Taps Coogan – November 10th, 2022

Robert Kessler, former CEO of his namesake Kessler Companies and noted Treasury investor, recently spoke with WealthTrack’s Consuelo Mack about his outlook for markets and the economy. Mr. Kessler spoke with WealthTrack in Spring 2021 and gave a timely warning about what he believed to be a raging bubble in stocks and, with impeccable timing, closed his namesake investment corporation in October 2021, near the market high.

Mr. Kessler:

“Being somewhat older… my marketplace starts in 1968. That makes 54 years playing around in these markets… There is no better sales group in the world than Wall Street. (They say) ‘Over the past 100 years, stocks have been incredibly the best performer.’ That’s simply not true…”

“In 1968, I began. The (Dow) got up to 1,000… By 1974 it dropped 70%… It got up to 1,000 again (in) 1976 (and) 1978. It didn’t get over 1,000 until 1982. That appears to be about 14 years… 1929, you were not even with your money with inflation until 1952. That sounds like 23 years. That makes it 37 years (combined) and then in between we’ve had a number of recessions like 2009, or like 2000, or 1987. So I’m not even counting them and over one-third of (the past) 100 years (are below the all time high) and it would be your luck or my luck… that’s when I decide I need to get out of the market and I decide that I need money, it’s one of those 37 years. So, let’s stop with this nonesense that it always works out perfectly. It doesn’t…”

“When everything is cheap and everything is fine you get to refinance, and refinance, and refinance… 20% of the Russell 2000 are technically zombie companies. They don’t (make) enough money to run on a daily basis…”

“Emerging market have trillions of dollars (of debt) coming due, not in 30 years, they’re coming due now… The dollar is up. It’s higher than it’s been for the last several decades and suddenly all these emerging markets have to return the money in dollars and they need new money… Suddenly you have the possibility of a major default among all the emerging markets, but that’s not the big problem. That’s us, the United States…”

“Treasuries were the first… that really went down in value and down in price… They have to be the first because the Fed raises and treasuries go with the raise. Usually the first in becomes the first out… So what will happen, no different than 2009, no different than 2001-2002…, the Fed reaches a point… that they stop and they sit… at that high rate. The average period of time until they cut is 11 months. The tendency is that they sit there at that high rate for another 11 months. That’s when Lehman happened, 11 months later. Assuming that the Fed comes down, and I’m making this up, next November, some point in August or around there Treasury (yields) will be coming down… It’s at that point that the stock market collapses… It doesn’t happen right away… You have to have patience… Being in cash is a good thing…”

“The Fed will probably go back to zero… We will get to zero. There is no way that companies that need to borrow money can afford to pay 10%, 8%, 7%, even 4%… I think we’re going to have something that is a 13, 14, or 15 year period of time when you’re not going to make any money (in markets)…. It’s going to be a very difficult period of time… Everyone’s got too much debt… Put your house in order. This is not going to be a good period ahead of us. If you don’t have a good job that works in every environment… think about getting rid of debt…”

For what little it’s worth, a lost decade is old Taps’ central case. That doesn’t mean markets go down for a decade, but that they struggle to make routine new highs. 

There is much more to the interview so enjoy it above.