Robin Griffiths joined Jim Puplava on a recent edition of the Financial Sense Newshour. Robin told listeners why he believes we’re in a bear market rally and why he doesn’t think there will be another bull market until 2023. See below for excerpts from his interview on the Financial Sense Newshour.
For audio see, The Unwinding of the Petrodollar and the New Currency Era.
In just about five weeks we did normally what you would see in the markets over a six-month period. Is this a bear market rally?
Yeah, I'm sorry to say it's a bear market rally. Our market is down a couple of percent in England. But the reason why the U.S. is different is it is a big and powerful economy and you are in the period running up to a presidential election. And there's so much money around it. I was reminded of Senator Everett Dirksen who used to say, ‘a billion here and a billion there,’ and you're talking real money. Well, now we're doing it in trillions and I’m thinking quadrillions are the next thing.
So, I think in this particular period, the rally in the U.S. is better than you're going to get elsewhere. There's something else interesting, the top five stocks, mainly in the high-tech area like Facebook, Netflix, Amazon, Alphabet and Microsoft, they are up 5 to 6%. The rest of the market is nothing like that.
There's one other thing which technicians know that normal people don't know. If you ask most people, ‘when do the biggest raises take place?’ They say, ‘oh, when we’re in a bull market.’ And when did the biggest falls take place? They'd say, ‘oh, in a bear market.’ But that sounds right. And it's logical, but it's not what happens.
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In reality, both the biggest falls and the biggest rises take place in bear markets. The ratio is something like 18 out of the last 20. The more violent and sudden you see a rally after a big fall, in my mind, immediately it’s a bear market rally. If you think about it on February 12, the U.S. S&P 500 was at a new all-time high in a roaring bull market. Then when it started to go a little bit weak, the traders would have said, ‘let's sell something easy to sell that’s very liquid, we'll do a trade and maybe short Amazon or Apple.’ And then suddenly, to their great surprise, courtesy of a germ, they were up 30% they have an urgent need to close that and make the profit by buying back and of course they know other traders in the same position.
So, the initial part of the rally, because it's their closing, is incredibly violent. Then of course, others coming in saying well, they're the best stocks anyway. And that's why it can feed on itself. With the money around provided by the Fed, encouraged by the president, I think this is quite dangerous. But even on the U.S. chart, it's still a bear market rally.
How are businesses, and especially small businesses, going to survive?
I talked to the owners of the little restaurants where I regularly like to eat, and they're all going ‘gosh, a month, we can hang in there and if you really push us, but it'll hurt, call it two months and if it goes on any more than that we're out of here.’ Now, the government, in the U.K., and I'm sure the U.S. has done similarly, is perfectly willing to make almost free loans available to these people, so that they can get through this and come back later.
But the business owners don't want those loans because all it means is when we get back to some sort of normal, they're living under a burden of debt, which they've got to service and pay back. They're not expecting interest rates to stay almost zero forever because if you print enough money, it's got to be serviced in the long run.
This is probably the worst economic situation that I have been through in my life. It may well be that the only one that was possibly worse, was the 1929-1933 period. When you get out the chart and look back at all the previous bear markets I've lived through and 1972 to 1975 was pretty scary. This is worse.
As we entered the beginning of this year, I was writing in my newsletter that the cycles looked as though they were about to stop turning down now. And next year and the year after, we're going to be very negative. Then, this is in January, I said, but as it happens in America, you are in the period running up to the presidential election, and all sorts of good things happen—that's typically a bullish thing.
In January over here, England didn't know whether it wanted to leave Europe or not. We had an election, which was a landslide victory to Boris Johnson making it clear Britain is going to leave Europe. We've got a dominant Tory party, which is going to spend money, and particularly in the northern part of England, because it was the northern voters who voted for Boris saying, get on with it. And then of course, instead of that happening, we then get a disease right out of the blue.
So, the good news was going to delay the setback in America and in Britain, but it was already taking place elsewhere. Then along comes the virus and said, ‘no, no, no, we're going to do it now.’ Which, of course, nobody could have forecast that I don't think even in China, they knew quite what was happening even though they were ahead of us.
We're back on track now and the prediction from my cycles was next year and the year after were going to be very, very tough economic years. If I had to put a date on the beginnings of a proper new bull market, it's 2023. Then I think the next generation, the millennials, will be in the driving seat. There're a lot of new technologies that they will want, and they'll have quite an exciting thing and they’re quite likely coming up from much lower levels than we are now. And all sorts of things that we old baby boomers got used to, this new generation has a whole new set of things that they can do. If you think about built-in 5G and things like that, one can easily tell a bullish scenario.
But we've got to get rid of all this debt. We've got to get houses and certain assets back down to levels where a normal person can afford a property to live in. So all of that's got to return to something when nice young people with proper jobs can afford an economic activity that doesn't look as though that will happen until 2023. So, we've got a tough period to get through.
In trying to hang it together with this disease, I think the yield curve of the death rate will flatten out. But as soon as governments say start going back to work, the death rate will pick back up again. So, there can be subsequent humps.
We will be getting news from pharmaceutical companies encouraged by government money to bring on potential vaccines, and some of them will be helpful, but they wouldn't have passed all the tests so that they're available at least till the end of this year. And that's super early, it should normally take longer than that. Meanwhile, elsewhere in the world, this whole disaster is going to rumble on round. So I think it is very serious indeed and we're trying to survive.
To hear Robin’s advice on what investors should be doing right now click here or for an archive of past shows, visit our Financial Sense Newshour page.
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