MacroVoices #392 Jesse Felder: Questioning the Soft Landing Narrative
Sep 7, 2023
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Guest Jesse Felder questions the soft landing narrative for the stock market, expecting more turbulence. They discuss recession risks and market reactions, the relationship between interest rates and equities, and the potential value of recycling nuclear waste. Also, they express skepticism towards power in Dubai and analyze crude oil, S&P futures, and the dollar index. Outlook for gold and high-yield bonds is discussed as well.
Rising interest rates and potential monetary policy lags may undermine the soft landing narrative for the stock market.
Equity valuations have reached record highs in relation to falling interest rates, suggesting a need for reversion to more normal levels.
Divergence between reported earnings and NIPA profits, along with financial shenanigans, raise concerns of an approaching recession.
Deep dives
Challenges of the Soft Landing Narrative
The podcast discusses the question of whether the current stock market rally is a bear market rally or a sign of a soft landing in the economy. Jesse Felder raises doubts about the soft landing narrative, emphasizing the potential impact of long and variable lags in monetary policy and rising interest rates. He presents leading indicators that suggest a possible recession materializing before the end of the year.
Valuations and Interest Rates
Jesse Felder explores the relationship between equity valuations and interest rates. He introduces the Buffett Yardstick, a metric that measures the total value of the stock market relative to the size of the economy. Felder highlights how valuations have reached record highs, coinciding with a period of falling interest rates. He suggests that with interest rates rising, equity valuations may need to revert back to more normal levels.
Financial Shenanigans and Earnings Manipulation
The podcast highlights concerns about corporate earnings and financial shenanigans in the economy. Jesse Felder discusses the divergence between reported S&P 500 earnings and NIPA profits, noting that such gaps have historically signaled a recession or its proximity. He points out various tactics used by companies to inflate profits, emphasizing the unsustainability of these practices and the potential for significant declines in earnings.
The Profit Potential of Recycling Nuclear Waste
The podcast explores a unique trade idea of recycling high-level nuclear waste and making a considerable profit. By negotiating with major governments and offering to dispose of the waste for a fee, the trade aims to capitalize on the storage costs incurred by current waste holders. The proposal suggests that acquiring burner reactors, which can burn the remaining 5% of nuclear waste, offers a solution to the waste problem and increases the profit potential of the trade.
Market Updates and Analysis
The podcast provides updates and analysis on various markets. It highlights the bullish trend in crude oil, the potential breakout in the US dollar, the consolidation of gold, and the resilience of the high-yield bond market. The market analysis discusses key technical levels, potential upside targets, and the factors influencing each market. It offers insights for investors and traders to consider in their decision-making process.
MacroVoices Erik Townsend and Patrick Ceresna welcome Jesse Felder to the show. They discuss the many reasons Jesse is questioning the soft landing narrative and expecting more turbulence for the stock market. Then Erik shares his exciting commodity trade idea before moving onto postgame with Patrick. https://bit.ly/45I2ysd