MacroVoices #416 Mike Green: Inflation is Dead? Can You Buy Commodities Anyway?
Feb 22, 2024
auto_awesome
Topics include backwardation in commodities markets, future of interest rates, precious metals outlook, passive investing impact on market dynamics, inflation calculations, global geopolitical tensions, investment strategies in commodities and financial spaces, and correlation between uranium trust movement and treasury yield trends.
Commodities offer appeal with structural backwardation, positive carry, and shifting forward curves.
Deep dives
Mike Green Discusses Inflation Trends and Potential Rate Hikes
Mike Green, chief investment strategist, addresses the current debate on inflation trends, focusing on Jim Bianco's assessment that inflation may have bottomed already. He highlights the priced risk of potential Fed rate hikes, emphasizing a consensus that inflation will likely approach the Fed's 2% goal. Green expresses skepticism about the high inflation levels predicted by some and discusses the market's reaction to potential inflation spikes.
Impact of Passive Investing on Market Distortions and Dynamics
Mike Green delves into the systemic effects of passive investing on markets, highlighting the distortions it creates and the risks it poses. He discusses the market's shift towards passive flows and its impact on value-seeking mechanisms, emphasizing the disproportionate influence on larger companies. Green points out the emergence of academic literature addressing the distorted impact of passive investing and its implications for market dynamics.
Commodity Market Dynamics and Backwardation Trends
Mike Green offers insights into commodity market trends, contrasting the expectations of a new commodity supercycle with his skepticism. He discusses the structural backwardation in commodities and the positive carry it offers, making them appealing investments. Green emphasizes the role of shifting forward curves in commodity investments and the potential for returns even without significant spot price movements.
Geopolitical Escalation Risks and Market Implications
Mike Green reflects on the risks of geopolitical escalations and their potential impact on markets and global dynamics. He discusses concerns over escalating conflicts and the implications for trade disruptions and market dependencies. Green points out the challenges posed by escalating conflicts and the need for investors to navigate potential geopolitical uncertainties over the next five years.
Discussion on the Changing Dynamics of War
The podcast delves into the evolving nature of warfare, highlighting a shift towards precision munitions and domestic disturbances. It emphasizes a decreased reliance on traditional combat methods, such as direct physical confrontation, in favor of proxies and advanced weaponry. The episode raises concerns about the increasing ease with which governments engage in military conflicts, noting a preference for conducting operations on foreign soil due to reduced costs.
Investment Strategies in Trend Following and Credit Cycles
The podcast discusses new investment products related to trend following strategies and credit cycles. Specifically, ETFs are introduced that focus on trend following incorporating spot price changes and carry components. The episode touches on strategies for capitalizing on credit spreads and utilizing overlays for hedging. It also explores the potential impacts of market dynamics on investment approaches, including considerations for high yield exposures and potential credit spread movements.
MacroVoices Erik Townsend & Patrick Ceresna welcome back Mike Green. Erik & Mike discuss backwardation in commodities markets, where rates and markets are headed from here, precious metals, and much more. https://bit.ly/3wthEFq
