IN-DEPTH: TRANSCRIPTION - LONGWave - 02-13-25 - FEBRUARY - Investment Themes for 2025
SLIDE DECK
TRANSCRIPTION
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Thank you for joining me. I'm Gord Long.
A REMINDER BEFORE WE BEGIN: DO NO NOT TRADE FROM ANY OF THESE SLIDES - they are COMMENTARY for educational and discussions purposes ONLY.
Always consult a professional financial advisor before making any investment decisions.
SLIDE 3 – COVER
This video will follow-on from the February UnderTheLens that outlined the six major Macro Themes for 2025. As in previous years we will build in this LONGWave video the Investment Themes that come out of the Macro Themes.
You will need to view the video in concert with a video already made available to you of a full discussion on the subject with the folks at Thoughtful Money.
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We discussed the subjects shown here in the Hour and a half Thoughtful Money video. The full supporting slide deck was also made available to you with that video
Hopefully therefore we can keep this video much shorter?
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As a reminder, the six 2025 Macro Themes are shown here at the bottom along with those from 2024 at the top.
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In 2024 we laid out the Investment Themes as show to the right
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.. but kept the discussions of specific instruments to the weekly Newsletters and twice weekly Chart mailings where we could give more detailed and timely analysis.
We will do the same thing this year but with some changes I will talk about in a moment.
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Shown here are the 2025 Investment Themes without the particular investment Instruments.
What should jump out at you immediately is a shift to a focus on multiple types of Markets versus just investment instruments within the Stock and Bond Markets.
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A central reason for this is because with the end of the Great Moderation and the changes underway within the 4th Turning it is going to be increasingly about which markets you are focused on and how they are impacting the other markets.
I believe the Thoughtful money video addressed this quite thoroughly.
We are now in an era where never before have you needed to EXPECT THE UNEXPECTED!
Where you continuously need to be concerned with:
- Market Interventions,
- Unexpected Regulatory / Banking change and
- Abrupt Government Policy change
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If you focus solely on the Equity market as so many people do you will be exposed to the tail on the dog – wagging away as the dogs eyes ears and nose are detecting danger. By the time the dog’s tail stops wagging it may be too late!
It may be helpful to think about the dog’s most important sense as his nose which detects danger in Credit Markets both domestically and internationally. Those signals today are almost always international and propagate in mille-seconds.
Currency Markets can be seen as the dog’s eyes, the bond market as the dogs ears and his brain as the mechanism for assessing the symbols of wealth. Commodities are the non-symbols non-fiat real wealth that keeps his body alive.
All are aimed at detecting danger to keep him alive.
2025 must be about investors being on top of all markets and knowing which ones to be in and how others markets are impacting your portfolio.
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As a consequence our twice weekly chart package will be changed to include a greatly expanded coverage of the areas shown here in what we will call the Market Lab. You may have already seen this expansion underway in recent mailings.
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Therefore what in important in this session is to touch on the Markets we have just mentioned.
As such I want to discuss the areas outlined here….
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.. starting with the Equity Market or the Dog’s Tail where everything seems fine right now?
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Market analyst are now increasingly talking about fundamentals being at historically high valuations and that we should expect total returns to fall over the next few years.
This fits with our projections for the Beta Drought Decade to be ahead which we outlined in our 2023 Thesis paper roadmap entitled “A Great Stagflation”.
A long term view of the S&P 500 on a monthly basis illustrates that from a technical analysis basis we may be an important cusp in the equity market. We have the convergence in the upper trend lines in the top panel of a red and black channel marked by the top of the DOME pattern and circled red “X”.
The Middle panel confirms this with potential central bank monetary policy projections.
Additionally, the proprietary MATASII Momentum indicator aligns and confirms the upper two panels.
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This chart which goes back to 2012 when Quantitative Easing was put in place has tracked our expectations pretty closely with adjustments for the COVID shock along the way.
This chart because of Thoughtful Money’s technical problems was not visible in the video but you can hear me talking about it at length at approximately the 1 hour mark.
This chart suggests that the current market lift is likely ending somewhere around 6400 in March/April of this year. Don’t invest based on that but certainly be aware.
