March 7, 2024 – In today's Big Picture episode of the Financial Sense Newshour, Jim Puplava discusses the need for a strategic investment shift amid Trump’s transformative agenda. Jim and co-host Cris Sheridan explore the "Mar-a-Lago Accord," targeting financial system reform, a weaker dollar, and a $37 trillion debt burden. Political factors—tax cuts, tariffs, and government efficiency—drive market volatility, with inflation poised for a comeback. Investment opportunities emerge in energy, robotics, AI, and autonomous vehicles, while precious metals and crypto shine as dollar hedges. With bond yields potentially hitting 5% and global growth stirring, they urge investors to think long-term, spotlighting industrial stocks as future leaders.
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Key points discussed on today's show:
Trump’s Financial Overhaul: The "Mar-a-Lago Accord" aims to remake the U.S. financial system, lower the dollar, and cut a $37 trillion debt burden, differing starkly from 2016’s low-rate, lower-debt environment.
Political Dominance: Nine political factors—tax cuts, tariffs, government downsizing, peace initiatives, deportations, military rebuilding, bureaucracy reform, inflation management, and Fed policy—shape market volatility.
Inflation’s Return: Insufficient Fed tightening, deportations, tariffs, and debt-driven stimulus signal rising inflation, potentially pushing 10-year yields above 5%.
Energy Focus: “Drill, baby, drill” boosts natural gas and pipelines as key investments, defying peak demand forecasts.
Tech Innovation: Autonomous vehicles, robotics, AI, and drones promise to revolutionize transportation, manufacturing, and defense.
Industrial Resurgence: Reshoring and infrastructure favor industrial stocks over consumer sectors, backed by $2 trillion in planned investments.
Dollar Hedges: Gold (eyed at $4,000) and silver gain as hedges, with a potential sovereign wealth fund and Bitcoin reserve enhancing crypto’s role.
Strategic Shift: Investors urged to look beyond daily noise, targeting long-term trends like technology and rare earths amid global economic shifts.
Transcript
Cris Sheridan:
Welcome, everyone, to Today's Big Picture. Today we're going to discuss why it is time for a strategic shift in investing. And this was an article that we actually posted on our website earlier this year talking about the three pillars that we use for looking at the market and economic environment. Those three pillars are the fundamentals, technicals, and thirdly, the politicals, encompassing fiscal, monetary, and regulatory policies. And we talked about how this year would be largely dominated by the politicals. And that is exactly what we've seen with, of course, tariffs, uncertainty over a number of different Trump policies rattling investors and creating a bit of volatility in the markets over the past few weeks and certainly throughout this year, with the stock market now down year to date. So, Jim, what does this mean for investors as recent policy shifts are now rattling the markets?
Jim Puplava:
Well, you know, our dear friend Jim Bianco put out a piece that highlights the major remake of our financial system under Trump. And I don't think people have come to grips with what is actually going on and where this is going. He called it the Mar-a-Lago Accord because a lot of these major policy shifts, whether globally, are associated with some hotel where everybody meets and they came out with the policy. But he called it the Mar-a-Lago Accord, which has several key concepts the Trump administration is intent on doing: number one, remaking the financial system. We are going to see major, major changes coming here. Number two, lower the dollar, and three, reduce the country's debt burden. And we'll get into why that is important because if we don't address that debt burden right now, as they're trying to reduce government expenses, waste, and corruption, it will be forced upon us by the markets themselves. And you don't want to get in that kind of position. But as Bianco puts it, you’ve got to start thinking big as there is radical change coming. Much like if you think about Strauss’s Fourth Turning, where you get this chaos and then eventually the bottoming of the cycle. And when the Fourth Turning ends, it’s followed by rebirth and renewal. And that’s kind of what we’re going through right now. Against that backdrop, though, I want to point out what Trump is dealing with now is much different than what he was dealing with in 2016. And there are three major factors here that we have to take a look at. Number one, interest rates are at 4 to 5%. Indeed, we could actually see the 10-year yield go over 5% this year versus, let’s say, when he first took office in his first term, interest rates were at zero to a half a percent. Take a look at where oil prices are now. They pulled back this week, but they’re bouncing back on Friday. But oil prices aren’t at 30 and 40; they’re more at 60 to 70 to 80. And I think what we closed, we’re right now a little over 66, but there’s a possibility we could spike this year. And most importantly, and this is the big one, we are close to 37 trillion in debt versus 19 trillion when he took office in 2016. And right now, interest on the debt is consuming 20% of gross government tax revenues. So if we don’t address this, the market will force us to address this. And that would create a massive, massive crisis. So that’s why you’re seeing efforts by DOGE to cut where they can because 65% of government spending is entitlements. So that only leaves the other 35%. So if you can, let’s say, correct waste, fraud, or especially—like I think there were two reports—4.7 trillion was spent by the Treasury and there’s no receipts, we don’t know where it went. There’s 2.5 trillion that’s sent overseas in Social Security. So these are the kind of things they’re going to focus on. And if they don’t, once again, the markets and the bond vigilantes could show up and force it, just like they did to Liz Truss when she tried to change policy in England.
