TABLE OF CONTENTS

1. Market Recap: Komal Sri-Kumar on how the Fed crashed markets

2. EQUITIES: A ‘mini depression’ is coming, says Chris Vermeulen

3. EQUITIES: Peter Berezin on a 4,550 S&P level in 2025

4. EQUITIES: Felix Zulauf on why ‘hell for investors’ is coming in January

5. ECONOMY: David Rosenberg on the market’s ‘rough year’ ahead

6. ECONOMY: ‘Buckle up’ for 2025, says Danielle DiMartino Booth

7. ECONOMY: Tavi Costa on the dollar peak and what it means for assets

8. ECONOMY: Jim Thorne on the ‘brand new monetary system’ that’s coming

9. ECONOMY: Ron Paul on ‘the biggest bubble of all history’

10. What to Watch

MARKET RECAP

Latest News. The much-anticipated Santa rally has proven to be elusive.

On Wednesday, December 18th, The Federal Reserve cut interest rates by 25 bps, bringing the Fed Funds rate to a range of 4.25-4.5 percent.

The Federal Open Market Committee (FOMC) forecasted only two rate cuts next year, despite having previously forecasted four rate cuts. Fed Chair Jerome Powell said that, “the slower pace of cuts for next year really reflects both the higher inflation readings we had this year and the expectation inflation will be higher.”

Markets reacted with a significant downturn. The Dow fell by 1,100 points or 2.6 percent, its tenth losing day in a row, and its longest losing streak since 1978. The Nasdaq fell 3.6 percent, and the S&P fell 3 percent. The 10-year Treasury yield spiked from 4.39 to 4.5 percent in intraday trading.

To understand Fed policy, inflation, and why the Fed caused a market correction on Wednesday, we spoke with Komal Sri-Komar, President of Sri-Komar Global Strategies and Author at .

Sri-Komar said that up until now, Powell had implicitly guaranteed that he would support equity markets, but on Wednesday he suggested that he would no longer continue to do so.

“I have been critical of [Powell] because of the fact that he’s not focused on just inflation, he’s focused really on the stock market, even though he doesn’t say so,” said Sri-Kumar. “And today’s developments — his press conference and the Fed decision — essentially told the markets that he may not be there to support them in the future.”

Powell was “irresponsible” to cut the Fed Funds rate to zero and increase the Fed’s balance sheet in 2020, according to Sri-Kumar, who said that this happened in the midst of “expansionary” fiscal policy and contributed to inflation.

He argued that inflation was set to rise in 2025, and so the Fed would not cut rates.

“[The] next move is either remain the same, or have an increase in the interest rate because inflation perks up significantly in the first half of 2025,” said Sri-Kumar.

In particular, Sri-Kumar singled out tariffs as a driving force behind an uptick in inflation as Trump takes office. Trump has threatened to levy across-the-board tariffs on Canada, Mexico, and China.

“Even if [Trump] does not increase by as much as he threatened, there is going be a significant amount of tariff increases which will in turn be passed on to U.S. consumers,” said Sri-Kumar. “That will push up the inflation rate, and that is going to make it very difficult for the Fed to keep cutting interest rates further.”

Sri-Kumar also mentioned that the fiscal deficit and corresponding debt service costs would have an “impact on inflation.” He said that the incoming Treasury Secretary, Scott Bessent, would face a challenge in bringing the deficit down.

“In order to [bring the deficit down], he will have to essentially deal with a number of what we call sacred cows,” said Sri-Kumar. “He has to deal with Social Security, Medicare, and entitlements which are automatically going to U.S. residents… He has to tackle them.”

Market Movements

From December 13 to December 20, the following assets experienced dramatic swings in price. Data are up-to-date as of December 20 at 9pm ET (approximate).

1. Blackberry Ltd. (NYSE: BB) — up 37.6 percent.

2. VIX Index — up 32.9 percent.

3. Papa John’s International (NASDAQ: PZZA) — down 13.1 percent.

4. MicroStrategy Inc.(NASDAQ: MSTR) — down 10.9 percent.

5. Rapeseed — down 5.6 percent.

The following major assets experienced the following price movements during the same time interval.

DXY — up 0.8 percent.

Bitcoin — down 3.5 percent.

Gold — down 1.4 percent.

10-year Treasury yield — up 3 percent.

S&P 500 — down 2 percent.

Russell 2000 — down 4.4 percent.

