The IRF Podcast

The IRF is joined by Brian Pellegrini, the Founder of Intertemporal Economics.

----more----

In this podcast Brian Pellegrini discusses the political factors that influence the recurring problems relating to Congress passing legislation to raise the US debt ceiling. Brian reflects on the various fiscal, monetary and macro-prudential policy dilemmas associated with the recent spike in inflationary pressures, the impact of higher interest rates and the consequent financial instability in the financial sector due, in part, to several regional bank failures.

Given the potential problems in the bond market, he expects the Fed to take steps towards a policy of yield curve control and to start acting as the market maker of first resort. Brian also explains why he predicts that the US economy will be in the midst of another inflationary cycle by mid-2024.

As a result, Brian expects the US stock market to follow a winding path. He foresees a strong outperformance by financials in the next 3 – 6 months, as inflationary fears fall on false hopes of a lasting return to a low inflation environment. He thinks that the year ahead will therefore be a period of volatility with a strong divergence between the performance of different stock market sectors.

In addition, Brian anticipates that there will be a greater degree of cooperation amongst the major central banks in the near term that would have some implications for the US dollar. In the longer term, he sees two major political challenges that will have an influence on the US dollar: i) demographic trends and their prospective impact on the US labour market; ii) the potential global division between the West and other parts of the world in the East and the Global South.

Brian Pellegrini is the Founder of Intertemporal Economics and the firm’s Senior Analyst. Brian founded Intertemporal Economics in 2018, previously he worked with Bernard Connolly as a senior analyst at Connolly Insight, where he specialized in Geopolitical Event risk, Monetary Policy, Labour Markets and Energy. Prior to Connolly Insight, Brian was employed in various positions across Wall Street, including working with high-growth technology firms raising capital, structuring options trades and valuing asset-backed securities. Brian has an MBA from Columbia University, a Master of Science in Finance from North-Eastern University and a Bachelor of Science in Computer Science from Columbia University. He is also a CFA charter holder.

Intertemporal Economics uses an in-depth analytical framework, which is based on microeconomic foundations. This allows an understanding of endogenous factors and patterns of human behaviour that cannot be analysed using quantitative techniques alone. The firm’s research focuses on topics affecting economics, interest rates and asset prices in developed and emerging markets.

The IRF is joined by Helen Thomas, the Founder & CEO of Blonde Money.

----more----

In this podcast Helen reflects on Rishi Sunak’s premiership so far and assesses the prospects for the UK economy and financial markets in the year ahead. She discusses the outlook for economic growth, inflation and monetary policy. 

Helen compares the outlook for interest rates and government bond yields in the US and the UK, noting key differences between the policies of the US Fed and those of the Bank of England. She concludes with an assessment of the differing prospects for Wall Street and the London stock market in an era of numerous international uncertainties and potential financial instabilities.

Helen has a distinguished career in both finance and politics. She was an adviser to the former Chancellor of the Exchequer, George Osborne. She also created the Financial Markets Reform Programme for the think tank, Policy Exchange. 

Founded in 2014, Blonde Money is an independent consultancy firm that analyses and monitors mispriced risks in financial markets in the USA, UK and EU. 

JP Smith of the IRF is joined by Patrick Perret-Green, the Founder of PPG Macro.

----more----

In this podcast Patrick argues that the impact of the problems in the banking sector is likely to be highly disinflationary as the contraction in credit creation outweighs the creation of money by the US Fed. Whilst the stock of money supply remains extremely high, the flow is contracting at a rate unseen in the lifetime of most market participants. 

Moreover, the expectation that high inflation is here to stay has become consensus, partly on the back of aging demographics pushing up consumption relative to savings, a narrative that Patrick does not buy into given Japan's experience over the past thirty years. Given the lags built into the inflation indices, especially with regard to shelter and the prospects for a marked weakening in the labour market as the global economy slows, investors will begin to focus on the secular disinflationary forces. 

Outside the US, Patrick is especially concerned about China where the capital-intensive growth model has run out of steam and the money created by the PBOC will be used to prop up the property market and especially the highly indebted local government financing vehicles.   

Given this backdrop, Patrick advocates a cautious and pragmatic approach to asset allocation favouring longer dated sovereign credit and equities that offer a defensive earnings profile and sustainable yield. Because of his pessimistic outlook for economic growth, he would underweight cyclical sectors, most commodities and emerging markets, the latter being further penalised by the likelihood of a stronger dollar as part of the global flight to perceived safer havens. Property and private equity are also very vulnerable to the process of price discovery and retrenchment by the banking sector. 