Cris Sheridan:
So again, we have this three-legged stool of market analysis that we look at, and the politicals are dominating the current environment. This was something that we said we expected to take place throughout this year, creating more volatility. That was not necessarily a bold call, but it was absolutely the correct call. And we began getting more defensive in our portfolios late last year. That’s been something we’ve been discussing on our show over the past few months. So now that we are looking at this Trump agenda with tariffs, retaliatory tariffs, what are the political factors in particular that you’re looking at that are likely going to determine the continued ups and downs of the market this year?
Jim Puplava:
Well, at the top of the list is the extension of Trump’s tax cuts, and he wants to add a few others like no tax on tips or Social Security. And that alone would probably add about six and a half trillion. But here’s the important thing: if he does not get this passed in 2026, we go back to the Obama tax rates. Poor and middle-class people are going to get hit really hard. I’ve covered this topic in our Lifetime Planning episode, comparing the tax rates where they were under Obama, where they are today under Trump. It’s not just that the tax rates are lower, but the lower tax rates—you are allowed to have a larger amount of income and have that income taxed at a lower rate. So he knows he would not want this to happen. If those taxes go back to the Obama tax rates in 2026, he’s going to be in trouble when it comes to the midterms. So at the top of the list is the extension of tax cuts and maybe some expansion. And to go along with the tax cuts, you may see, to get blue states to go along, reinstating the SALT deduction on property taxes and state income taxes. Number two, which is dominating the headlines right now, is tariffs, and we’re talking about reciprocal tariffs. Number three is to reduce the size of government, especially with the waste and the fraud that is going on. So hence, that’s why you’re seeing DOGE getting very actively involved. Number four, you’ve seen that in the headlines this week: ending the wars in the Middle East and Ukraine. Trump is very big on peace. There was peace during his first term, and he would like to bring that about in his second term. Number five, the deportation of 12 to 15 million undocumented immigrants. That could have some inflationary implications and also impact the labor market. Six, rebuild the military. Seven, reform the government bureaucracy. I was really surprised, Cris. I never knew this, but when it comes to government pensions, when you retire, the people that do that work in an underground basement—it’s almost like a cave with no computers. They’re doing it all manually; it takes three to six months. So getting the government to be more efficient, reforming the bureaucracy, and a big one—and this is going to be probably his most difficult—is managing inflation. Because if we see a return of inflation, it’s not going to be hyperinflation, but it’s going to be a higher rate of inflation. The government needs that to reduce its debt burden. And then nine, the Federal Reserve and monetary policy. We’ve talked about on the program—there was a paper issued by the Treasury Committee last October, and they talked about the mounting debt burdens, the higher interest rates, the amount the government was now spending more on interest than they do on the military. And at some point, the debt burden and the deficit was going to get so large that it could be difficult to finance. In other words, the Fed, they’re predicting, will have to institute some form of QE to mop up the excess debt that is not taken by the marketplace. So, Cris, those are the big nine ones that are going to impact policy. And you’re seeing it. You know, what is the House working on? They just passed a large bill that would take into consideration the tax cuts. What’s on the front lines? We’re talking about tariffs, we’re talking about the war in Ukraine, and we’re talking about deporting illegals. We haven’t heard too much on rebuilding the military or the Federal Reserve. And that’s because when they first started cutting, we saw a drop in interest rates. They were rising from September, and then we got up to close to 5%. They dropped down to, I think the 10-year got down to 4.2. And it’s now on its way back up.