USD/yuan — up 0.3 percent.

EQUITIES:
’MINI DEPRESSION’ COMING
Chris Vermeulen, December 20, 2024

Chris Vermeulen, Chief Market Strategist of The Technical Traders, said that the S&P 500 could pull back 35-55 percent over the next year or two, and that Bitcoin still has significant upside in 2025, diverging from and outperforming stocks.

In an interview on the show on November 28th, Vermeulen had predicted that Bitcoin would top at $108k in this trading cycle. On December 17th, Bitcoin indeed reached over $108k, its all-time high.

Vermeulen said that he had exited his Bitcoin position, and is now “just waiting to see what Bitcoin is going to do.” He said that Bitcoin could go as high as $160k, as long as the stock market does not see a significant correction.

“I think it could be like two, three months from now we could see [Bitcoin] actually pop,” he said. “It’ll be… a parabolic type move.”

When it comes to stocks, Vermeulen said that the last week’s market correction was a temporary blip, and that “we are still in a bull market.”

“It’s the market trying to buck you up, it’s the bull trying to get rid of you before it wants to go higher,” he said. “I think stocks are going to rally back up to the highs, potentially push to new all-time-highs by the end of the year.”

However, he warned that January could see the market top, leading to a 35 to 55 percent pullback in the S&P 500.

“We’re going to have a series of like, bear flags [in 2025] and it’s going to unwind,” said Vermeulen. “I do feel like we could see like, a 35, 55 percent pullback in the S&P 500 over the next year or two.”

He also predicted that most of the world would experience a “big recession,” which would “feel like a mini depression.”

EQUITIES:
START OF EVEN BIGGER CRASH IN 2025
Peter Berezin, December 18, 2024

The S&P 500 is likely to retrace towards 4,550 by the end of 2025, said Peter Berezin, Chief Global Strategist at BCA Research.

Berezin said that 2025 would be bearish for stocks. By contrast, most Bloomberg price targets for 2025 range from 6,500 to 6,800, according to Berezin.

He pointed to weakening labour market data as a sign of economic vulnerability.

“My view [on the stock market] is predicated on the U.S. entering recession next year,” he said. “The economy is vulnerable, and I think there are a couple of potential shocks that could easily knock it into recession.”

As examples of shocks, Berezin pointed to a “trade war” and Trump’s proposed tax cuts triggering a market “revolt.”

“I think that the market is just going to revolt if Trump tries to cut taxes by as much as he’s pledging,” said Berezin. “If we have a riot in the treasury markets, that’d be pretty nasty for the economy… certainly enough to trigger a recession.”

When it comes to the market’s strong performance over the year, Berezin said that much of it had been driven by Magnificent 7 tech stocks: Alphabet, Apple, Amazon, Meta, Microsoft, Nvidia, and Tesla.

“If you look at… the overall S&P 500 index, earnings growth for the 493 companies that are not the Magnificent 7 has actually been fairly weak,” said Berezin. “If you look at, say, the smallest listed companies [on the stock market], more than half of them are unprofitable.”

He said that consumer staples, healthcare, and utilities are examples of sectors that would not be “as badly hurt” during the market decline he expected to happen.

EQUITIES:
JANUARY WILL BE ‘HELL FOR INVESTORS’
Felix Zulauf, December 14, 2024

Felix Zulauf, Founder of Zulauf Consulting, said that 2025 would be a “rollercoaster year,” with a 1,000 point sell-off in the S&P 500, and 15-20 percent in the major indices starting in Q1.

“I expect the top, very soon, early in Q1 of 2025,” he said. “[This would be] triggered by uncertainty about the Trump trade policy, the tariffs, and perhaps also the DOGE [Department of Government Efficiency] cuts that people are talking about.”

Yet Zulauf said that in Q2, the Fed would step in to ease monetary conditions and support markets, setting off another rally. This could send the S&P 500 to as high as 7,000, according to Zulauf.

In the longer-term, Zulauf warned that Donald Trump’s trade policy could weaken the U.S. economy, drawing comparisons to The Great Depression.

“People should not forget that the intermediate-term correction that started in 1929… turned into a terrible mess, a global economic crisis, depression, and the market meltdown because in June of 1930 they introduced major tariffs with the Smoot-Hawley Act,” he said. “We have to watch very carefully what eventually comes out of Washington.”

