TRANSCRIPT: Preparing for the End of an Eight-Year Bull Market w/ Economist and FreedomFest Founder Dr. Mark Skousen

Announcer: It’s time for Marc Lichtenfeld’s Oxford Club Radio, the hardest-hitting half hour about you and your money. And now, here’s Marc Lichtenfeld.

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 Marc Lichtenfeld: Welcome to Marc Lichtenfeld’s Oxford Club Radio. I am Marc Lichtenfeld. Thanks for joining us. We have a tremendous show for you today coming up in a little bit. We’re going to talk with Dr. Mark Skousen. He’s the editor of Forecasts & Strategies, also a professor of economics and business at Chapman University and the producer of FreedomFest, the world’s largest gathering of free minds. It’s a terrific conference. I was there a few years ago. I’m hoping to get back there this year. So we’re going to talk with Dr. Skousen about a lot of different things, including will the Trump rally continue, is this market overvalued, things that I’ve been saying for a little while about the market’s overvalued, sentiment is extremely high, and we’re really getting very, very mild pullbacks when we get any kind of pullback, so we’re going to get Dr. Skousen’s take on all of that.

We’re also going to talk about some important issues that the treasury secretary has been talking about, Steve Mnuchin. He’s been talking about taxes and specifically border taxes and simplifying corporate tax and all that, and what this means for you. And there are some pretty significant implications, so we’re going to get into that a little bit later.

If you want to get in touch with me, you go to, click on “Contact” and shoot me an email. You can also leave your comments right under the episode you’re listening to if you’re listening to us on Oxford Club Radio. You can tweet at me @StocksNBoxing. You can read me on Lots of ways to get more Marc Lichtenfeld, which is pretty much what the world needs right now.

So let’s start off. I want to talk about something that has me a little bit concerned from my somewhat bearish standpoint. If you’re new to the show, I’ve been saying for a little while that I believe the markets are going to head down this year because sentiment is just too extreme. We’re eight years into a bull market. Bull markets naturally come to an end. Eight years is a pretty long period of time, and valuations are pretty high. So it’s not that I see a crash coming and it’s not that the end of the world is coming. It’s just that bull markets end and bear markets take their place, and then bear markets last. The average bear market lasts a little over a year and then you get another bull market. And I just think that we’re due, and the fact that sentiment is so extreme, that we should start seeing the market roll over sometime in the very near future, and that’s been my stance since the beginning of the year.

And I’ve been pretty alone on that stance. There’ve been very few people out there – other than the perma-bears, people who always say the world’s coming to an end – but there have been very few people saying that the market should head lower this year. Until this week. And I’ve seen a couple of different things where some very well-known investors and some other people who are perhaps not so well-known are starting to echo that sentiment. So the first one that I noticed who really caught my attention is Jeffrey Ubben from ValueAct Capital. Now, ValueAct Capital is an activist investor. They buy large chunks of companies and try to create change within those companies, whether it’s getting seats on the board of directors, getting a company sold, and they basically are value investors, as their name suggests. And so they buy companies that are just undervalued where they’re not getting a shareholder return that they should, and they go in and try to change that.

So Jeffrey Ubben and ValueAct Capital recently said that they are starting to pull out of the market. They’ve raised about $3 billion in cash by selling equities. Now, that doesn’t mean that they’re going completely to cash or that they’re selling every stock that they own, but they are lightening up, and Jeffrey Ubben is one of the very few hedge fund people that I listen to and really pay attention to. There’s a few in the healthcare space, the Baker brothers, Sam Isaly from OrbiMed Advisors… and Jeffrey Ubben’s not a healthcare specialist, but a market generalist. But when he speaks, I listen, and the fact that he is pulling back a little bit gives me a little bit of confidence that my prediction is the right one.

That being said, I’ve been seeing some more things in the mainstream media that are starting to say “hey, you better watch out.” There was the main article on Yahoo Finance, the lead article, I think it was on Thursday, that basically said how to prepare for the next market crash, and it wasn’t saying the market is going to crash and here’s why. It was kind of just saying more or less what I’ve been saying, that markets go down sometimes. And sometimes they go down severely and you should be prepared. But the fact that that was the headline on Yahoo Finance, one of the most mainstream financial media sites there is, caught my attention, and not in a good way, because generally speaking, when the mainstream is thinking a certain way, the markets go the opposite.