Cris Sheridan:
So, Jim, one issue that’s on the minds of consumers right now is inflation. Voters really do vote according to their wallet. And if inflation does not continue to decelerate, that is going to be a problem. And that could upend a lot of perhaps what we see in the midterm elections or even with Trump’s popularity ratings going forward. If he’s not able to lower the price of inflation meaningfully, which he largely ran on, that’s still a concern. You know, I mean, if you look at consumer sentiment data, if you look at consumer surveys, inflation is still at the top of the list as far as concerns. What is your perspective on the inflationary outlook as we move forward for this year?
Jim Puplava:
I think it’s one of the stories that’s going to be at the top of the list this year: the great inflation comeback. Because if you take a look at, even though the Fed was late to tightening, they didn’t do it soon enough or sufficiently enough. And already, you know, one of the reasons the bond market reacted the way it did when the Fed first began to cut interest rates by 50 basis points last September was the economy was growing at 3% a year. The unemployment rate was at 4%. Why in the heck are you cutting interest rates when things are growing? In other words, everybody—the markets began to question the Fed’s policy. It’s like you were too late in raising interest rates, and now you’re lowering interest rates when things are going well in the economy and the labor markets. So insufficient tightening and also the reversal of immigration—if we start shipping people out—that could see the labor markets tighten, which could mean higher wages. And also reshoring allowed us, you know, if you think of everything that we’ve done with government policy, especially the almost—what was it—17 trillion of debt that was added, or not quite 17, because a couple trillion of that came from Trump’s first term. But almost over 12, 13 trillion of debt that was added by the Biden administration. And Cris, that had an impact. It’s still one of my beliefs: one of the reasons we did not suffer a recession when the Fed raised interest rates from almost 0 to 5 was the amount of government stimulus, the amount of checks that we were sending out in COVID, and even, in fact, Biden’s first piece of legislation was 1.9 trillion of spending in checks that were sent out. So that allowed us to sidestep a recession. But it had an inflationary impact, as we saw beginning in 2022 and ’23, when the inflation rate got all the way up to 9%. The other thing that we’re seeing right now: the output gap is wide, the tight labor markets, and also credit growth, which is likely to push prices higher this year. And of course, the number one topic du jour this week: tariffs, and of course reduced labor supply, is also going to have an inflationary impact. Now, the one big one that needs to be addressed, and they’re trying to do this with DOGE, is the debt and deficit issues will likely push bond yields higher this year. We could see—and I’m—and I think there are a number of people that see this—we could see bond yields rise and go above 5%, which would be detrimental for the markets and especially for overvalued tech stocks, as John Roque was talking about in the first segment of the show today, especially on the MAG7 side. But many of the anticipatory and leading indicators that we follow are suggesting, number one, the global economy is going to start growing again, and that could raise inflation. We saw for the first time Germany, which has been a very fiscally sound country, is talking about restimulating their economy, spending 1.2 trillion. Now that’s significant, Cris, because that’s coming out of Germany, and they’re really tight-fisted on spending.
Cris Sheridan:
Yeah. And when it comes to the tariff situation too, you know, Trump is really trying to frontload a lot of these tariffs ahead of the midterm elections to get some of these riskier negotiation tools up front. But one of the difficulties that we see is, of course, as part of his plan to do this is also reshoring, reindustrializing America. But that takes a long time to do so. Many of these front-loaded policies by Trump have inflationary consequences in the near term, whereas some of the benefits that he’s hoping to achieve, they have major lagged effects and will take months, if not years, to put into place. And as Peter Boockvar spoke with us earlier in the week on FS Insider, I mean, if you look at just the comments from business leaders, CEOs across the board, almost in every single industry, they’re all saying the same message: heightened uncertainty, increase in pricing pressures. So that’s not a good situation to be in. How are we now investing and approaching the markets?