David Osman of IRF is joined by Ben Rabidoux, the Founder of North Cove Advisors.

----more----

They discuss the importance of the housing sector as a driver of consumer spending and broader economic growth in Canada. The Canadian government is trying to achieve a soft-landing with the central bank providing an appropriate degree of monetary tightening to curb inflation without creating a recession. According to the Bank of Canada, higher interest rates are working their way through an overheated economy.

Canadians are feeling the pinch of high inflation and concern about an economic slowdown. Ben points out the risks associated with a tightening monetary policy stance and a sharp slowdown in discretionary consumer spending. He identifies the early signs of cracks in consumer credit, including rising insolvencies and deteriorating credit card trends.

In the housing sector, affordability concerns are continuing to weigh on demand and put downward pressure on house prices. Ben compares the highly-leveraged state of Canadian consumers with their US peers. Given the prospect of higher US interest rates this year, Ben highlights the risks that this poses for the conduct of monetary policy in Canada and the implications for the Canadian dollar.

North Cove Advisors is a boutique research firm that is exclusively focused on Canadian macroeconomic coverage with a strong focus on housing, household credit and consumer spending trends.

David Osman of IRF is joined by Michael Churchill, the founder of Churchill Research.

----more----

In this podcast Michael discusses the economic and financial implications of the worst bond yield inversion for 40 years. He argues that the curve inversion is saying that the Fed is overdoing it.

Historically, that is a recession predictor – albeit with a long lead time. But so far other indicators are not corroborating a near-term deflationary recession. He points out that the 2020-21 helicopter drop was of world-historical enormity – and now it’s being worked off. This has created all kinds of uncertainties and risks. He notes that US M2 growth is negative YoY, but still 38% above pre-COVID levels. This is a classic conflict between level and rate of change. The rate of change is weak, but the level is still high. He observes that over enough time, the rate of change always wins.

Michael emphasizes that the 2020-21 M2 boom was a one-off, but people misinterpret it as systemic. He sees that as being very dangerous. The big risk is that the Fed keeps hiking until lagging indicators give it the slowdown it wants (particularly rising unemployment). The hotter the economy runs in the meantime, the bigger the risk of Fed overshoot.

Michael points out that the “option value” of holding cash is rising given the obvious risk of Fed error. He notes that the gold price is tracking the 12-month Fed Funds future (inverted) tick for tick. Put differently, the dollar is following funds-rate expectations very closely. He finds it bizarre that the 350 bp rise in TIPS yields hasn’t pulled gold down much further and interprets this to mean that money is not as tight as the inverted yield curve suggests. With respect to his various portfolios, Michael explains why he has been adding to his weighting in Japan and discusses the adjustments he has recently made to his weightings in various sectors, including airlines, processed goods and raw materials.

Churchill Research analyses the world from both the top-down and the bottom-up. The first cut is macro, using their supply-side economic model to identify countries and sectors that are likely to outperform or underperform. Next, they apply their bottom-up analysis, looking for interesting individual companies within targeted countries and sectors. These stocks are included in their various portfolios. 

IRF represents high-quality and differentiated Independent Research and Alternative Data Providers.

----more----

This is the fifth episode of the IRF Research and Markets Podcast series.

In this edition, experienced market practitioner JP Smith reviews the analysis and views of some key IRF Providers focusing on the lively debate over US inflation and the relationship with commodity prices, bonds and equity markets, with a particular emphasis on emerging market equities and the extent to which the consensus bullish view is consistent with the outlook for the key country constituents.

IRF Providers mentioned in this podcast include: CrossBorder Capital, Suttle Economics, PPG Macro, WilmotML, Talking Heads Macro, Minack Advisors, CHA-AM Advisors, Independent Strategy, PRC Macro, Copley Fund Research, Emerging Advisors Group, Alberdi Partners, Greenmantle.

David Osman of IRF is joined by David Ranson, the president of HCWE & Co. for the latest episode of the IRF Podcast. Here David Ranson discusses the misunderstood causes of inflation and the consequent undermining of sound money as a store value. He highlights the importance of the quality of money, as opposed to the quantity. 