Now, one headline on Yahoo Finance does not mean the mainstream is bearish, not by a long shot. In fact, the mainstream is extremely bullish right now. Almost anybody you talk to is very bullish, media or investors. But I don’t like to see when the mainstream starts to get on my side because they’re usually very late to the party. So I’m going to keep an eye out for that. I’m more emboldened that ValueAct Capital is on my side than that Yahoo Finance is, but I will keep an eye out. If I start to see a lot of mainstream media articles with a bearish slant, it may make me reconsider. There’s a lot of variables in place, but as of right now, I do think that the markets head lower. When exactly, I don’t know. How far they go lower, I don’t know. But I do think by the end of the year that we will be lower than we are today. And lower than we were at the beginning of the year. So I’m sticking with my bearish 2017 forecast. Again, not that the world’s coming to an end, not that the market’s going to crash, but it will be a bear market, or at the very least, a correction.

All right, we’ll find out what Dr. Mark Skousen has to say about all that when we come back. This is Oxford Club Radio. I’m Marc Lichtenfeld. Stay with us.

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 Marc Lichtenfeld: Welcome back to Marc Lichtenfeld’s Oxford Club Radio. I’m Marc Lichtenfeld. Our guest this week is a personal favorite, Dr. Mark Skousen. He’s the editor of Forecasts & Strategies, professor of economics and business at Chapman University… He’s also the producer of FreedomFest, the world’s largest gathering of free minds, author of several books, including his latest, The Maxims of Wall Street. That’s one I have – I keep it right on my nightstand all the time. So, Dr. Skousen, thanks so much for joining us. Great to have you as always. I wanted to start off by asking you about something I was talking about in the earlier segment, which is I’m a little bit bearish. I think that sentiment is getting close to extreme, if not already. Valuations are high. What do you think? Is this Trump rally going to continue?

Mark Skousen: Well, I’m 100% invested. I’m going to stay invested until the evidence is there. I think a lot of people try to jump the gun. They try to predict if the market is topped out. A lot of people thought that the market couldn’t possibly move higher, and a lot of people use rather unusual indexes to decide whether the stock market is overvalued or not. There’s Robert Schiller’s CAPE index, which takes a 10-year average of the P/E ratio, and there’s two elements to overvaluation. There’s the price, but there’s also earnings. I mean, if you’re going to look at price-earnings ratio, which for the S&P 500 is I believe still under 20, but the whole concept is that with tax relief, especially for business, and deregulation of some sort, if we can have both of those, that could boost earnings and justify a higher price. You know, the stock market, the public is right during the trends but wrong at both ends, and of course, the problem is what is the end, and I’m willing – I’m still willing to stay invested until it’s pretty clear that we’ve entered bearish territory, and I don’t see any evidence of that yet.

Marc Lichtenfeld: So what would make it clear to you that things are turning around?

Mark Skousen: Well, I’d like to see interest rates rise. I’d like to see the Federal Reserve tighten the money supply. If there’s evidence that the Trump agenda of tax cuts and reforming Obamacare and Dodd-Frank, if that’s not going to go through, then those are indications to me that we’re headed for a correction. Not necessarily a full-scale bear market, but a significant correction, which we haven’t had in, what, five years.

Marc Lichtenfeld: Now, are you seeing any areas of the market that are particularly attractive right now?

Mark Skousen: Well, that’s a good question because we’ve seen all of the Trump stocks really rally quite a bit and it’s really hard to find undervalued plays that people haven’t already picked off, and so I’m taking more of a strategy like you are of income investing. I know at the Orlando MoneyShow, we both recommended Omega Healthcare, which is a stock that has not gone up yet, but maybe that’s a good market to get into and earn 8% while we wait for the baby boomers to retire and move into all those nursing homes.

Marc Lichtenfeld: Let’s switch topics a little bit and talk about bonds. What’s your stance on bonds?

Mark Skousen: So two years ago, we sold our entire bond position – corporate bonds, muni bonds, treasury bonds – because I think even though they’ve continued to rally, I think the evidence is pretty clear the interest rates are bottomed, the Fed is determined to raise rates or deregulate the markets and let the bond traders decide. Inflation, I think, will be coming back if the Trump agenda gets through, and that means higher interest rates. So I think it’s much smarter for investors to move out of those sectors, of those bonds, and I think the golden age, which lasted 25, 30 years since the early 1980s, I mean, how long can you have a rally in the bond market. So I think it’s much smarter to move on.

Marc Lichtenfeld: And I’m 100% in agreement with you there. We’re talking with Dr. Mark Skousen. He’s the editor of Forecasts & Strategies, professor of economics and business at Chapman University and producer of FreedomFest, the world’s largest gathering of free minds. Tell us what’s on tap for FreedomFest this year. It takes place in July in Las Vegas, right?