Jim Puplava:
Well, I want to begin with energy, because one of his policies is “drill, baby, drill.” And so we’re invested in energy and especially nat gas, because that’s going to be a critical fuel for a lot of these data and AI centers. Because a lot of the governors are concerned about—they absorb and require so much electricity that they don’t want that drawn from the grid system because it starts creating power outages. So you’re doing like what Elon Musk did, where he built probably the largest data center. He built it and then built three or two natural gas plants and had it up and running in three months. So we see natural gas as a key play here, along with nat gas pipelines. And also one of the policy changes likely to come: they’re going to lift the ban on natural gas exports because companies can make a lot more money on selling natural gas to Europe, and especially with the shortages they’ve had there with the Ukraine war. And Cris, we don’t buy the IEA forecast that we’ve reached peak demand in energy. The statistics just simply don’t line up. And the consumption of energy in oil will be higher this year than it was last year. It’s been growing a little over a million barrels a day per year. And we still see that continuing the balance of this decade. So energy is right there. Another thing that we’re really big on—and we see massive changes and innovation coming with technology. One of the things that you’re likely to see here in the next two years is autonomous cars and humanoids. Imagine a UPS driver pulling up to your driveway and a robot getting out and delivering your package. That’s coming. So we are going more to autonomous cars. That’s really going to change the car market tremendously. You may see—like this is really big with millennials—instead of owning a car, you just call a driverless car. It shows up, takes you to work. At the end of the day, it shows up, takes you home, and you only use your car—or like, it’s going to be a driverless Uber that’s coming, and that’s going to majorly—that’s changing transportation. And it’s not just these autonomous driving cars. You’re going to see autonomous driving vans and trucks. And then on top of that, you’re also going to see drones play a major portion with transportation. So picture yourself: you order a prescription from Walgreens or CVS, and a drone drops it off at your doorstep an hour later. That’s coming. You’re seeing drones not only change transportation and delivery, but you’re also going to see it in military use—from drones taking off on aircraft carriers to drones used in submarines, to drones themselves used in combat. We saw that with the Hamas war, where they were sending—like when Iran sent, I think, what was that, three, 400 drones into Israel. So drones are going to play an important part, not only in transportation, but military use. AI in business and manufacturing is going to revamp, I think. Cris, you’ve had a couple guests on lately that have been talking about this issue.
Cris Sheridan:
Yeah, it’s really interesting when we think about just the massive integration of artificial intelligence into workflows. Today, we here at our company use AI extensively, and we’re seeing this increasingly being done by more and more businesses. But one of the big things that we also discussed this week with an AI expert is how we’re seeing that increasingly now applied to the government as well. So artificial intelligence is increasingly being integrated into the government’s workflows, operations. This is now being done at the Pentagon, at the defense level, and that is going to continue. And I think when people think about DOGE cutting back on government spending and waste, of course that is phase one of DOGE. But according to Elon Musk and many people involved in that process, the next phase is really going to be applying a heavy use of automation and AI into government operations. So we’re not just seeing federal workers cut for no reason. They are going to be replaced largely with a heavy use of AI and automation. And Musk is moving full ahead on that front.
Jim Puplava:
Yeah, and another issue that we’re very big on is robotics. We actually hope to have our first Optimus robot in the office, maybe even thinking of buying one for the house. But robotics—you’re talking about reshoring manufacturing. And one of the ways that’s going to keep manufacturing competitive is the use of robotics. We’re going to have to, because we’re going to compete with China, and China is moving full force with robotics. So robotics is big in the area of what we’re investing in. And also the Internet of Things—from data centers and the cloud—I mean, that continues to grow. And that’s a part. And you’re going to see a lot of this not only in AI, but with robotics in advanced manufacturing techniques. I mean, take a look at—have you ever seen an Amazon warehouse video of how it’s run with robots, or even seen a Tesla factory of how they manufacture cars? So you’re going to see more of that, especially with 3D printing. And because Trump is emphasizing the reshoring of companies back—I think right now, I think there’s about 2 trillion that have been lined up by companies that are going to be investing here, whether it’s Apple investing half a trillion dollars, whether it’s Taiwan Semiconductor investing 160 billion and building five new chip plants here. Industrialization of America is going to be one of the key things where consumer stocks were big drivers of the economy. I think what you’re going to see going forward, Cris, it’s going to be more about infrastructure and industrial stocks as we rebuild our industrial base. And you’re going to see that with favorable taxes, favorable regulation, and policy to favor rebuilding the country’s industrial base, which we basically outsourced over the last three or four decades. That’s now coming in reverse. And, you know, a good example of this: if we’re going to bring factories back here, if we’re going to keep advancing with technology—well, one of the key things we need is rare earths. China dominates that market. So what are you hearing this week with Ukraine? You’re hearing about this rare earth deal for half a trillion dollars with Ukraine that would give us a source of strategic materials needed in technology where it would not be dependent on China. So, you know, once again, a lot of things like this—it’s going to be a different environment. And I would sum it up that industrial stocks are going to be some of the new leaders that you’re going to see in the marketplace as we reshore and rebuild our industrial base, along with growing use of technology in just about everything. So technology is not going to stop; it’s going to continue. And we’re investing in technology.
