“We’re In Uncharted Territory” | Warren Pies on Treasury Issuance, Housing Market, Oil, And Recession Risk

45 snips

Oct 30, 2023

Warren Pies from 3Fourteen Research shares his views on bond supply, housing market, oil, and recession risk. He discusses the mortgage buydowns and their impact on homebuilders, predicts a recession in Q2 2024, talks about the relationship between interest rates, oil prices, and economic activity, and explores US government deficits and uncertainty.

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Introduction

00:00 • 4min

The Relationship Between Bonds and Stocks

04:03 • 6min

Earnings Expectations, Stock Market Reactions, and Concerns

10:18 • 5min

Stock Market Optimism Based on Unconvincing Margin Expansion

15:29 • 17min

Impact of Mortgage Rates on the Housing Market

32:49 • 16min

Oil: From Bullish to Neutral

48:23 • 10min

The Relationship Between Interest Rates, Oil Prices, and Economic Activity

58:03 • 2min

US Government Deficits and Uncertainty

01:00:08 • 7min

Warren Pies of 3Fourteen Research returns to Forward Guidance to share his views on oil, bond supply, the housing market, and the labor market. Having been an underweight bonds and overweight commodities (oil), Pies now views both the 10-Year Treasury and oil as roughly fair value.

Pies expects the mortgage buydowns, where homebuilders shield new homebuyers from the cost of higher mortgage rates, to no longer work at 8% mortgage buyers. He thinks a recession might start in Q2 2024 as employment in residential construction begins to wane. Filmed on October 27, 2023.

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Timecodes:

(00:00) Introduction

(01:14) Why Warren Has Been Significantly Underweight Bonds (And Why He Is No Longer)

(12:12) Earnings Expectations For Stocks

(24:59) Warren's View On Housing Market & Recession

(33:31) The Buydown Math For Homebuilders Stops Working At 8%

(40:21) Labor Market Remains Very Tight

(43:44) Is U.S. Economy Reaccelerating From Trough of 2022?

(48:21) Warren's View On Oil

(50:56) Hedge Funds Tend To Short Oil On A Directional Basis As Opposed To Being Part of a Basis Trade (Such As So Often The Case In Bonds)

(52:42) Overweight Position In Energy Stocks (Within Equity Sleeve)

(01:00:09) Pro-Cyclical Deficits Run By U.S. Government

Disclaimer: Nothing discussed on Forward Guidance should be considered as investment advice. Please always do your own research & speak to a financial advisor before thinking about, thinking about putting your money into these crazy markets.