Remembering, that a top doesn’t necessarily mean a crash but only the beginnings of a change in trend.
CHART 16
That chart was built upon our thinking in 2012 as you can see from the copyright block on the likely advancing roadmap of the predictability of Monetary Malpractice.
There is little doubt to us that with the mispricing of Risk and lack of real price discovery that we are at the stage of Mal-Investment, Dysfunctional Markets and Investor Delusion.
CHART 17
The Bond Markets are also cautioning!
CHART 18
Yields and rates are highly likely headed higher in the long term.
Because of over $700B in unrealized Bond losses in the US banking sector the Federal Reserve will be forced to take yields lower or face a US national banking and commercial real estate crisis. Federal Reserve actions are likely to be executed through QE of some disguised form and Yield Curve Control policies - not too dissimilar to what Japan had to do when their markets in the 90’s reached similar points of over valuation and concentration.
CHART 19
Credit Markets always lead and we don’t expect it to be any difference this time.
Therefore Credit Markets are not only an investment area but additionally are important early warning indicators.
CHART 20
This Yield Curve chart of the 10Y UST Yield minus the Fed Funds Rate is something we discovered during the Dotcom Bubble. It warned and shielded us quite effectively during the 2008 Financial Crisis.
Presently on the right you can see how it has been drawn out by Covid but has recently arrived at the point of cautioning us again. The central panel reflects the S&P 500 and the bottom panel the MATASII proprietary Momentum indicator which are also aligning as in the prior era of warning.
The damage in the economy and markets can be expected to occur when the Fed and financial markets begin readjusting to protracted periods of inverted yield curves.
CHART 21
This chart of High Yield bonds such as JNK is also another credit area to watch as the significance of the degree of Zombie corporations now operating in both the S&P 500 and Russell 2000 is an increasing problem for the Federal Reserve.
In 2008 the Fed was forced into unprecedented and frankly questionable actions legally to save these players. The layoffs and fall-out was felt to be just too much for the economy to handle.
A breakdown here is something that the “DOG” and professional asset managers can be counted on to react to extremely quickly!
CHART 22
If history is any measure then Tariffs can be expected to trigger Trade Wars.
There is an old saying that when trade stops crossing borders then tanks start to.
If not tanks - then seldom do Trade Wars not lead to Currency Wars to offset the impact of trade balances and competitive dis-advantage.
Expect it to be no different if Trump continues with his focus on making Tariffs a key focus of his administration to re-shore American Manufacturing.
CHART 23
The US Dollar is also at a potential significant cusp as marked by the red arrow.
If the Fed lowers rates then the dollar can be expected to fall – at least temporarily.
Currently the strength in the dollar has been as much about weakness in the Euro.
However, the Yen is presently a major concern as is the possibly of China not maintaining its effective US dollar peg.
The US dollar continues to worry many as De-Dollarization, advancements in Crypto Currency and surging gold prices support major concerns and potential increased volatility.
CHART 24
Commodity prices closely track changes in the US dollar.
A weak dollar is normally positive for commodities.
CHART 25
Currently the overall Commodity complex is completing a corrective consolidation.
If commodities are to break overhead resistance then the next upward leg is underway.
Many sub sectors in the commodity complex are already breaking higher but until the overall breakout is confirmed we still must label the corrective consolidation as yet incomplete.
CHART 26
We have kept this video short because of the detail it supports as outlined in the hour and half Thoughtful Money video
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Our 3 times a week mailers will keep you posted as the situation changes
You can count on change!
2025 will be about you expecting change and how well you adjust to it!
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I would like take a moment as a reminder
DO NO NOT TRADE FROM ANY OF THESE SLIDES - they are for educational and discussions purposes ONLY.
As negative as these comments often are, there has seldom been a better time for investing. However, it requires careful analysis and not following what have traditionally been the true and tried approaches.
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Do your reading and make sure you have a knowledgeable and well informed professional financial advisor.
So until we talk again, may 2025 turn out to be an outstanding investment year for you and your family?
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I sincerely thank you for listening!
