The Haymaker + Wealthion

In The Ring - July 8th, 2022

“We’re going to get inflation down […] that means we are going to be aggressive on rate hikes and we may have to take the risk of causing some economic damage.” - Fed Governor Christopher Waller (July 7th, 2022)

Hello, Haymaker friends and readers!

This week’s Haymaker features our inaugural video post.  And though it’s leading off with a short introduction to quickly cover key topics, we’re otherwise letting the audio do the speaking (literally). 

Some background:  On Tuesday morning, I was afforded the chance to speak with Adam Taggart of Wealthion to discuss a wide range of financial and market-related topics. Adam and I were introduced by our mutual friend and my fellow Substack scribe, Doomberg, who thought the Wealthion team might enjoy picking the Haymaker’s aging brain for an hour or so.

Needless to say, I was happy to participate and learned from Adam as much as I contributed to the conversation. The list of luminaries he has interviewed over the years is a lengthy and impressive one, including Danielle DiMartino Booth, Jim Rogers, Luke Gromen and Stephanie Pomboy.  Frankly, I felt out of my league, but that’s a familiar feeling for me.  

Those of you who have read my book, Bubble 3.0, or have simply been keeping up with us here on Substack, will be familiar with much of what Adam and I explored.  However, the discourse allowed me to flesh out some of my favorite topics – or the opposite thereof – in the context of very recent economic developments. 

On the least favorite side would be my conversion to the recession-is-nigh club, one to which I really don’t want to be a member.  Frankly, I hope I’m wrong about that and there’s a decent chance I am.  Several people I highly respect strongly disagree with that belief, including StoneX Financial’s Vincent Deluard, whom I often refer to as one of the smartest men I know.  

One somewhat critical comment from a Wealthion audience member described my recession forecast as “a day late and a dollar short”.  Apparently, he was reacting to today’s revision by the Atlanta Fed’s GDPNow forecast that decreased the second quarter rate of contraction from -2.1% to -1.9%.  He must have missed the fact there is still a minus sign in front of the slightly improved number.  This makes it two quarters in a row of falling GDP, often considered a recession confirmation. Yet, there could well be major positive revisions to this datapoint as more information comes in, and the Atlanta Fed is not the official arbiter of recessions.  That “privilege” lies with the National Bureau of Economic Research (NBER).

Considering that I’m essentially short the dollar with a large number of my personal investments, this viewer was onto something, even if accidentally.  However, I feel it’s a case of a lot more days too early, rather than late, in that regard because the dollar has been in a relentless up-trend, wreaking havoc on a plethora of asset classes in the process. 

This is a topic I intend to address in an upcoming Haymaker in much more detail.  As a sneak preview, I believe the dollar is dangerously overextended against real assets, i.e., those that offer protection from fiat currencies which have been overproduced in vast quantities. This, of course, includes the dollar.  Its steady incline is mostly due to the reality that markets are increasingly discounting a looming recession. The knee-jerk reflex is to buy the dollar and sell almost everything else.  

Yet, as I discuss with Adam in this podcast, a U.S. recession will blow up the U.S. government’s finances once again.  Because these are already highly precarious, it means there will be another onslaught of Treasury bills, notes and bonds that will be issued to fund the proliferating deficits.  This will either drive interest rates to economy-crushing levels – precipitating even more torrents of federal red ink – or force the Fed to reprise its role as the government debt buyer of last resort. It’s my belief the latter outcome is far more likely, though it may attempt the former… for a while.  But get ready for another Powell Pivot, for which our Fed chairman is becoming world renowned, befitting the head of the planet’s de facto central bank.

(As a postscript to this topic, last night I listened to about half of a podcast my great mate Grant Williams released yesterday with Greg Jensen.  Greg is Co-Chief Investment Officer of hedge fund Leviathan Bridgewater, founded by the mythic Ray Dalio. Over the weekend, I will listen to the rest of Grant’s interview of Greg and discuss it in the upcoming Making Hay Monday.  For now, suffice to say that it is very much in synch with much of what Adam and I discuss.)

Overall, the feedback from Wealthion listeners was extremely positive and gratifying.  One question asked was essentially “What do we do under the circumstances?”  For all of you who regularly read our Making Hay Mondays, you know many of my recommendations of both a general and specific nature. But my two main suggestions, as most of you realize, are to gradually buy into the bear market while retaining significant cash reserves.  Of course, energy securities remain my favorites and many offer remarkably high yields.  The other is to be willing to raise cash into the snappy bear market rallies that have – and almost certainly will continue to – come along.  In fact, one has just happened, with the S&P now up 7% from its mid-June trough. (For sure, most of that happened in the final week of last month.)

Lastly, on the subject of audio, I am over the moon (and there’s a Hay Moon coming up next week!) about the latest development in the Bubble 3.0 section of my growing publishing portfolio, and here it is: the audiobook is now available for purchase. My team and I realized some months ago that in the modern world, audiences are increasingly drawn to audiobooks as a way to take in new content while doing everything else that fills up the hours of a busy life. That being so, we rented a studio, brought on a voice-actor, and hired an editor to put everything together. The result is a recording of which we’re proud and one we hope you’ll enjoy. Speaking of that…

Following on the good vibes of my Wealthion interview, I would like to extend to each of you the same offer I extended to Adam’s subscribers/listeners. Simply follow the website link below to find Bubble 3.0 for sale and enter the discount code ListenWealth33 to receive a 33% discount on your audio download.  (For those who would prefer a hard copy, that will be out soon, as well.)

Bubble 3.0 Audiobook: https://awesound.com/a/bubble-30-historys-biggest-financial-bubble?code=ListenWealth33

Okay, you’ve read the spiel and seen the book offer, I think you’ve earned a couple hours of laidback listening. Click Part I below and enjoy. (And please sure to Like/Comment afterwards).

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 Part I

Part II