What To Buy With Higher Interest Rates Ahead? - Weekly Market Recap: Jan 14, 2022

[@danielbarnett6859]

This channel keeps getting better and better 👏. Thanks Adam!

[@rdlouzau8752]

Thanks Adam for bringing Lance to the table enjoying every point he brought us..

[@falsificationism]

Fantastic explanation of the inverted yield curve! Good conversation as usual. Thanks, fellas!

[@nunodasilva4853]

Great to see Lance back....i listen to his show daily...great to see Adam that he will become a weekly regular 💯

[@allanjohnson4566]

I like when you get into the detailed rants on the economy, markets with Lance.

[@suegibson8914]

Interestingly Lance didn’t mention Precious Metals as a safe place, that’s where I’ll be along with energy stocks.

[@sivi9741]

He did at 10m …

[@TbirdThunderstruck]

He mentioned Gold as a good asset. Energy stocks will likely sell off a lot though in the next crash.

[@philshyu5248]

If you look back at the panic selling events of March / April 2020, you will see that precious metals tanked along with equity markets. Using that event as a guide, you can see that owning cash and derivatives (short positions, puts or the VIX) is truly the place to be.

[@mattanderson6672]

Great interview!! Thank you !

[@sarahdonnelly5923]

Great description of how the yield curve functions! Thank you.

[@RaulSanchez-de8xg]

This guy is good. He was explaining so I could understand. He taught me a few things.

[@sivi9741]

Great show . Wish more explanation would be given on why short term treasuries would be favour vs long term bonds and why someone would chose to sell one sorts to buy the other ? And vice versa.

[@kinglewy5772]

Great show, wondering why Lance is going into bonds and not Gold for safety, especially after gold went sideways last year.

[@sivi9741]

What IS wrong with everyone . He did at 10m …..

[@scottfuscomusic]

OUTSTANDING! And you asked the exact question I was asking

[@FamousInvestingQuotes]

Thanks Adam and Lance. It was very interesting conversation!

[@Contrarian_Misfit]

I love this channel! Thank you for the information

[@Not_So_Weird_in_Austin]

Great explanation on yield curves in bonds thanks for the presentation.

[@Radio280]

Excellent interview. Would love to see Lance invited again. Thank youuuu

[@Wealthion]

Lance will join me every weekend for these Market Recaps going forward

[@chloemaxwell2628]

Love this new series!

[@paulinechernick2537]

Excellent speaker. Clear, organized and intelligent.

[@vivianocallaghan9331]

Yet another excellent interview, well done and thanks for the amazing insights

[@audiwong9622]

His sage advice at 24:00.. no free lunch in this world ever

[@tmclean9]

Good stuff Adam and Lance. One correction, Lance mentioned Cathy Woods' stocks earnings. Her companies, in general, only have losses.

[@TbirdThunderstruck]

Only 80% or so don't make any money 💸😂

[@ask_why000]

Tell me why the Fed will follow through on rate increases this time.

[@theinvestmentabc6245]

I am 99,9% sure that they will and even more than most people think. Unfortunately there will be more inflation due to more supply chain shocks and the FED will be pressured to stop it. They will create the mother of all recessions, no doubt about it. 2023 will be remembered

[@TbirdThunderstruck]

What do you mean? 2015 they announced they would start in 2016. They did exactly when they started in 2016, until end of 2018. If they did last time, what makes you think they won't hike rates this time?

[@LahraWelch]

Just perfect! Thank you for passing down this very educational and valuable information

[@mattanderson6672]

Yes!

[@danielturner9832]

It sounds like TMF for bonds?

[@BatmanBoss]

Thanks guys!

[@GeKa853]

I didn't fully understand the concept of un-inverted yield curve vs inverted

[@flavius13]

Thank you for doing this; we dont have resources to gather this info

[@Ryan_Tinney]

Thanks for bringing Lance on. His KZbin channel is vastly under watched.

