, right, I mean, you know, last week with Bitcoin, we heard, you know, when he sold 32, when Saylor sold 32 coins, you know, there's rumors that, you know, he was going to sell everything and the market freaks out. You know, last week we heard that, you know, Meta is coming with a share offering. We're at this point in time where I think investors, short term investors in the casino are whipping stuff around and are not doing fundamental research. Now, we can complain about that, David, or we can sit there and say, let's take advantage of the vol and let's take a look at where we think long term value lies. And I think for me, it would be in memory, it would be Micron and I think Bitcoin and digital assets, as we are talking about the Clarity Act, a blockchain is going to be embraced by Wall Street. You can sit there and buy Bitcoin at 60 to 61,000 and everybody is disinterested with it. To me, that's a bottom. And so I'm very comfortable with where we're going and 14 to 18 months out, you know, if you buy those areas today, you're going to be very happy. [00:37:09] Speaker 2: Okay. The long end of the curve in the U.S. has surged. This is an article from CNBC. HSBC has called this the danger zone. I'll just read this paragraph real quick. The shift in bond markets assumptions is a wake up call for investors in an asset class that has long been called a safe haven due to bonds, predictable income and guarantee of the return against maturity. HSBC in a note this week wrote that U.S. treasuries are now in a danger zone above four and a half percent. Now, as you know, everything follows the 10 years. So are they right? Are we in the danger zone? [00:37:43] Speaker ?: Yep. [00:37:43] Speaker 1: Four and a half line in the sand. Trump's got to cut a deal. He's going to cut a deal. And I'm making the assumption that the cent's telling him that, right? Where I think the market is wrong is I think that they view worse as going to raise rates. Same thing up here in Canada that Macklin's going to raise rates. Rates are going down. Open the straight. Energy goes down. Look at the data. Inflation's not there. Look at the job numbers in the United States. Full-time jobs are negative. Unit labor costs are very, very low. So, you know, trim mean PCE. No, like, so the point I'm trying to make is we get that down. And then I would suggest to you that the curve drops. But I will agree. Look, look, 450 is the demarcation line. And Trump's got to cut a deal. And my call is he's going to cut a deal within between now and the end of the end of this month. And I think Besant's in there saying, look, the credit markets are telling you, and now the equity markets are telling you, stop yapping on X and cut a deal with Iran. [00:38:51] Speaker 2: What do you mean inflation's not there? Are you referring to the fact that most of inflation was energy going up? [00:38:57] Speaker 1: Yeah, look, and this goes back to a relative price change caused by a supply shock is not inflationary. Does it change the relative prices? Do prices go up? Do some go up? Yes, that's not inflation. Tiff Macklin knows that. Wersh knows that. And so when you look at the trim mean, so what the trim mean does is it throws out the highs and the lows in the data set. You don't get inflation. And the same thing with Canada. You're looking at the data in Canada. There's no inflation. And so, in fact, in Canada, you've got R-star dropping significantly. So they're going to cut, and when they do, you know, we're going to run it hard. And here's the thing that I think going back to last Friday with that jobs number, first off, no one looked at it, okay? 70,000 of those jobs were basically leisure. Well, David, you're in Toronto. I mean, I'm in Toronto. You're in Vancouver, and we got the World Cup. No one's talking about the World Cup effect. 52,000 was government. And the other was basically, you know, education and health care. And then if you look at full-time, it was negative. So that was not a strong job number. But what is the Pavlovian, Keynesian response? We've got to raise rates. And that's why I say it's called, I call it the Keynesian brain rot. Like, there are different schools of thought in economics. And, you know, we're going to punt Keynesianism, thank God. But I would say to you, all I hear 24-7 out of the sell side and Wall Street and central banks is Keynesian dogma, and its days are numbered. [00:40:51] Speaker 2: You're saying then the government needs to cut back spending? [00:40:55] Speaker 1: They will grow out. So when I say Keynesian dogma, what I'm trying to say is, very simply, growth is bad, raise rates. As opposed to growth is caused by supply shifting, actually, that's deflationary. That's