In his recent take on equities, published in ValueWalk March 18, 2014, Jeff Saut likened the current bull run to a market for kids, as described in the classic “The Money Game” by Adam Smith. “The strength of my kids is that they’re too young to remember anything bad, and they are making so much money they feel invincible,” says the Great Winfield in the book.
Nevertheless, Jeff Saut goes on to rubbish market doomsayers’ fears on grounds of not particularly onerous valuations, the great American recovery, biased chart-reading, exaggerated margin fears and a Crimean fait accompli.
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Here’s more food for thought for bears from the permabull.
The idea of US energy independence is profoundly bullish
In an interview with Eric King published in kingworldnews.com, Jeff Saut analyses market behavior after Janet Yellen’s recent bombshell on interest rates.
“The equity markets and bond markets were looking at this period of time being the back half of 2015,” says Jeff Saut. “So we saw the yield on the 10-year old from about 2.7% to 2.77%, which I think was one of the biggest moves on the upside in terms of interest rates since about mid-2011.” Yet, stocks, which abhor higher interest rates, dipped and surprisingly, recouped their losses. “In secular bull markets all surprises are on the upside,” he explains.
Jeff Saut goes on to dwell on the likely US energy independence. Citing large outputs of oil from Bakken, Eagle Ford, and the Permian, he says crude oil pricing could be fairly comfortable over the next few years and that energy independence is a profoundly bullish factor for US markets.
Jeff Saut: China will not implode
Jeff Saut brushes off another pet peeve of the negative nabobs: China’s slowdown.
He says China’s massive monetary reserves, and the stated willingness of the government to ramp up growth through infrastructure spending when so required, puts paid to any fears that the country’s economy is likely to implode.
In a significant observation, Jeff Saut says, “China is in the transition of converting from a manufacturing/export driven economy, to a manufacturing and domestic driven economy. You get that kind of slowing and you get these kinds of bumps and grinds in an economy when you make that kind of transition. But China will get through this and emerge even stronger.”
Gold in a secular bull market
Jeff Saut’s bullish views on stocks are not at the expense of gold. He maintains that in the long run gold still thrives inside a secular bull market.
The inherent distrust for currencies that exists in countries such as China and India make them huge buyers of gold, he observes. And this distrust extends out of India and China to other emerging and frontier markets that are still licking their wounds from political coups, devaluations and such like.
Jeff Saut does admit that he is unable to comprehend a lack of faith in the Chinese renminbi currency, recalling Sir John Templeton’s advice to him to “Go long the renminbi and never sell it.” According to Jeff Saut, Templeton rightly thought that in the long run the Chinese currency would continue to appreciate versus the US dollar.