[@farzadfadai7238]

Fantastic guest and interview

[@aepfelchen28]

Great show, thank you for bringing Lance in. So good to get some serious background from the trading sie.

[@gsschneck]

So hang on: The 2year/10year ratio at the moment is .556. So it is not inverted at the moment. Is he saying that when the ratio is greater than 1 it is inverted but then when it goes back to less than 1 it is re-inverted which is the predictor for a recession? If that is correct, I wonder how quickly it will occur?

[@emmanuelananda6551]

Lance is a wonderful addition

[@georgeholloway3981]

I can't understand how the moment of uninversion could occur when people start moving their money into long bonds. Wouldn't that further lower the yield on the long bond?

[@FREEDOM195844]

Great informative channel! Thanks

[@bpmattic9648]

OK, no exaggeration Lance’s bond/yield summary pays 1000 to one on a time per unit learned basis compared with all other market analyst discussions. I was literally about to start dropping negative comments to smart bond people asking them to explain the bond market in real, actionable & pragmatic terms. Now I’ll just use more of my energy following Lance and Wealthion.

[@Purnama1008]

Bring Danielle and Lance together: two great thinkers with experience.

[@shaileshparikh6920]

When he says bonds are attractive - short end 2 - 5 yrsor long end bonds - 20 yrs?

[@janjansen3816]

I managed to buy Marc Faber's book Tomorrow's gold. (It is also available on the internet archive.) This is the best book on investing I've ever read. It was written 20 years ago, but it is still fresh and relevant. It's main focus is on asian emerging markets. The thing I learned from it: there are only a few sweet spots in the stock market... Another great video Adam! (cancelled my netflix ;))

[@sheevamatimbas4300]

Lance is THE man

[@steveholloway7565]

Another good one. Tks.

[@danyuljackson]

Great topic. 👍

[@johnkobialko4765]

Execelent interview! Thanks

[@billz2899]

Bond for safety? Or bond for appreciation? If you buy for appreciation, on the flip side, you may also buy for depreciation, then how you get safety? It’s self contradictory.

[@conservativemovement]

The indexers built a dance floor for the speculators, so the race is to the swift who can ride small and medium-sized waves and loops in an informed, measured, and carefully timed manner.

[@AI_futurist_]

Recently discover your channel. Thanks for dumbing down the discussion! not sure what lance is advising tho!

[@samplrl]

Overshoot will be an understatement.

[@TheRealBrook1968]

? We are leaving a long term stock bull market and are on the first year of the commodities bull market and value is overbought?

[@Wealthion]

In the immediate term, Lance means. Longer trends are full of short term cycles.

[@samplrl]

Euro$ futures curve is already inverted.

[@andrewm6786]

Hey , what is the data source you use to view Euro$ futures curves? I can see individual products on CME but can't find visualized curves anywhere.

[@Purnama1008]

Great reflections by Lance. Everyone knows the market rallies initially with rate hike (buy the news in this case) but no one has discussed the tipping point of the rate hikes when markets sentiment changes and it finally crashes. Our older sages (Grantham, Munger..) are saying 2023.BTW, Lance in response to your stock buybacks as an illegal… SEC is in a orchestrated coma, all supporting oligarchs. Lance is brilliant. Bring him back.

[@Brandon-ld5vh]

You are early with bond purchases. Rates will go up until it rips the market apart at the seams. Then everything sells as that happens, buy bonds.

[@pistolpete8539]

Buy PM.

