JotCast | April 2025 Capitalist Times Live Chat

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April 2025 Capitalist Times Live Chat

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Mike C.

2:35

2. There’s a lot of discussion of multi-decadal cycles in play (e.g., Ray Dalio, The Fourth Turning fans, etc.). With reference to this odd moment in history, particularly around the murky goals of tariffs and the impact on the US economy, and pondering if this time different (i.e., the highly unusual pro-cyclic use of deficit spending under Biden, followed by what looks like it might be dismantling of significant international trade systems that were generally efficient and effective), what indicators would you watch to suggest that we’re entering something more profound than a routine bear, with or without recession? What would a more substantial macroeconomic regime change look like, while it was unfolding?

All the best

Elliott Gue

2:35

Yes, I believe these multi-year cycles are very important and it's something I've been writing about a good deal over on The Free Market Speculator and, of course, Energy & Income Advisor as well. I call it the Great Cycle. Basically, if you go back through history you'll see long periods when stocks -- in particular US stocks -- outperform everything else. Towards the end of these periods, you get a lot of chatter about US exceptionalism, stocks look expensive using standard valuation metrics and people start talking about how those valuation metrics don't apply because "this time it's different." That was true back in the late 1990s. No one cared about anything but the Nasdaq and stocks like Cisco. I remember those days well. I wasn't around in the late 1960s, but I've studied that environment at some length and we had the "Nifty 50" stocks -- the idea being these big American companies were one decision stocks that you could just buy and hold. At any rate, historically these periods are characterized by

Elliott Gue

2:35

weak commodity prices and a strong dollar. Now, following these periods, you tend to get multi-year cycles where equities underperform -- in the 70s they were down in real terms and in the 1998-2012 period stocks were flat. In these cycles, commodities "work," you'll generally see a weaker dollar and international stocks outperform US (in at least some cases). Now, I have some good news and some bad news. The good news is that these big cycles are very profitable -- in the 1998-2012 period, for example, if you were in energy stocks, precious metals and agriculture names, you were making some nice gains while those who bought and held tech -- the hot group in the late 90s--got crushed. The bad news is that these cycles are slow and uneven to the point that it's tough to recognize what's happening in real time. So, you'll get periods within these cycles where stocks are strong and commodities correct. Not all commodities move in the same direction at the same time, etc. So, they can be hard to stick with.

2:36

My view is that this process has been underway since about 2020-22. And, given the normal timing of 12 to 15 years, I think you can expect this cycle to endure into the 2030s.
My point is that I do think this is a more important macro regime change than just a normal cyclical adjustment. In prior cycles like this – 1968-1982 and 1998-2012 – there were actually multiple cycles within the cycle. 3 or 4 recessions in 1968-1982 depending on whether you count 1980-82 as two cycles or just the 1. In 1998 to 2012 we had 2 recessions, including one of the worst since the Great Depression.

So, I think making money in the broader stock market will likely require staying on top of the economic indicators to try to participate in some of these shorter more volatile bull market cycles – much like 1974-1979 and 2002-2007.

Mike C.

2:36

Good morning Roger, Elliott, and Sherry –
Thanks as always for being a solid, reliable, steady source of information and perspective in these times!
A couple of questions for today’s chat:

Roger lists a hedging position in the aggressive CUI portfolio. With Elliott’s sense of a 50% chance of recession, can you recommend an easy/convenient approach to hedging the EIA portfolio (with or without options)?

Roger Conrad