Mark Skousen: Yeah, you know, CPAC is going on right now in Washington, D.C., and that’s the Super Bowl for conservatives. Well, the Super Bowl for libertarians and free thinkers is July 19-22, and we’re having it in Las Vegas, which is the most libertarian city in the world and entertainment capital of the world, which is always great. And we’re going to be at the Paris Resort. We have William Shatner as our keynote speaker, and we have Steve Forbes celebrating his 70th birthday the very week of our conference. We’re having people coming in from all over the world to celebrate his ideas, his life. It’s the 100th anniversary of Forbes magazine itself, and it’s also the 100th anniversary of the Bolshevik Communist Revolution, so we’re having a big session on capitalism versus communism, who’s winning the 100-year war. We always have our mock trial. This year it’s the police on trial. I think that’s going to be pretty interesting. And we have, of course, a three-day investment conference with Alex Green and maybe even you will be making an appearance. I don’t think we’ve discussed it, but we would love to have you out there, and we have Jim Rogers and Mark Mobius both coming from Asia along with Keith Fitz-Gerald and Nicholas Vardy from London. So I mean, it’s going to be a really rock-and-roll conference. We attract several thousand people. It’s our 10th anniversary. We have a film festival, the Anthem Film Festival, which is always really popular. So there’s a lot of events that are going on – we have the pitch tank, which is early investing, crowdfunding and all that sort of thing. So there’s something for everybody, philosophy, history, science and technology, healthy living. We have John Mackey. Co-authors, two doctors speaking on the Whole Foods Diet. Our healthcare sessions are always very popular. So there’s a lot going on. If people go to, they can get all the details about it.

Marc Lichtenfeld: All right. And I’m going to do my best to get there this year. I loved it when I was there a few years ago. But was it last year that you had a very special speaker or was that 2015 when the speaker eventually went on to win the White House?

Mark Skousen: Donald Trump. Yes, that’s right. So the president of the United States, prior to that, did come on 7/11 in 2015 at the beginning of his campaign, and some people are holding us responsible, giving us credit or blame for jump-starting Trump’s campaign because it did kind of turn around his campaign and he was on TV all day from FreedomFest. And so, yes, two years ago we had Donald Trump. Who knows, he may show up to celebrate Steve Forbes’ birthday, but that’s a long shot, and I’m not sure he’s the best person to have for this event. Who wants to have a bunch of protestors and all that sort of thing? I think having William Shatner there is really going to be exciting. A lot of people are very excited about that. Last year we had George Foreman, so we have some big names. We have lots of debate, lots of things going on. In fact, we’re going to have the Trump debate, which last year almost caused a riot, and we’re having another Trump debate there. We have our favorite Mexican expert, Roberto Salinas, coming, who’s a very strong anti-Trump advocate. So it’s really going to be a lot of fun, and we’re looking forward to it.

Marc Lichtenfeld: All right. We’re out of time, but this was great. And again, the web site is Dr. Skousen, thanks very much for joining us, and we’ll see you soon.

Mark Skousen: All right, thank you, Marc. Take care. Bye-bye.

Marc Lichtenfeld: That’s Dr. Mark Skousen, editor of Forecasts & Strategies, professor of economics and business at Chapman University and the producer of FreedomFest, the world’s largest gathering of free minds. All right, when we come back, we’re going to talk tax policy, so get your popcorn ready. This is Oxford Club Radio. I’m Marc Lichtenfeld. Stay with us.

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 Marc Lichtenfeld: Welcome back to Marc Lichtenfeld’s Oxford Club Radio. I’m Marc Lichtenfeld. Again, the website is, or follow me on Twitter @StocksNBoxing.

So I want to talk about Steve Mnuchin, who is our new treasury secretary. He was on CNBC this past week and he was talking about tax cuts for the middle class and simplification of business tax, which are, in my opinion, all really good things. I really hope that they are able to get those things through and get them through quickly. If you can relieve the middle class of some of their tax burden, that would certainly be great for the middle class and great for the economy. And simplifying the business tax too. Just simplifying tax in general. There’s no reason why someone like me who’s reasonably intelligent – and that could be argued all day long whether that’s the case – but someone who’s reasonably intelligent basically can’t do his own taxes. I mean, I could if I got some computer software and I was willing to expand my threshold for frustration, but I don’t. I get frustrated very easily, and I haven’t done my own taxes in about 20 years after I nearly put a foot through the computer trying to do them. So to me, there’s no reason. How much do you make, this is how much you should owe. It shouldn’t be that complicated, but it is. So hopefully they can simplify that and, like I said, lessen the tax burden on the middle class. That would be terrific.