[@Brandon-ld5vh]

@@pistolpete8539 in a crash, everything gets sold, I’ll buy pm after that

[@pistolpete8539]

@@Brandon-ld5vh Yes, when the market does crash, the paper price of precious metals price will also drop with equities, as investors sell in mass in order to attain cash to pay off their margin calls issued by their brokers. The chances of being able to purchase precious metals at the paper price are extremely low, as every person and their pet dog will be lining up outside mints and coin shops hoping to purchase PM at the discount price. Demand will be extremely high. The mints and coin shops are very unlikely to sell their PM at the discounted paper price. Would you sell PM at the discounted paper price when the true value is so much greater? Dealers know both the true value of PM and the increase in demand, and the physical price will reflect this situation and thus be significantly higher than the physical price is today when premiums are added. Unless you are extremely lucky to be first in line, chances are you will pay a significantly higher price for physical than you would if purchased today.

[@alxktl]

Bonds focus. Do that please.

[@pedroortiz7067]

Excelente

[@FGTBOGSAT]

Peak inflation? I doubt it.

[@andrewm6786]

I don't fully understand the idea that long duration bonds are a risk off product. Aren't long duration bonds relatively much more price sensitive for a given rate change than short duration? Wouldn't that make them riskier than short duration? Isn't just the fact in itself that the rate is higher indicating that they have higher risk than short duration? So then why would people move into duration as a safety mechanism to cause an uninversion?

[@seanferenci138]

Long gov bonds are a "risk off" product in the sense that during a flight to safety people rush to them because the principal is guaranteed. They are very rate sensitive and you can lose money if you sell as rates climb.

[@jimbobarooney2861]

I imagine he maybe talking about TLT, so basically it's a supply and demand situation, it's an etf so it behaves like a stock in that sence

[@seanferenci138]

@@jimbobarooney2861 TLT is a 20 year+ duration bond ETF. In a massive sell off it may briefly experience a price drop because of margin calls. It would bounce back quickly because in these situations long bond yields normally fall and the TLT NAV would have to be reflected in the ETF's price.

[@TbirdThunderstruck]

You are somewhat correct, but often depends what you mean by "risk". The most important component in terms of RISK is the quality of the debt, rather than duration. I.e treasury bonds are safer than corporate bonds. The long term duration bonds typically have higher VOLATILITY, because they typically have greater changes in yield/rate so they are more price sensitive as you correctly have stated. If you are unsure on your trade then lower volatility will be safer in a way though.

[@seandebney6561]

Hi Adam - really love your channel and I can't wait to hear Lance's wisdom each week! I am in Ireland and have a self directed pension - can Lance or the guys at New Harbour manage funds from Ireland or can you recommend a financial advisor that has a similar investment perspecticve in this jurisdiction? Many thanks

[@rickphillips381]

In my opinion, YOY headline CPY will be above the Fed's 2% target at the end of the year, primarily due to OER. Housing/rent inflation lags about 18 months. Also, I expect Lance's call for a recession in 2022 has a very low probability. Now, 2023 is another story when I expect the yield curve to invert.

[@TbirdThunderstruck]

Why recession in 2023?

[@rickphillips381]

@@TbirdThunderstruck I should have stated more. Bernanke said it's the Fed who usually "murders" the economy due to hiking rates too much to battle inflation. Every cycle is different, but we had slowing GDP, declining inflation in Q4 2018 when the Fed was hiking and QT'ing. In Q4 2018, -20% SPX and -48 bps on the 10yr. Then Powell pivoted big time in early 2019 and cut rates 3 times in 2019, when the Fed was set to hike 3 times in 2019 per their DOTS. This time, I feel the economy is not in good enough shape to handle the expected 7 hikes (per futures) over the next 1.5-2 years. If the Fed hikes that much, I expect the curve to invert. When the curve inverts, it has an 8 for 8 track record going back to 1969, of having a US recession within a year of the inversion. If Powell pivots more dovish and hikes less than 3-4 times, I don't see a 2023 or 2024 recession. Take care

[@TbirdThunderstruck]

@@rickphillips381 Thanks a lot for the explanation! The yield curve inversion is very interesting. I agree we are prone to a recession if rate hikes are too aggressive. The timing depends entirely on how large the rate hikes and how quickly, etc. As you say, Fed could flip from hawkish to dovish very quickly. Very interesting times.

