Mailbag: Ken Fisher Talks Crypto, The Bull Market’s Age, “Depopulation” and More

Transcript

Ken Fisher:

I've never understood a fundamental, basic reason to own crypto, other than what I consider to be the wrong notion that these will somehow, sometime replace currency in the world. So every month people send me in questions. I try to give short answers. That's nearly impossible for me to do. But I do try to rip through these and I hope you benefit from them. They're often questions that you might have on your mind.

So one that's, you know, I get this every month from somebody... I don't always respond to it. What are the pros and cons of owning crypto at this time? Well, crypto isn't one thing. That's the first thing to get. It's kind of like saying, what's the pros and cons of owning real estate? There's different kinds and they react to different things. There's Bitcoin, which has a limited supply and is kind of the prime crypto. And then there's all kinds of other cryptos. There's new cryptos being created pretty regularly. The fact is, other than Bitcoin, the rest of them all have pretty much unlimited supply. And the potential to create competitive cryptos is unlimited.

I've never-- and people criticize me for this, and that's okay-- I've never understood a fundamental, basic reason to own crypto, other than what I consider to be the wrong notion that these will somehow, sometime replace currency in the world. The fact is, they're all pretty volatile. The volatility doesn't come down over time. And as long as they're volatile they're not really currencies. And you can treat them like they're currencies if you want, but you end up sometimes winning and sometimes losing on that because of the volatility of them.

You have to really believe that there's a problem with money as we know it. That's fundamental that this addresses, and the ones that people often talk about are you can conceal transactions, but most people don't really have a great need to conceal transactions. There's no real reason why you need to go to the grocery store and conceal that you're buying whatever it is you're buying at the grocery store. The other is the notion that this will be secure from inflation when normal currencies are not. There's actually no statistical evidence to support that whatsoever. In fact, in the huge inflation binge and bulge that we had in 2021 / 2022, crypto acted badly, not positively. And it's one of these currencies that over the time that its been around, has proven that it's not a currency because Bitcoin, for example, the most archetypal of them all, has had over the last decade plus multiple drops in price as big as the drop of stocks in the Great Depression of 1929 to 1932. Down. Up down up. Down. Up. If you can handle that kind of volatility, you've got a rock hard stomach. If you know how to time that kind of volatility to your advantage, you could make a huge amount of money. But if you could time that, you don't need any advice from me about anything.

I'm supposed to give you short answers to these things. And I've already proven I can't really do that very well. So I'm going to kind of leave this one at that. It's really owning crypto in a lot of ways more about you than it is about crypto.

Are we closer to an old or new bull market on a global scale? Well, I don't know the answer to that. Let me just say that this bull market, depending on how you want to measure it from the world as a whole, from certain parts of the world, or from the land of the free and the home of the brave, the United States of America. This bull market began sometime between the summer of 2022 and October of 2022. We've had a big full-scale correction after that, but not a bear market. And so this bull market has now been running on, you know, three years. Is that very old in the scale of bull markets? No. But there's bull markets that have died in three years and less. So we could be close to the end.

The thing that kills a bull market is when we have euphoria followed by bad things happening. I don't see the bad things right now that aren't pre-priced, that aren't what everybody talks about and have already been weighed into stocks. And while we are not in a pessimistic world today, we're not in a euphoric world either. John Templeton famously said that bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria. And that's mostly true. The fact of the euphoria, however, is you would see that in a whole series of features that I don't see at all today. There's just not that much.

And so I'm going to bring in a topic that sometimes I'm asked about not here, which is meme stocks. Meme stocks have a quality in their history which expresses both optimism and pessimism all at the same time. Because meme stocks almost always start with a stock that was seriously depressed from short selling done by institutions, and then online social media crowds started buoying it up to where the short sellers had to buy back their stock, pushing it up still further, turning them into headline, exciting stocks that got people chasing the enthusiasm. The one part, the enthusiasm, the other part, the pessimism of the institutions in the first place that were selling it short, thinking they would all be terrible and fall apart. What I'm saying to you is with the recent rise of meme stocks, you have an indication that we're positive, but not too positive, all at once.