Cris Sheridan:
Yeah. And earlier, Jim, you mentioned driverless taxis, robo-taxis—Waymo, for example, which is operating extensively across a number of different U.S. cities, primarily Phoenix, San Francisco, Los Angeles, and Austin, Texas. Those are the places where you’ll see Waymos all over the place. I just recently went to San Francisco a couple weeks back and took a driverless taxi, a Waymo, for the first time.
Jim Puplava:
What was it like getting in a car with no driver?
Cris Sheridan:
Yeah, it was pretty interesting. I pulled out my phone and I had the videotape rolling. I was sitting in the passenger seat. My family was sitting back in the back row. And I mean, it handled everything just fine. And, you know, you think about San Francisco—it’s a bustling city. There’s a lot of pedestrian traffic moving in and out of cars. Sometimes, you know, the lanes are very narrow. So, you know, you think about an AI car navigating that type of complex scenario with all sorts of uncertainty, random things that can happen. And it was doing it flawlessly. And I talked to an Uber driver right afterwards because we also hailed an Uber driver during our visit. And I asked him, I said, “Hey, man, there are Waymos all over the place. What is that going to do to your job?” He said, “Oh yeah, I’m out of a job. The driverless taxis—they just can’t compete. They’re too good; they’re too competitive in price.” So again, that’s the future. And these things—we should expect to see these types of developments continue with greater and greater levels of autonomy.
Jim Puplava:
Yeah, and another thing that just hit me too—you think about an aging population. As people get older, you know, their eyesight isn’t as great; they’re not as quick with their driving skills. So think of somebody in their late 80s or 90s that no longer feels comfortable driving, taking a driverless Uber. Yeah, which—yeah. So, you know, then you don’t have to worry about it as much. So it’s going to change the automobile market in so many ways, where, you know, you may have—well, Tesla will certainly be the leader in this area—but you may even see some of the other car manufacturers that start coming out with driverless-type cars, because that’s where you’re going to see transportation. So, you know, think of what this might mean for drivers for UPS or for FedEx, and think of what this is going to mean for Amazon. So a lot of your Amazon deliveries in the future are going to be driverless cars and robots.
Cris Sheridan:
Absolutely. Yeah. And with a lot of the developments that we’re seeing in new battery chemistry—whether or not that is with solid-state batteries, as Toyota recently announced, or even the use of graphene in batteries or with all sorts of different applications—this drives the technology even further. It makes it more efficient—shorter charging times, lasting longer. So that’s why we’re seeing a real inflection point with the use of humanoid robots now in warehouses, or even with continued increase in the EV space, which I think is going to continue as the battery chemistries continue to improve and become more efficient. So lots of fascinating things happening on the technological side. And we’d recently talked with an expert, President/CEO of HydroGraph, about graphene. And it’s pretty amazing. She—Kjirstin Breure—she believes that graphene is actually going to become more important than silicon. If you think about, you know, we went through a Silicon Age with computation, she thinks graphene is going to be that next really important material substrate that’s going to drive a revolution in nanotechnology. So that’s something to also keep your eye on in the years ahead. So, Jim, again, we’re talking about how it’s time for a strategic shift in line with the article that you wrote earlier this year. And you also talked about, in addition to some of the things that investors can look at when it comes to robotics and artificial intelligence, which we believe is going to continue to plow forward and there are opportunities there for investors. But you also talked about precious metals and cryptocurrencies in terms of a dollar hedge. And the dollar has weakened, I would say, pretty substantially off of its highs from the beginning of this year. So what do you think is the way forward for some of those dollar-hedge investments?