[@TbirdThunderstruck]

@@rickphillips381 Also is your 3-4 rake hike threshold 0.25% basis point hikes or 0.5%. Can the economy not handle around 0.75%-1.5%? For example 2018/2019 wasn't rates around 2%-2.25% before the economy and financial markets had major issues, bailouts, etc. Private debt is a lot higher since then and economy potentially more fragile without fiscal and monetary stimulus. So it would make sense a rate hikes to only need to go a lot less high before bringing on a recession. Please correct me if I am wrong, only been learning about this for a year or so. Really appreciate your knowledge.

[@rickphillips381]

@@TbirdThunderstruck You are correct about the 2018 Fed Funds level. There have been some market folks talking about a 50 basis point hike in March, the futures show that has only about a 5% chance. Powell has talked a bunch about market stability and a 50 basis point hike with probably cause the VIX to spike to the 40-50 level with the S&P down about 10% more. Generally, tech stocks are long duration assets with low dividends and don't like an economic Quad 4 (when inflation and GDP's rates of change are declining). In the past when the Fed had hiked in a Quad 4, we get lower stocks and lower long term rates. Yes, you bring up a good point about private debt being bunch higher, and that is a disinflationary factor and somewhat of a governor on higher rates. I think the Fed will be spooked by higher inflation, which I expect to be above 4% into at least Q3 of this year. Unless the stock market really continues lower (the Russell 2000 is down more than 15% from it's Nov high), I think they will do 3 or 4 hikes this year. But I still worry they will not create a soft growth landing and will cause problems similar to Q4 2018.

[@stevecash778]

Enjoyed the show. Precious metals next time please.

[@MarkSeve]

Stocks are nothing more then a derivative, and one day will be worth about as much as the paper they are printed on.

[@Ahmed-bj4gu]

Thanks for all the priceless information that you and your team are bringing to us by inviting such top notch guests. I'm certain that Jerome Powell is among the first one's to watch each episode :) Question for you and your panelists: If Mr. Powell goes 'shock and awe', as some financial gurus are recommending that he do, to prove that he's still in the game, and does the first rate increase by 50 basis points instead of 25, what'd be the difference in market affect consequences for each scenario?

[@Wealthion]

So glad you are finding these interviews of value. Answering your question generally, if the Fed surprises the market by being more hawkish than anticipated, stock & bond prices will react more negatively than otherwise. By what magnitude? I don't know (and not sure anyone else can say with certainty, either). But if you're worried about a swift market correction, a surprise aggressive hike could trigger one.

[@TrumpetEeps]

30 year treasuries are heavily shorted right now and have been for the last couple years, but more now than ever, I hope the shorts realize the error of their ways! Stay safe!

[@johnbirman5840]

If even Gold drops during a correction, or God forbid a Crash - switching from Growth to “stodgy “Value companies will protect you how? Everything gets whacked. And if a deflationary period is possibly soon to occur, this too isn’t too great for Gold either - a double weighted anchor? Cash looking better?

[@1967MGC]

Cash will be king for a short time.

[@bobs8005]

Good point. For value is it that people are just expecting value stocks will recover quicker than growth after a crash? Not too sure.

[@scottsmith3123]

Confusing! Don’t understand why he’s "buying bonds now and planning to add more later this year". If FED is planning 3 rate hikes this year, then yields on 10-yr (and 20-yr) will increase ... and prices will drop. Michael Burry is shorting long (20-yr) Treasuries. What am I missing? 😧

[@TbirdThunderstruck]