Zulauf also pointed to Trump’s DOGE, headed by Elon Musk and Vivek Ramaswamy, which is tasked with cutting $2 trillion in government spending, as a trigger for a short-term market correction.

“Even if they cut out only half of what they said, it would be $1 trillion, and $1 trillion is about 3.5 percent of GDP,” he said. “While I applaud that structurally for the long-term, in the short-term it would be very painful.”

In general, Zulauf expected a “trading environment good for traders, and hell for investors,” due to uncertainty and volatility in markets.

ECONOMY:
’PRETTY ROUGH YEAR’ AHEAD
David Rosenberg, December 21, 2024

David Rosenberg, President of Rosenberg Research, said that the U.S. economy would be considerably weaker in 2025 relative to expectations.

Rosenberg pointed to weakness in the U.S. economy, as highlighted in several recent data releases.

“The Philly Fed Index swung to a pretty big negative,” he explained. “Most of the regional surveys, even on the services side, have been softening. Manufacturing is in a recession… It’s consistent with an economy that’s growing at a 1 percent annual rate, not 3.”

When it comes to the Dow Jones’s longest losing streak since the 1970s, Rosenberg said that this fits with his view that the economy is “cooling off.”

“We’re supposed to get the big Santa rally,” he explained. “December is almost always an up month, seasonally. The fact that it’s down month-to-date with a few days to go, that’s actually very surprising.”

Rosenberg forecasted that inflation would experience downward pressure in 2025, driven by a fall in housing costs.

“What’s going to compound the downward trend in inflation is going to be the rental components,” he said. “We have a massive pipeline of rental construction coming in in 2025 at a time when the vacancy rate nationwide is already at a cycle high. That is going to weigh on rents, and it’s starting to finally feed through, more dominantly, in the CPI data.”

ECONOMY:
’BUCKLE UP’ FOR 2025
Danielle DiMartino Booth, December 19, 2024

Danielle DiMartino Booth, CEO of QI Research, said that the U.S. is already likely in a recession, and that inflation would trend downwards into 2025.

DiMartino Booth said that even if Trump levies tariffs next year, shelter costs are falling, which would lead to a reduction in inflation.

“Goods are actually deflating by 0.6 percent year-over-year, so even if that is to turn positive in 2025, you still have a downward trajectory for the inflation rate going forward,” she said. “I happen to disagree with what the Fed determined in taking their inflation expectations upwards.”

She also disagreed with the Fed’s labour market projections.

“[The Fed’s] projection is that the unemployment rate is going to fall to 4.2 percent,” she said. “We have a complete deniability on Powell’s part… I do project that we will see a rising unemployment rate, and inflation begin to drift down as we get into 2025, and that the Fed will be forced to reverse course yet again.”

DiMartino Booth said that the U.S. economy is already in a recession, and that future revisions to economic data would demonstrate that this is the case.

“The recession begins several months before job losses begin,” she explained. “That would put it in March, April, May of 2024… It took the National Bureau of Economic Research 366 days to announce that a recession had started after it had begun in December 2007.”

She added that she hoped the recession would end “towards the middle of 2025.”

In terms of investment implications, DiMartino Booth said that safe, dividend stocks should do well. She also said that gold would be a “good play,” as well as bonds, in 2025.

ECONOMY:
DEATH OF THE DOLLAR?
Tavi Costa, December 17, 2024

Tavi Costa, Portfolio Manager at Crescat Capital, said that “the [U.S.] dollar holds the key for the entire market,” and that the dollar was reaching its cycle peak, which is bullish for other asset classes, such as emerging market stocks.

“When it starts moving higher, it basically attracts capital from all over the world into the U.S. dollar,” he explained. “It tends to inflate other things… it inflates either treasuries or equity markets or real estate, or something along those lines.”

When the dollar becomes stronger, the rest of the world becomes “cheap,” said Costa, causing capital to flow to emerging markets and under-valued sectors.

“If you look at Brazilian equities or the mining industry, they have not performed at all,” he said. “They… have not received any of those flows just yet… Things take time, and so those flows, at some point, will come back. And so I do think we’re in the process of seeing those things.”

He gave the example of billionaire hedge fund manager David Tapper, who was rotating into Chinese equities.

“The time to be short China, and negative on China, was 5 to 10 years ago,” Costa said. “I am not of that view anymore.”

As the dollar weakens in the future, Costa predicted that Chinese equities, Japanese stocks, and Latin American assets could perform well.

