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Mike Maroney Interviews CPM Group's Jeff Christian on November 2018

November 13, 2018
Video Transcript

Mike Maroney: Good afternoon! My name is Mike Maroney. It's Tuesday, November 13th. I'm here with Jeffrey Christian. Jeff, how are you doing today?

Jeffrey Christian: It's pretty good. It's starting to be winter here in New York, but a... I'm a man for all seasons.

Mike Maroney: Well, there you go. Well, we're finished with the election and obviously, the results were somewhat expected. The Democrats have taken the House. The Republicans continue to hold on to the Senate and we have some tremendous price levels in both gold and silver for investors who are looking at potentially diversifying with both gold and silver. What do you think about what's happening with silver now that's it's broken below $14.00 an ounce for the first time in quite some time?

Jeffrey Christian: We thought that $14.00 would be the base, and as we're talking, silver is a few cents below that. I think that silver probably is pretty close to its low. Obviously, it's a very volatile market and it is a... can be prey to volatility, but I think that, you know, from a longer-term perspective prices below $14.00 are a very good, attractive level to build long-term positions.

Mike Maroney: Fantastic! Now, obviously, when you look at both the metals you find that gold is not making a new multi-year low, which silver is and some people call that a bullish divergence. What's your view on gold and the fact that it's been able to hold above its recent lows?

Jeffrey Christian: Well, I think what you're seeing is that gold is much more of a financial asset, a quasi-currency, and a hedge against economic problems in the eyes of investors around the world than is silver. I mean, silver is very important to a lot of investors, but gold is even more important. I think what you're seeing is that there are a lot of investors who are more interested in gold right now as their building long-term insurance policies against economic, financial, and political problems longer term. So, gold is out performing silver right now, because of that and more a dominant financial aspect of gold relative to silver.

Mike Maroney: Now, we've had some interesting action in the stock market. I'm going to use the S&P as somewhat of a barometer. We had a high of $2,947 and we saw about a 340 point drop all the way down to that $2,606 area. We've since popped back to the upside. Now, a lot of the financial pundits are talking about the fact that when one party controls both the House and the Senate and then gives up one half of that control, it's very bullish for the stock market, because it causes gridlock. What's your view on stocks right now, Jeff?

Jeffrey Christian: Well, I'm not sure that it's because it causes gridlock, but maybe because it causes even bigger tax benefits for investors and corporations to have a split house, but our view is that the stock market is probably close to its peak. We don't necessarily see it falling sharply immediately, but we do think that it has the capacity to decline at some point. I should say, this isn't our view, this is a view that we hear from people around the world-- large institutional investors, government sovereign wealth funds, family offices. Everyone's looking at the stock market and they can say, you know, this thing is looking top heavy, it may not make new highs, but it may not fall immediately, and it is vulnerable to downward drafts, but those downward drafts could come at a later time. Now, I would say this, we're looking for a relatively healthy stock market the rest of November into December, but when you look at 2019 relative to 2018 and you look at what's happened in the stock market in 2018, you had this tremendous liquidity event in the stock market, but one thing you had about 1.2 trillion dollars of money coming into the stock market to stock buy backs and tax cuts being reinvested in the stock market. That's not going to be there in 2019. That has helped support stock prices in 2018. It's helped stock prices move to record levels in 2018, but we've really seen since the second quarter is stock prices moving sideways supported by that liquidity, but unable to make new highs. I think that when you go into 2019 and you say that's not going to be repeated, that spells trouble both for the overall economy, but also and perhaps more importantly for the stock market.

Mike Maroney: Well, fantastic. So, I'm going to give a brief synopsis of what I've heard today. One, it looks like the stock market could go a little bit higher, but obviously looking a little bit topped. Precious metals look to be positioned at the lower end of the price curve and look to be set to move higher. It looks like a good time to not to wait to buy, but to buy and wait. Would you think that's a good statement?

Jeffrey Christian: That's exactly what we're looking at. We don't think that the economy rolls over in 2019, 2020. There could be a recession, it could be shallow. We think the bigger problems probably lie beyond 2019, but they're clearly on the horizon and the horizon is getting ever closer.

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