MARIA: WELCOME BACK TAKE A LOOK
AT WHERE MARKETS ENDED A
VOLATILE WEEK AFTER THE JOBS
REPORT ON FRIDAY AND JAY
POWELL’S COMMENTS THAT RATES
COULD GO HIGHER FOR LONGER.
ECONOMIST AND AUTHOR OF MEGA
THREATS TEN DANGEROUS TRENDS
THAT IMPERIL OUR FUTURE AND HOW
TO SURVIVE THEM THEY HAVE WARNED
THAT MARKETS THIS YEAR ARE GOING
TO GET HIT WITH WHAT HE IS
CALLING A PERFECT STORM.
RECESSION A DEBT CRISIS AND OUT
OF CONTROL INFLATION.
HE JOINS ME NOW.
IT’S WONDERFUL TO HAVE YOU THIS
WEEKEND, THANKS SO MUCH FOR
BEING HERE.
WALK US THROUGH THE PERFECT
STORM THAT YOU ARE EXPECTING.
>> THE NATURE OF ECONOMIC
MONETARY AND FINANCIAL RISK HAS
CHANGED IN THE LAST TWO OR THREE
YEARS.
A COUPLE OF YEARS AGO WE WERE
WORRIED ABOUT INFLATION AND
DEFLATION NEVER WORRIED ABOUT
INFLATION.
A COUPLE OF YEARS AGO WE WERE
WORRIED ABOUT TOO MUCH SAVINGS
NOT ENOUGH AND DEMAND STAGNATION
NOW WE HAVE TO WORRY ABOUT
STAGFLATION RECESSION AND
INFLATION PRETTY COUPLE OF YEARS
AGO WE WERE WORRIED INTEREST
RATES ARE TOO LOW NOW THE RISING
BECAUSE OF INFLATION AND WITH
LARGE STOCKS OF PRIVATE AND
PUBLIC EVENTUALLY THAT MAY
BECOME UNSUSTAINABLE, WERE
WORRIED ABOUT HYPER
GLOBALIZATION NOW WE HAVE TO
WORRY ABOUT THE GLOBALIZATION OF
GLOBAL SUPPLY CHAINS AND
FRAGMENTATION AND PROTECTION.
A COUPLE OF YEARS AGO WE WERE
WORRIED ABOUT ASSET CREDIT
BUBBLE AND ASSET PRICES AND NOW
IT’S A BEGINNING OF A BUST AND A
CRUSH AND THERE WILL BE MORE OF
IT EVEN THE ECONOMIC MONETARY
AND FINANCIAL RISK ARE DIFFERENT
FOR WHAT WE HAD TWO OR THREE IS
AGO.
>> YOU THINK THE CATALYST HERE
IS A FEDERAL RESERVE RAISING
INTEREST RATES.
WE ARE ABOUT A YEAR WHEN THE FED
STARTED THIS PROCESS OF RAISING
INTEREST RATES THE FED STARTED
ON MARCH 17 THE YEAR AGO RAISING
RATES BY 25 BASIS POINTS WE HAVE
SEVERAL MORE MEETINGS AND WE
HEARD JAY POWELL ON CAPITOL HILL
SUGGEST THAT WE GET TO SEE MANY
MORE RATE HIKES TO COME ANYWAY
LOOK AT 50 BASIS POINTS VERSUS
25 BASIS POINTS FOR THE NEXT ONE
HOW WE FELT THE REAL TRUE IMPACT
OF THE STRING OF RATE HIKES YET?
>> NOT YET WE HAVE LONG AND
VALUABLE LOGS IT TAKES 12 - 18
MONTHS UNTIL YOU REACH THE
IMPACT OF THE POLICY ON ECONOMIC
ACTIVITY AND THEY START TO SOLVE
BUT NOT ENOUGH UNFORTUNATELY
FEEL THE FED WILL HAVE TO RAISE
RATES AT LEAST BY 50 BASIS
POINTS NEXT TIME AROUND AND PUSH
THE FED FUNDS RATES TO AT LEAST
6% PREVIOUS THAT THEY THOUGHT
THEY COULD STOP IT BY 25.
THE PROBLEM WITH THE INTEREST
RATES AS HIGH YOU CAN HAVE A
SIGNIFICANT CORRECTION FURTHER
AND EQUITY MARKETS BOND YIELDS
ARE GOOD TO GO HIGHER, SPRINTER
GOING TO GO HIGHER SO YOU HAVE
FINANCIAL DISTRESS IN THE
SILICON VALLEY BANK IS AN
EXAMPLE OF THE BOND PORTFOLIOS
THAT YOU OBTAIN WERE YEARS
YIELDS ARE HIGHER AND THE PRICE
IS LOWER BUT THAT’S ALSO GOING
TO BECAUSE A HARD LANDING OF THE
ECONOMY IN ITS GOING TO MAKE
THEIR DEFAULTS IN THE PRIVATE
SECTOR LARGER AND GREATER
ECONOMIC CONTRACTION SO THAT YOU
WILL FEED ON EACH OTHER.