“We’ve seen two [political] trends happen in Latin America: the Bolsonaro trend, which has been more conservative, and then we’ve seen the Milei and El Salvador sort of libertarian movement,” he explained. “This is a big change in leadership in Latin America overall, so I do think this is going to translate into growth, and translate into inflows of capital at some point.”

ECONOMY:
’BRAND NEW MONETARY STANDARD’
Jim Thorne, December 16, 2024

Jim Thorne, Chief Market Strategist at Wellington-Altus Private Wealth, said that the incoming Trump administration will harness crypto to boost the U.S. dollar and form a new monetary system.

Thorne highlighted incoming President Trump’s pro-crypto policies, and said that Trump’s Treasury Secretary appointee, Scott Bessent, wants to negotiate a new monetary standard, backed by crypto.

“If the thing that basically is the bridge between the digital world and the analog world is stablecoins, and stablecoins are backed by the U.S. dollar and the U.S. Treasury, [then] the U.S. monetary leadership is insured for the next century,” said Thorne. “I think we are starting to see the early building blocks as we speak, and it’s going to happen under the Trump presidency.”

He added that if stablecoins are backed by U.S. Treasuries, then this would create a “massive demand for Treasuries,” which could be a solution to the U.S.’s deficit problem.

When it comes to Bitcoin, Thorne said that Bitcoin could reach $500k per token over the next four years due to rising demand and government policy.

“Trump is going to implement the [Bitcoin] treasury reserve,” he explained. “People need to take Mr. Trump at face value and… recognize the fact that we’re going to renegotiate and build a new Bretton Woods system. And I would suggest to you that Bitcoin and digital assets are going to be a major player in whatever this looks like going forward.”

Thorne said that in terms of assets, he would invest in the Nasdaq, the S&P 500, and Bitcoin in 2025.

ECONOMY:
’BIGGEST BUBBLE OF ALL HISTORY’
Ron Paul, December 15, 2024

Ron Paul, Host of The Liberty Report and former Congressman from Texas, warned about the rising U.S. deficit and debt levels, and said that this could lead to a lot of economic damage as the U.S. struggles to liquidate its debt.

Paul highlighted the danger of the U.S. government’s $36 trillion debt and “out of control” deficit. He pointed to the Federal Reserve as the root of the U.S.’s fiscal problems.

“[The Fed] has created the biggest bubble of all history, and that is the $36 trillion of [debt],” Paul explained. “There will be liquidation of the debt… I think interest rates would go up and prices would go up, and that would be part of the liquidation.”

Paul warned that if nothing is done to reduce the size of the debt and deficit, “there will be big pain and suffering.”

“I think that we should wean ourselves off [excessive government spending], but I think the political forces are so strong,” he said. “The military-industrial complex, the pharmaceutical industry, the whole works, the welfare state — they are not going to accept that… I fear that the consequence of this situation is actually, you know, violence.”

He added that deficit reduction measures, like those proposed by the Elon Musk and Vivek Ramaswamy’s DOGE, will face political obstacles.

“[The DOGE] is talking about getting rid of some of the bureaucrats, but believe me, there is a powerful force that runs Washington, and those are the special interests and the lobbyists, and they really control things,” said Paul. “I don’t think it’s going to work because I think the people who are going to be hurt by cutting [government] spending are going to be very, very noisy… it’s like drug addiction.”

Paul said that he is “not in favour of” tax increases, and that deficit reductions should come via cuts.

“The government is way out of control,” he said. “It goes back to the Fed. [The] Fed is the backbone of this whole system, because it wouldn’t be this size if you didn’t have [the] reserve currency of the world that’s doing, still, better than it deserves… This bubble can’t just keeping getting bigger without bursting.”

WHAT TO WATCH

Monday, December 23, 2024

• Consumer Confidence — These data reflect the degree of optimism or pessimism that consumers feel about the overall state of the economy and their personal financial situation.

Tuesday, December 24, 2024

• New Home Sales — The number of new houses that were sold in November.

Thursday, December 26, 2024

• Initial Jobless Claims — This measures the number of individuals filing for unemployment benefits for the first time.

