Larry McDonald, founder of The Bear Traps Report and author of “A Colossal Failure Of Common Sense,” thinks that those who take the Federal Reserve at its word are making a serious error. McDonald wastes little time to argue that the Federal Reserve’s assurances that it will tighten monetary policy (by raising rates and reducing its balance sheet) amount to little more than a “sham”: a series of promises that it can never keep, because doing so would plunge the United States into a deep recession.

McDonald explains that, while he does not expect the S&P 500 to reach a new high for several years, he is anticipating a sharp rally in risk assets as the Federal Reserve tones down its hawkish rhetoric and abandons the most extreme of its measures to moderate inflation. McDonald argues that this supportive liquidity environment will drag the U.S. Dollar down and give an even greater lift to the ongoing bull market in energy as well as other hard assets such as gold.

Filmed on May 31, 2022. 

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Larry McDonald on Twitter https://twitter.com/larry_macdonald

Jack Farley on Twitter https://twitter.com/JackFarley96

Blockworks on Twitter https://twitter.com/Blockworks_

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Timestamps:

(00:00) Introduction

(01:50) Can The Fed Reduce Its Balance Sheet?

(04:36) The Fed's Choice Between Stagflation and a Recession

(09:39) How High Can The Fed Get? 

(19:27) Dot-com Bubble 2.0?

(24:23) Outlook on S&P 500

(27:25) Bit.Com

(27:55) The Energy Trade

(31:44) Have We Reached Full Panic Mode Yet?

(34:45) Commercial Real Estate

(36:52) Shorting The U.S. Dollar

(41:27) Inflation and Deglobalization 

(45:08) ESG Investing 

(49:25) Global Recession 

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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.