what we're going to get into. We're going to go back to an era when Reagan got in and Volcker got in. In that area, roughly, not perfectly, though, right, between 1980 and 2000, where you had supply-side economics, you had a peace dividend, follow the Berlin Wall, end of Cold War, and you had a massive productivity run. And when you did that, you had earnings forward, I mean, trailing earnings on the S&P significantly north of 30. And so what I laugh at is now the bears are saying we're in an earnings bubble, right? So, yeah, earnings are going to grow. We're going to have a growth phase. We're going to have a productivity phase. And maybe earnings growth stall in 32 or 33. But right now, the movement in the market is driven by earnings growth. And that's where I push back at you again. If you've got oil going down and gold going down, and you've got everybody piling into bank stocks up here in Canada, and growth is not going to be anywhere, the question for Canadian investors will be, when does everybody wake up and run for the door at the same time? Well, finally, let's close off. [00:42:33] Speaker 2: Are they running out of the door of gold? Speaking of running towards the door and out of it, has the rating, re-rating of gold, is that coming to a close? It's not just gold, by the way. If you look at other precious metals, palladium, platinum, both following gold's lead, going down after the end of January. Is this trade over for now? [00:42:58] Speaker 1: I think if we consolidate, I'm still bullish on gold and commodities till the end of the decade, right? You know, if you're going to run the real economy hot, you have to have commodities, right? And then what I would say to you is, you know, and I try to get people, look, parabolic moves are to be sold, not bought, right? And, you know, and I follow the Charlie, I call it the Charlie Munger rule. When you've got an asset class or a sector that trades back to the 200-week moving average and it's upward sloping, you buy it. So it's buy low, sell high. So do I like gold? Yes. Is it going to be okay? No. But you've got the crazies that went in there. Once the mo breaks, these guys just sell with extreme prejudice and then they pound it. So I would wait for gold to settle out, you know, let it go through the summer months and then there's going to be a wonderful buying opportunity, right? [00:43:59] Speaker 2: It's, yeah, it's extraordinary how they've closed the correlation gap. Yeah. Used to move separately and now metals are moving together. All right, Jim. Finally, your thoughts of all the assets that we talked about so far, the TSX, the S&P, gold, Bitcoin. What's your outlook here? Do you like any of them? What do you like the most versus the worst? [00:44:22] Speaker 1: Well, right now, I think the S&P, you know, the, I think, take the long view, S&P is going to be somewhere about 16,000 by 31. But I think, David, what your listeners have to accept is that given where we are in the markets, there are going to be times when an asset class or a sector or a stock gets extremely overbought or extremely oversold where the long-term fundamentals haven't changed. And you have to basically sell the parabolic moves and then you have to buy the extremely oversold areas and you just need to be nimble and recycle your capital. I'm very constructive on, you know, if Bitcoin, if Bitcoin went parabolic, I would be telling you to sell it. I mean, I was telling people I've been a gold bug forever. When it started to go parabolic, I kept telling people, sell it. They say, you're not a gold bull. I said, I'm a gold bull. I don't like parabolic charts. So we're in a secular bull market where you're going to have rolling periods and eras and sectors that are going to go parabolic or get oversold. Buy the fear, sell the greed. We're going much higher. [00:45:39] Speaker 2: Well, good mantra. Thank you very much. Let's take that, let's take that to the grave with us. Buy the fear. No, sell the fear. Um, well, Jim. No, no. Buy the fear, sell the greed. Okay. I, wow. Okay. I somehow, I thought the other way makes more sense. [00:45:56] Speaker 1: No, this is, this is, this is Buffett, right? You want to be greedy when people are fearful, right? [00:46:02] Speaker 2: Makes sense. Yeah. All right, Jim, thank you very much. Where can we follow your work? [00:46:06] Speaker 1: Uh, you can get me on X at drjstrategy or, you know, wellingtonaltis.com. [00:46:12] Speaker 2: Well, we'll follow Jim in the links down below. So, uh, do make sure to, uh, check him out. Thank you very much again. We'll speak to you again soon. Take care for now. Cheers. Be good. Thank you for watching. Don't forget to like and subscribe.