----more----

David also explains why the 30-year forward price of gold is the best way to assess the quality of money and he argues that the current burst of inflation was not generally expected because the cause has not been diagnosed correctly. His empirical analysis has major implications for the conduct of monetary policy and the impact of those central bank policies on an economy’s performance.

David points out that the historical evidence does not support the belief that raising interest rates to control inflation is effective. He concludes that the present policies being pursued by the US Federal Reserve and other central banks around the world are not only harmful, but also ineffective when it comes to preventing inflation in the medium to longer run. Consequently, he is very bearish about inflation worldwide.

David Ranson does not expect a recession this year, but he does expect US economic growth to remain very slow. He foresees waves of stubborn inflation in the years ahead, with interest rates rising erratically, if the conduct of US monetary policy does not change. David argues that to control inflation the general public must have confidence that the value of the money unit will be preserved. Hence, he believes that the floating US dollar needs to be anchored to something stable, such as gold.

David has a Doctorate in Business Economics from the University of Chicago Business School.

HCWE & Co. has a clientele of institutional investors, hedge funds and family offices throughout North America and Europe. Over the years, HCWE & Co. has demonstrated a successful track record, anticipating major economic and asset market moves in both the US and elsewhere.

IRF represents high-quality and differentiated Independent Research and Alternative Data Providers. This is the fourth episode of the IRF Research and Markets Podcast series, available on Apple, Spotify and Google.

----more----

In this edition, experienced market practitioner JP Smith reviews the analysis and views of some key IRF Providers focusing on the outlook for energy prices, bonds and equities in the light of recent developments in China and the conflict between Russia and the Ukraine. 

This episode includes: CrossBorder Capital, Talking Heads Macro, The pH Report, Emerging Advisors Group, PRC Macro, Global Forecaster, Independent Strategy, Greenmantle, Eurointelligence, CHA-AM Advisors, Totem Macro, Variant Perception and Copley Fund Research.

David Osman of the IRF is joined by Ron William, the Founder of RW Advisory to discuss the performance of the US dollar in 2022 and indicate how he expects it to perform against other major currencies in 2023.

----more----

Ron compares the similar trends in the US and UK government bond markets and points out the implications for both interest rates and bond yields in 2023.

With respect to the world’s major stock markets, Ron contrasts the remarkably different trends in the US S&P 500 Index and the UK FTSE 100 Index and assesses how both markets could perform in 2023. With regard to the Emerging Markets, he highlights two of the stock markets that are likely to do well in 2023. Ron also assesses the trend in the gold price and compares the prospects for gold in 2023 with the outlook for the price of silver.

Looking further ahead, Ron discusses the importance of the 45-60 year Kondratieff Cycle. He explains that we are now in the late stage of the K-wave cycle and points out how this is expected to influence the world’s financial markets in the years ahead.

RW Advisory specialises in blended, top-down, semi-discretionary analysis, driven by cycles and by proprietary timing models. Ron is a market strategist with over 20 years of experience producing macro research and trading strategies for leading economic research and institutional firms.

David Osman of the IRF is joined by Ryoji Musha, the Founder of Musha Research. Musha Research was founded in 2009 following Ryoji Musha's long and distinguished career working for leading global investment banks in Japan and the USA since 1973. During that period, he achieved the top-rating for Japan Equity Strategy in the Institutional Investor polls.

----more----

This podcast explores why the Japanese economy is beginning to emerge from the torpor of the post-1990 crash that has dogged the country for over three decades. In 2022 a weaker yen has transformed Japan’s international competitive position with profound implications for Japan’s economy, economic policy and corporate strategy. Also highlighted is the importance of longer term global geopolitical factors, particularly the evolution of Japan’s trading relationship with the USA and the emergence of the Chinese economy as a major player on the world stage.

Ryoji Musha assesses the outlook for Japan’s monetary policy and discusses the future direction of yield curve control and Japan’s ultra-low interest rates. He points out the beneficial effects of a moderately weaker yen for Japan’s domestic demand, production of exports and the relocation of factories from abroad. A cheaper yen is also encouraging more tourists to visit Japan. In addition, he believes that Japanese equities are now extremely undervalued, thereby potentially encouraging more corporate share buybacks.

Musha Research was founded in 2009 to provide more direct assistance with financial market analysis and determination of medium and long-term outlooks. The activities of Musha Research are guided by three principles: adhering to consistent logic; reaching conclusions based on their own beliefs; and using a viewpoint that incorporates both history and a global perspective.