TABLE OF CONTENTS

1. Market Recap: Mike McGlone on ‘severe deflation’ in 2025

2. EQUITIES: Markets are ‘insane,’ says Gareth Soloway

3. EQUITIES: Fr. Emmanuel Lemelson on finding ‘deep value’ stocks

4. EQUITIES: Michael Gayed on his ‘bad feeling about December’

5. ECONOMY: Douglas Holtz-Eakin on a potential bond market ‘revolt’

6. REAL ESTATE: Ron Butler on the ‘catastrophic’ housing problem in Canada

7. What to Watch

MARKET RECAP

Latest News. Consumer Price Index (CPI) data were released on Wednesday, December 11th, showing an uptick in inflation in November. Year-over-year headline inflation was 2.7 percent, in line with expectations, while core inflation, which excludes food and energy, rose 3.3 percent.

Markets reacted positively, with tech stocks leading the way. The Nasdaq Composite rose 1.7 percent on Wednesday, with Alphabet, Tesla, Meta, and Amazon hitting record highs. The S&P 500 rose 0.8 percent. Bitcoin soared from under $98k to $101,300 per coin in intraday trading. The 10-year Treasury yield rose by 0.07 percentage points.

Mike McGlone, Senior Commodity Strategist at Bloomberg Intelligence, discussed the latest CPI report, as well as what the future holds for risk assets and commodities.

McGlone said that much of the uptick in the recent CPI reading came from a 4.7 percent year-over-year increase in shelter costs. He said that many market observers do not predict inflation will drop significantly in the near-term.

“It might be kind of silly to expect inflation to drop a lot when we have the stock market related wealth effect the highest in 100 years,” he said. “That is, we’ve had this massive pump in equities — it’s two times GDP — and that’s a massive wealth effect. So why should consumers stop spending?… And also we have a wonderful situation for [the] wealth effect: we have the stock market going up, and the Fed’s easing.”

McGlone warned, however, of “significant deflationary forces” in China, the world’s second-largest economy, where the 10-year note was “at 1.84 percent” on December 11th. He also said that U.S. stocks are highly “elevated,” when looking at metrics like market indices relative to GDP, which could imply a correction.

“The number one force for deflation in this country is a backup in the highest stock market valuation to GDP in 100 years,” he said. “Tariffs will happen right away [under a new Trump administration]… and maybe a little purging of some of those excesses there [in the U.S. bureaucracy]'; that means 2025, I think, is finally going to have a little bit of a backup.”

“We’re at the point now where every single outlook for next year assumes the stock market is going to go up,” said McGlone. “Just imagine if it drops 10 percent. That’s severe deflation, on the back of what’s happening in commodities.”

Bitcoin is a leading indicator for risk assets, according to McGlone, who said that the Bitcoin-gold ratio can be used to help determine when a correction in risk assets will occur. He mentioned that this ratio is currently around its 2021 cycle peak.

“The best leading indicator [for risk assets] might be Bitcoin,” he said. “On a 100 day basis, the Bitcoin to S&P 500 correlation is about 0.50, it’s the highest in its history.”

McGlone said, “The best case I think for gold, is if Bitcoin resistance around $100,000 holds, and eventually kicks down. That means all risk assets are expensive, signalling lower. That means a major, I think, tilt towards gold and treasury bonds.”

Market Movements

From December 6 to December 13, the following assets experienced dramatic swings in price. Data are up-to-date as of December 13 at 9pm ET (approximate).

1. Walgreens Boots Alliance — up 21.4 percent.

2. American Superconductor Corp. — down 17.2 percent.

3. Adobe Inc. — down 15.8 percent.

4. Natural Gas (Henry Hub) — up 6.2 percent.

5. Tesla — up 12.1 percent.

The following major assets experienced the following price movements during the same time interval.

DXY — up 0.8 percent.

Bitcoin — up 3.8 percent.

Gold — up 0.5 percent

10-year Treasury yield — up 0.6 percent.

S&P 500 — down 0.6 percent.

Russell 2000 — down 2.6 percent.

USD/yuan — No significant change.

EQUITIES:
MARKETS ARE ‘INSANE’
Gareth Soloway, December 11, 2024

Gareth Soloway, Chief Market Strategist of Verified Investing, gave his market outlook, warning of a potential correction ahead.

Soloway predicted an “unbelievably nasty” downturn may occur in 2025, based on his chart analysis, as well as historically high stock market valuations when looking at PE ratios.

“Stock valuations are insane,” he said. “We are priced beyond perfection. In fact there’s no doubt there’s a bubble here… I am very skeptical that the markets will continue to go up.”

He said that U.S. consumer spending had been held up by the wealthy, whose stock market portfolios had seen substantial increases, allowing them to buy more goods and services.