Jim Puplava:
Well, gold is heading higher, and it’s likely to be revalued either by the Treasury or a sovereign wealth fund. And you even have people like—you’ve had Ed Yardeni on your show. Ed Yardeni is not known as a gold bug, but he sees gold hitting 4,000 this year. And one of the things that really struck me—if you listen to Bessent, Secretary of the Treasury, he keeps talking about revaluing and monetizing U.S. assets. And one thing that stands out is the price of gold, because the Treasury has about 263 million ounces of gold that are on the books at roughly about $42 an ounce. Well, if you revalue gold to where it is today, over 2900, Cris, that’s almost three-quarters of a trillion dollars. And if gold goes to, let’s say, 4,000 or even 5,000, as some suggest, you could see that being worth anywhere from 1.5 to $2 trillion. And one of the ideas that they’re talking about—Trump wants to establish a sovereign wealth fund. And one of the ideas would be it would be funded with gold and revaluing that gold. So gold, in addition to being a hedge against uncertainty and inflation, you’re also seeing it—especially in Asia and with the BRIC countries—because China does not want, let’s say, foreign investors dominating their domestic financial markets. They’re using gold in terms of settlement on excess currencies. So let’s say I’m Brazil, I’m trading with China, and let’s say they buy a billion dollars’ worth of commodities from me, and I only buy, let’s say, half a billion dollars of goods from China. Well, what do I do with the extra half a billion? I have Chinese yuan. I can exchange it for gold. So gold, once again, is resuming its historical role as money. So there’s another factor. In fact, some of the biggest buyers of gold—you know, it’s interesting because just in three months since Trump got elected, you have seen COMEX gold go from 17 million ounces to 40 million ounces. And the surprising thing—and silver equally as large. And as soon as it gets there, Cris, it’s flying out the door. So somebody is buying this gold, and they’re buying this silver. We’re extremely bullish on silver, not only for its industrial and technological use, but also because of the valuations where you have that gold-to-silver ratio roughly over 90 right now. And we think we could see that go down to maybe a more historical role somewhere around 50 to 1. So we see a lot of upside with silver. And the other thing we like—and we’ve been invested in Bitcoin since 2023—we see a role for cryptocurrency, and Trump is very big on that. So our dollar hedge—and we see this as part of our portfolio—is going to be precious metals and crypto, and it’s probably the two best-performing assets in our portfolio outside of our tech stocks.
Cris Sheridan:
Yeah. And just this week, Trump established a U.S. Strategic Bitcoin Reserve, as well as a digital asset stockpile for other cryptocurrencies. And so that has given a little bit of a boost to Bitcoin and some of the other cryptos out there. The one thing that many crypto bulls were a little disappointed on is that this reserve will be largely centered around Bitcoins that are already held by the U.S. government that happened through prior seizures, particularly Silk Road, which was one of the largest, and puts a limit on any new purchases. So if any of you would like to learn more about what we are specifically doing in our portfolios and would like to come on board to take advantage of our comprehensive financial planning or asset management services, you can visit us on our website, financialsensewealth.com, or you can also give us a call at 888-486-3939.
Jim Puplava:
A lot of times, I mean, we get 24-hour news. Some event happens—whether it’s fires or some other thing—then the news media just beats the damn thing to death. But what you don’t want to do as an investor: get focused on the day-to-day news events. And what we’re basically saying: start thinking strategically. What are the big changes that are coming? What does that mean? What does that translate into for investing? So think beyond what happened today or what happened last week and think about what’s going to be happening over the next year or several years, and I think you’ll come out ahead when it comes to investing. Well, that concludes today’s program. In the meantime, on behalf of Cris Sheridan and myself, we’d like to thank you for joining us here on the Financial Sense Newshour. Until we talk again, we hope you have a pleasant weekend.
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