With de-population occurring in many developed countries like South Korea, Japan, Italy, what will their economy and society look like? Well, let's think about that for a second, because you could play this two ways. There's people that believe, and I think wrongly, that you need to have a steady stream of young people coming along to make an economy do well, because those young people would be eager buyers of goods and services as they build their families, because they'd be the productive workers to make the economy grow. And this is often thought of in terms of the ratio of old people to young people, and thought that a country with a lot of old people, relative to young people, can't do well. So that becomes true almost always with nations that are developed nations. The old age group relative to the young age group is almost always high. But if you think of older developed nations, they continue to grow. And why? Well, first, people are productive longer in life than they used to be. Secondarily, technology in all of its facets increasingly makes it so that you don't need youth in the ways that you used to need youth when so much more of what GDP was, in any country, was physical labor requiring a youthful body.

Then finally we get this thing that people talk about otherwise, which I think is an irony, which is, they say, won't AI kill so many jobs? Well, if AI does kill so many jobs, if, if, if, you don't need so many workers, do you now? And those are trade offs. But let me give you an example. Italy, cited in the question, is a country that has had economic problems and it's had old age dependency. Its old age dependency is a little worse than the average of Europe. Not dastardly so, but lower. And yet overall, if you think about their economy and their culture, you say, what will their economy and society look like? That's the question. They don't look that different.

If you go back to the era of my grandfather Hugh (my grandfather was born in 1875), he's 25 in 1900. Half of American labor was agricultural. Half. That meant a huge amount of need for those youthful bodies that could do all the heavy work or middle aged bodies, or starting to get a little old bodies. Also, people didn't live as long, now they live longer. Not only with agricultural work. About 2% of GDP. But manufacturing is ever smaller. And that is not just true as some people think for America, that's true in all developed nations, because the growth has been in service and the information economy. And as that continues, it gets easier and easier for older people to participate. And people live longer and spend more, longer. And so the economy changes. But by the aging, not so much in the society that goes with that, not so much with the economy.

And finally, in chapter three of your book, Beat the Crowd, you discuss the leading economic index as a tool for forecasting economic conditions, particularly its correlation with recessions. Given the current performance of the indicator should we anticipate a recession in the near future? So when I wrote that book, it was true that the leading economic index had had a good history of forecasting. And in fact, I said in my 1987 book, The Wall Street Waltz, that it was one of my all-time favorite indexes for forecasting. In fact, it's kind of broken in recent decades and has not been very good at predicting things of late. If you go back, it was very clearly predicting recession in 2022 and had for quite some time, and it kept predicting recession after the stock market bottomed in 2022 and started booming in the latter part of 2022 and through 2023. And in fact, throughout that whole time period, the leading economic indicator was basically negative. And yet we never, ever had recession.

In my mind, it is an index that has kind of been broken, as a lot of our economic constructs are broken and I think are a lot less reliable. I'd focus a lot more on real-world phenomena. Some of the components of the index itself. But let me make a point to you. And it's a real simple one, a real simple one that most people get backwards. And I'm supposed to give you a short answer. And I told you before, when I first started this, it's nearly impossible for me to do. Famous economist Paul Samuelson said in the 1960s, when I was young, he said that the stock market predicted seven of the last five recessions. There's a lot of truth to that. Sometimes the stock market falls and you don't get a recession. But when the global stock markets hit all-time highs, you've never had recession in the next six months. The fact is, you could extend that to the S&P 500 with a little shorter time frame. The world as a whole, just a little less volatile than a single country is, even though the US is one of the less volatile countries of the world. The fact is that because we hit a peak in the stock market, both in the United States and the world, just as a week ago, as I speak now here in the latter part of August, you know intuitively that we're not about to go into recession. It never happened before function. It never happened. Doesn't mean it can't happen. But when you say, you know, should we anticipate the answer is no, the stock market's told you no.

If you look around the world at some of the other ones that I would focus on more if I were you, the spread between short-term interest rates and long-term interest rates, which is not terribly positive in America, globally is very positive. And I've written about that quite a lot. It's one of the things that people don't look at that they should. But I don't think the leading economic index forecasts with the accuracy that it used to, because a lot of its governmentally created components are now largely broken and have been steadily over the years. I wouldn't focus on it too much.

Thank you so much for listening. I hope you tune in next month when I cover questions people send me. Thank you.

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