“Anyone making under $50,000 can’t even go to McDonald’s anymore,” he said, “but the high end, which spends the most money, they are keeping the economy going. As long as the stock market keeps going up, the merry-go-round and the music will continue to play, but at some point it can’t.”

However, Soloway said that he is bullish on Chinese stocks, as well which he said would outperform global equities in 2025.

“So, number one, China is talking [about] massive stimulus now… [and] that’s bullish for equities in China,” he explained. “Number two, Trump has threatened massive tariffs on China. He generally threatens monstrous tariffs, and then he imposes something less. It’s a negotiating tool. So I think prices on China equities are reflecting a potential of these massive tariffs. My guess is… it won’t be as high as markets anticipate. That will be bullish.”

On Bitcoin, Soloway said, “As long as the stock market is going up, Bitcoin likely goes up with it. But once we see that correction in the stock market, or pullback in the stock market, Bitcoin likely comes back in.”

Yet, Soloway said he would buy Bitcoin if it corrects, especially given the incoming Trump administration’s pro-crypto stance.

EQUITIES:
MARKET’S HIDDEN GEMS
Fr. Emmanuel Lemelson, December 10, 2024

Fr. Emmanuel Lemelson, a Greek Orthodox priest and CIO of Lemelson Capital Management, discussed investing in “deep value” stocks in the midst of historically high market valuations.

Lemelson said that the markets are at “scary” levels when looking at The Russell 5000 to U.S. GDP.

“I think through the close of business yesterday… we hit a new record, it’s 2.09, I want to say,” he said, referring to the Russell 5000 divided by GDP. “The previous record was like 2.084.”

Yet, despite record market valuations, Lemelson said that there are sectors and strategies which can help investors turn a profit.

He singled out off-price retail as an undervalued sector, mentioning that his firm held stakes in Walgreens, Kohl’s, and Big 5 Sporting Goods.

“We own a stake in Big 5, which is a very unpopular sporting goods store,” he said. “They’ve been around for a very long time, they fill a niche market. They’re trading at a pittance, frankly, a fraction of tangible book value… Are people going to have their kids not do school sports next fall because the economy is [down]? Probably not.”

Lemelson said many of the major tech stocks are over-valued, and that his company had taken a short position in Tesla.

“A lot of these big tech names, it’s like the lemmings going over the cliff,” he said. “If you look at Tesla, for example… Do you really want to buy a company that the NTSB [National Transportation Safety Board] just said had the highest fatality rates, on the road, for its cars?… and yet people buy it, because it’s like a meme stock.”

When it comes to a broader macroeconomic outlook, Lemelson said that he was hopeful about the new Trump administration.

“He’s got a lot of really great businessmen that he’s appointing in his cabinet,” he said, pointing to the examples of David Sacks and Paul Atkins. “I do believe he [Trump] will do what’s in the best interests of the country.”

EQUITIES:
’THIS WILL END BADLY’
Michael Gayed, December 7, 2024

Michael Gayed, Publisher of , talked about his bearish outlook for markets, and the assets he is most bullish on.

In 2023, Gayed had predicted the unwinding of the carry trade between Japan and the U.S. This trade involves investors borrowing from Japan at near-zero interest rates, and using the money to buy U.S. risk assets.

When the Bank of Japan (BoJ) raised its interest rates in July of 2024, this triggered a sell-off in U.S. risk assets, so that investors could cover higher interest payments in Japan.

Gayed said that the unwinding of the carry trade may not be over, and that it is still “lingering.”

“I have a bad feeling about December… because there is a BoJ decision coming up,” he said. “It seems like they need to hike rates… Japan has a real inflation issue, and if The Bank of Japan does panic to try to counter the inflationary pressure, then you might have a repeat of August [when the carry trade unwound].

He warned that U.S. markets are caught up in a “speculative mania” that would “end badly.”

“It’s unlike other speculative manias in the sense that it’s very concentrated… in tech stocks, it’s concentrated in Bitcoin and some certain cryptocurrencies,” he said. “It’s concentrated also in levered funds… It’s very clear, we’ve become a gambling nation. Everyone is just trying to YOLO into 2X and 3X and individual stocks… [T]he last time we had that feeling as a society was the peak in 2021.”

However, Gayed said that he was bullish on long-duration treasuries and small caps.