EITHER WE FIGHT INFLATION AND
CAUSE A HARD LANDING IN A
FINANCIAL CRUSH WERE WE DON’T DO
THAT AND WE BLINK AND INFLATION
EXPECTATION IN THE WAGE AND
PRICE BECOMES WORSE AND LIKE THE
70s WITH INFLATION AND
RECESSION AND STAGFLATION.
UNFORTUNATELY THE DAMAGE HAS
ALREADY BEEN DONE BY DECADES OF
MISTAKEN ECONOMIC POLICIES ON
THE MONITOR IN THE FISCAL AND
OTHERWISE FACING A HARD LANDING
OR FACING INFLATION.
>> THE HIGHER RATES MADE
EVERYTHING THAT MUCH WORSE.
WERE TALKING ABOUT THE
PRESIDENT’S BUDGET THIS WEEKEND
AND WHAT DID THE COMMITTEE FOR
RESPONSIBLE BUDGET TELL US WE
ARE GOING TO SEE INTEREST
PAYMENTS OF $10 TRILLION.
JUST INTEREST PAYMENTS ON THE
DEBT THAT WE HOLD BECAUSE OF
HIGHER RATES.
YOU ARE EXPECTING THE STOCK
MARKET TO REACT TO THIS.
ARE YOU EXPECTING A SIGNIFICANT
SELLOFF IN STOCKS IN D.C.
ANYWHERE TO HIDE. IF I’M AN INVESTOR AND FULLY
IF I’M AN INVESTOR AND FULLY
INVESTED, WHAT DO I DO?
>> HOPEFULLY THERE WILL BE A
COMPROMISE ON THE BUDGET BECAUSE
IF IT’S NOT WE’RE GOING TO HAVE
A LOOMING CRISIS ON THE DEBT
CEILING AND THAT WOULD BE
TERRIBLE FOR THE MARKETS.
MY MAIN WORRY INFLATION IS GOOD
TO BE HIGHER THAN OTHERWISE
BECAUSE YOU HAVE WAGE INFLATION
YET THE SERVICE SECTOR.
IF THAT HAPPENS FOR MARKETS, THE
SHARES WOULD BE LIKE LAST YEAR
WHEN INFLATION IS HIGH AND
RISING EQUITIES OF COURSE ARE
HURT BECAUSE OF THE DIVIDENDS IN
THE BOND YIELDS ARE HIGHER BUT
HIGHER BOND YIELDS IMPLY LOWER
PRICE ON BONDS SO ANY 60 - 40
PER FOLIO IF YOU DO WELL ON
EQUITIES AND BONDS AND VICE
VERSA THAT DRIVES INFLATION LOT
BUT WHEN IT’S RISING YOU LOSE
MONEY ON THE EQUITY SIDE OF THE
PORTFOLIO AND YOU LOSE MONEY ON
THE BOND SIDE OF YOUR APPROVAL
YOU, WHAT HAPPENED LAST YEAR WE
SAW LOSSES ON EQUITIES AND BONDS
IN MY VIEW IS LIKELY TO CONTINUE
HERE.
MARIA: WERE TALK ABOUT SOME OF
THE WORST WEEKS FOR MARKETS
SINCE SEPTEMBER IN TERMS OF THE
VOLATILITY THAT WE SAW THIS WEEK
BECAUSE OF JAY POWELL’S
COMMENTARY WHAT IS THE MOST
IMPORTANT FACTOR THAT WE NEED TO
LOOK FOR AS THE MARKET REACTS TO
THE SLOWING ECONOMY.
>> WE CERTAINLY HAVE TO SEE
WHETHER INFLATION IS GOING TO
FALL OR NOT BECAUSE OTHERWISE
THE FED WILL HAVE TO KEEP I
RATES.
IMPORTANTLY I THINK COMMODITY
MARKETS ARE GOING TO REMAIN
TIGHT FOR GEOPOLITICAL REASONS
AND LABOR COSTS ARE GOOD KEEP ON
RAISING AND THAT CAN INCREASE
WAGE INFLATION AND SERVICE
INFLATION.
THE KEY THING WE HAVE TO KEEP IN
MIND IS GEOPOLITICS OF RUSSIAN
INVASION OF UKRAINE WHERE THE
SPRING IS GOOD GET WORSE IT
COULD LEAD TO OTHER SHORTS OF
ENERGY MARKET AND FERTILIZER
PRICES AND THE FACT THAT CHINA
REOPENED IS GOING TO INCREASE
THE DEMAND FOR COMMODITIES IN
THE LOOMING PRICE BY THE MARKET
MORE THAN 50% THAT THIS YEAR
THEY’RE GOING TO STRIKE IRAN
IRAN IS THE THRESHOLD NUCLEAR
STATE THERE ON THE VERGE OF