Equities Extremely Complacent; De-lever and Prepare to Buy The Dip

**Luke Gromen** (0:00)
The overriding piece of advice is be unlevered because there are things happening that haven't happened in a long time, or ever, and they're happening, and they're happening with increasing frequency. And so the overton window of possibilities in markets, if you will, I think, is as wide as I've ever seen it. And I've been doing this 30 plus years.
And so it ties back to that prior point of very bearish in the near term, but ultimately very bullish, which is to benefit from the very, what I think is going to happen very bullishly over the next decade. Plus, you got to survive. You got to get there. And that to me and says, just be unlevered. I think you want to own some gold and I think you're going to be real happy with where you are in in five years, ten years for most investors.

**Wilfred Frost** (0:47)
Welcome to The Master Investor Podcast with me, Wilfred Frost, where we celebrate and learn from the success of the greatest investors, business leaders and politicians in the world, giving you our listeners.
The Master Investor Podcast is sponsored by LSEG, Interactive Brokers, The World Gold Council and BNY Investments. Please do remember the views expressed in this podcast are for general information purposes only. Nothing in the podcast constitutes a financial promotion, investment advice or a personal recommendation. More on that in the show notes. My guest today is Luke Gromen, the founder of Forest For The Trees, FFTT, an independent macro research outfit that tries to look where others aren't and identify major long-term actionable ideas that most market participants are missing. Luke, it's fabulous to have you with us. Welcome to the podcast.

**Luke Gromen** (1:46)
Thanks for having me here, Wilfred. It's great to be here.

**Wilfred Frost** (1:50)
I think I need to start by saying that I love the name of your firm, but I also for the Brits that are listening, I wanted to point out of course that you draw the title from a phrase that is slightly different over here, which is not seeing the wood from the trees as opposed to the forest. But we get the gist, which is that you're trying to identify big themes that Wall Street is missing.

**Luke Gromen** (2:13)
That's exactly what we try to do. We aggregate a large amount of publicly available information in what we think is a unique manner, and trying to identify what we call developing economic bottlenecks in different sectors, because it's been my experience over those decades that sectors and companies that are poised to benefit from those bottlenecks or be hurt by tend to outperform on a sector basis. Publish two reports a week for 46 weeks a year. So I do a lot of writing, do a lot of thinking. I think I've got the best job in the world.

**Wilfred Frost** (2:51)
It's certainly a very stimulating kind of set of topics to cover. And I'm delighted that we're going to get to do that together for the next 45 to 60 minutes. And let's dive right in. I want to talk about the Iran war. I know you've been looking at this a lot and talking about bottlenecks. Obviously, the Strait of Hormuz has been one that's come into focus.
The fact that the war has restarted in the last two weeks, is that something that you think warrants more immediate attention than has been getting?

**Luke Gromen** (3:26)
Probably. Probably. And I think as we go back, it's been a topic where we have a saying where, or at least we used to in a former life for me, you can be right for the wrong reason or you can be wrong for the right reason. And thus far in the Iran war, I've been wrong for the right reason, which is to say, we had published for clients, I had very high conviction that the war was going to last much longer than expected. You recall Wall Street consensus was it's only going to last three to four weeks. Trump was saying it was only three to four weeks. We from day one were saying it was going to last a lot longer. So we got that exactly right. As it's ongoing, I think it's going to accelerate, probably or continue from here for longer than people want to imagine.
We also said that Hormuz was going to stay closed longer than expected, which again, early on was, hey, this is going to be over by April. We were telling clients prepare for May, June, even July 4th for it to still be closed. Here we are, it's July 29th. It's essentially still closed. So we got that exactly right.