Inflation expectations are sometimes more important than interest rate hikes. Look at 2016, the Fed started to hike rates in the beginning of the year, and TLT rallied at the same time. Middle of 2016, inflation went from 1% to 2% and TLT had a correction (the market was not expecting a move up so quickly). By end of 2018 was when the market had a tipping point and interest rates were too high for equities, and was the best time to buy TLT, had a decent rally into 2020 with the covid crash. That's why it may be good to buy now, it may be good to buy after inflation moves a bit higher, it may be better to buy more at the point where interest rates start to crash the stock market. Averaging in doesn't sound that crazy to me. Michael Burry seems to think inflation will be out of control, even thinks we are going to have hyperinflation soon and so thinks we will be like Germany in the 1920s. In that case bonds are the worst for that environment. I believe that Lance is more correct in his timing, hyperinflation is possible, but I think Michael Burry might be a little early on this one, just how he was early with his puts on Tesla and Russell 2000, I believe he is a early on hyperinflation. Disclaimer: I could be wrong.. Take your own risk you are happy with.

[@christiananheluk3687]

Adam . . . Get Darius dale and Jeff Snider

[@Wealthion]

I've asked Jeff & he's interested but his Compliance dept won't let him come on

[@Capital-gn2sh]

Please explain why there is no liquidity in the bond market? As you rightly identified the bond market is much larger than the equity market but it makes little sense that it is less liquid. I think that you got your 3 legged argument wrong. I suspect that you were trying to emphasis that the bond market has lower volatility than equities & in the near term lower capital risk. I don't disagree with your conclusion but I think that the analogy might need some more work.

[@danielwerner6501]

Bitcoin has all 3 items: Safety, return and liquidity. Boom. Otherwise I love your work Lance :)

[@craigfaille3190]

Once the insiders cost average out then rates will go up

[@Bob-nh7dx]

How come none of experts ever remind us that gold and silver, both physical and miners, trade DOWN with broad market sell-offs just as deeply. Then they rebound faster and higher, but other asset classes move well too. I love gold and silver, just frustrated with half-truths that will destroy people who buy into gold ahead of major correction thinking they'll be protected. They won't. Just look at sell-offs in 2000, 2008, 2020.

[@nancy3853]

Feds will raise rates. Banking is nervous

[@jimbobarooney2861]

Banks do better, they are more profitable with higher rates

[@slowmoney5567]

Hang on. At 14:00 he says that money is moving into long term bonds for safety, but the yields going up. I think you’ve got your wires crossed. It’s people moving into short term bonds (2 year) for safety and hence lower yields. Some selling of the 10 year bond, though not necessarily as much hence yields rise. Sorry I stopped watching after that.

[@andrewmarsden1970]

Lance shares some interesting stats and views via Twitter and LinkedIn.

[@bubbleox8399]

There is always a exception to the rule I give you cardano all 3 exist at the same time how good’s that.

[@justneal99]

Lance for President. Let's go Brandon.

[@trustyshellback]

When the FED raises the interest rates, all bond holders will get hammered. The stock market will lose money also. And, of course, the real estate market will go down too. Nobody knows exactly WHEN all markets will decline. It will be like the iconic movie scene in "A Bronx Tale" when Sonny announces to a biker gang: "Now youse can't leave." 🔷🔷🔷🔷🔷🔷🔷🔷 🇺🇸 Marc J. Metivier 🇺🇸

[@hildedewaele5069]

👍

[@robjohnson7878]

He’s buying BONDS?? I always knew that guy was coo-coo.

[@trustyshellback]

To those who use well what they are given, even more will be given, and they will have an abundance. 🔷🔷🔷🔷🔷🔷🔷🔷 But from those who do nothing, even what little they have will be taken away. 🔷🔷🔷🔷🔷🔷🔷🔷 [Matthew 25:29 NLT] 🔷🔷🔷🔷🔷🔷🔷🔷 🇺🇸 Marc J. Metivier 🇺🇸

[@Index-o1234]

🤔🤣-Everybody is broke!!😂

[@martinjdesmond]

Sorry, but I don't agree with the prediction for deflation. Wages are rising for a variety of reasons including a shortage of workers. That shortage of workers is going to be with us for a very long time due to baby boomers retiring.

[@merlinwizard1000]

10th