“They’re interconnected,” he explained. “If you end up having long-duration treasury yields collapse [due to deflation worries or the reverse carry trade],… In that collapse in yields, now small caps finally have their lifeline, because now they can refinance into lower yields.”

ECONOMY:
IS U.S. DEBT DEFAULT COMING?
Douglas Holtz-Eakin, December 9, 2024

Douglas Holtz-Eakin, former Director of The Congressional Budget Office (CBO) and President of The American Action Forum, discussed his long-term outlook for U.S. deficit and debt, and their impact on the economy.

Holtz-Eakin said that “there is no excuse” for the U.S. to be running a deficit that is 7 percent of GDP, especially given that the economy is at “full employment” and is “not engaged in an overseas war.”

“We know that this is part of a larger trajectory where the debt relative to GDP has gone from 30 percent in 2000 to 100 percent now, and is on a trajectory to go steadily north as far as the eye can see,” he said. “And that’s literally unsustainable.”

If the government fails to control the debt and deficit levels, Holtz-Eakin predicted that interest rates could spike, and there would be a bond market “revolt.”

“[Long-term interest rates will] go up,” he said. “If they [The Trump administration] in fact do both extend the tax cuts and do another [set of spending measures] — his promises add up to another $3 or $4 trillion — I think you’ll see a revolt. I don’t think the bond markets are going to like that a bit.”

Holtz-Eakin expressed skepticism about Trump’s proposed Department of Government Efficiency (DOGE), headed by Elon Musk and Vivek Ramaswamy, which is tasked with trimming $2 trillion in government spending.

“If you want to talk about cutting $2 trillion out of spending, you have to recognize that the Constitution gives the power of the purse to Congress, and it gives the implementation of that spending to the Executive, and nowhere in there is the DOGE,” he said. “And so the question is, what authorities does the DOGE have on paper? They don’t have anything.”

He drew a comparison to The Grace Commission under President Ronald Reagan, which issued several recommendations for reducing spending.

Holtz-Eakin said, “it doesn’t look like it [The Commission] changed the size and scope of the federal bureaucracy very much.”

He said that to tackle the deficit, modifications need to be made to entitlement programs like Social Security and Medicare.

“I think more affluent individuals have to get less back in their Social Security,” he explained. “Medicare is harder… We have struggled mightily in this country to control healthcare cost growth. We’ve made some real progress, but that’s the next big challenge.”

REAL ESTATE
’CATASTROPHIC’ PROBLEM IN CANADIAN HOUSING
Ron Butler, December 12, 2024

Ron Butler, Host of “The Angry Mortgage Podcast” and Principal Mortgage Broker at Butler Mortgage, gave his outlook for Canadian real estate.

Butler said that a correction is “on the horizon” for condominiums in Toronto.

“We have seen an absolute catastrophic problem developing in investor-driven condominiums in [Toronto],” explained Butler. “We have brand new [condo] products coming on the market… This new product is priced so grossly higher than resale products right across the street… The delta is completely unmanageable.”

Toronto condo investors were driven by “absolutely ridiculous” assumptions when they purchased real estate, said Butler.

“The assumptions were… that prices would simply go up eternally and forever,” said Butler. “Another assumption would be that 2 percent interest would continue forever, and that mass immigration would continue forever. All of these things have become untrue, and the feasibility of even closing on these condominiums… is doubtful.”

However, Butler said that single-family homes in Vancouver and southern Ontario would not suffer from a correction, due to geographic, regulatory, and financial barriers to building new units.

“In Ontario, we suspect that the development of single-family homes in 2024 has just fallen off the face of the earth,” he said. “There’s no financing for development available for single-family homes, and the big builders of single-family homes in Ontario and in British Columbia all stopped building them about 12 or 14 months ago. They sold what they had pre-sold, and they closed their sales offices.”

WHAT TO WATCH

Tuesday, December 17, 2024

• U.S. retail sales — The total revenue generated by retail businesses across the U.S.

Wednesday, December 18, 2024

• FOMC Rate Decision — The Federal Open Market Committee will meet to make a decision on The Fed Funds rate.

• Housing starts — The number of new homes being built across the U.S.

Thursday, December 19, 2024

• Existing home sales — The number of pre-owned homes being sold across the U.S.

• U.S. leading economic indicators — This is a composite of ten key metrics designed to forecast U.S. economic activity.

Friday, December 20, 2024

• Personal Consumption Expenditures (PCE) Index — A measure of how much U.S. households spend on goods and services.