A couple things do concern me, though. One is this idea of a border tax. I’m still stunned that this is out there and being considered seriously when we know that protectionism doesn’t work. It sends the economy lower. It can hurt the world economy. It’s just a terrible idea. And the idea that it’s going to bring manufacturing jobs back to the United States is a complete fallacy. Yeah, you’re going to be able to point to a couple of anecdotes in the news where a company says, “all right, we’ll keep this plant open and keep 600 jobs,” and that’s wonderful for those 600 people, but the people who are losing manufacturing jobs, they’re not losing them to Mexico and to Sri Lanka and to Thailand and China. They’re losing them to robots, and that’s going to continue. I mean, we’re already seeing it even in the world of fast food, where they’re starting to replace the counter help with kiosks. Robots are cheaper, unfortunately, and we’re going to see that in all sorts of aspects of the labor force, including even some creative things. I think you’re going to be seeing robots writing, writing works of nonfiction. Not necessarily books, but I think even some of the things that I do. I’ve seen plenty of stock analysis in various reports that are written by a computer. And you can tell it’s written by a computer, but that technology’s getting better and better.

Now, a computer’s not going to be able to inject some personality, I don’t think, but there are plenty of purely quant reports where the computer takes the numbers and puts them into coherent sentences and issues a report. Now, I don’t think they’re worth anything. I do think you want a human being analyzing this stuff and making sure because sometimes the numbers are a little wonky. Sometimes there’s an outlier in the number and you need somebody to look at it and go, “oh yeah, that number doesn’t make sense because this event that occurred last year, that’s a one-time event” or whatever. I think you do need some human intelligence, but there are robots that are coming for all our jobs. It’s not the Mexicans.

So this idea of protectionism really is very worrisome, and retailers who import a lot of their goods have said basically, “if this happens, we’re raising our prices. We’re going to have to.” And obviously the manufacturers would like this policy to go through because they will actually lessen their taxes on exports as part of this policy that’s being proposed. So the manufacturers love this idea, but retailers, if you go shopping in Wal-Mart and Target, anybody who brings goods in from overseas, your prices are going up. So yeah, maybe it’ll save some more jobs. I don’t think it will in the long run, maybe it will, but your prices are going up for everyone. It’s going to be very inflationary.

Lastly, this quote really disturbed me. This bothered the heck out of me. So Mnuchin basically said the Trump administration may judge the tax, meaning this new tax policy of cutting taxes, simplifying business taxes, so the Trump administration may judge the tax by its own dynamic scoring, which takes into account economic growth rather than the Congressional Budget Office’s numbers. Now, the Congressional Budget Office has long been seen as an independent organization, a nonpartisan organization. Their numbers… I guess we could argue whether they’re accurate or not. If you don’t believe them, you don’t believe them. Nothing I’ll be able to say is going to convince you of that, but they are widely recognized as nonpartisan. So it’s not that it’s the Democrats in control and they’re going to skew the numbers in order to paint a picture, or the Republicans will do the same. That’s not the case at all. This is a nonpartisan organization.

So what Mnuchin’s basically saying is “we’re not going to use this nonpartisan organization, we’re going to use our own numbers.” So in other words, “we’re going to make it up. We’re just going to make up the numbers and say whatever we want to say and that will support our argument,” which is really dangerous. And again, I don’t disagree with all the policies that they’re proposing. Some of them, the border tax and any tariffs, I’m very against, but cutting corporate taxes, cutting taxes on the middle class I’m very much in favor of, simplifying tax I’m very much in favor of. But we should have an understanding of what effect these taxes will have on our debt, on tax revenue, on the economy, and I would like an organization that doesn’t have a horse in the race to be coming up with that analysis, not the Trump administration or any administration that’s proposing tax policy. This isn’t only a Trump thing. If Obama was doing it, I wouldn’t want the numbers coming from the Obama administration. I’d want independent analysis so that when somebody with an opinion says, “I think this is going to work,” somebody who, like I said, doesn’t have a horse in the race can look at it and go, “yeah, it’s going to work,” or “it’s not going to work,” or “it will work, but here are some things to consider, and if X happens, it could result in Y.” Because lower taxes are wonderful, but if it’s going to explode the debt, if it’s going to hurt the economy in any way, we should have an understanding of that, and it’s very bothersome that they are going to not listen to independent analysis in order to push an agenda. And whether that agenda is right or wrong. And again, I do agree with many parts of it.

So that’s very worrisome, but we’re going to have to look and kind of see how this goes. So far I kind of admit I do like what I’ve seen of Steve Mnuchin, but it’s very early in the game, and we’ll certainly be commenting on developments on tax policy as it goes because it is something that’s going to affect you. I know some people don’t like when I talk politics, but I’m not here talking about abortion, I’m not here talking about transgender bathrooms. This is stuff that will directly impact your wallet, your bank account, your taxes, so I do think it’s important to touch on.

We’ll be back next week with another great show. We’ll be talking with Chris Gaffney from EverBank. Until then, I hope your longs go up and your shorts go down. I’m Marc Lichtenfeld.

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