YouSaid · the spoken record

Larry McDonald

lines on the record: 73
first: 2024-03-29
most recent: 2024-03-29
sittings or episodes: 1
sources: podcast

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“Bear trap support typically bear market rallies fade and fall. In other words, say uranium in the uranium sector, those stocks for years were in this long decline and every rally failed. And so what we look for are those turning points where you're entering a new bull market and we're trying to discover those and we discover those by talking to clients, talking to people in Washington. Okay, is there a change in energy policy? And then is there a change in the technicals where all of a sudden Camico or Next Gen or one of these your uranium plays made that bottom and then has now making lower higher lows for the first time in a decade? And that's what we're looking for is how to listen when markets speak.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“Now, in high yield and CCCs, you've got a lot of private credit, private credit bubble right now. And so High Yield has not broken down. High yield is typically a much very good leading indicator on the economy. It's typically one of the best. And so we're not seeing strong signals there yet, but we are seeing strong signals on all the consumer finance plays. Any company that faces the bottom 60% or the bottom 50% of consumers, there's just dozens and dozens and dozens of them that have shown tons of stress and tons of problems or just earnings warning or the CFO is just not comfortable with the guidance. So that's what we mean about how to listen when markets speak in terms of being contrarian. What we try to do is, you know, we were buying a lot of these uranium names 2020, 21. We look at bear markets and bear markets typically, that's why we talked called.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“The first couple things is that when the transports in the banks are not acting well, something's wrong. That's listening to the market. There's something going on around energy prices and rates that is starting to really hamper parts of the US economy. So everybody's pretty bullish on the U.S. economy now. But for my lifetime, just look back in history, when the transports are underperforming the S&P by 18%, I think over two years, and the banks are underperforming by 20 to 40 percent, in some cases 50%, that means there's an interest rate problem in there or an oil problem or an inflation problem. There's something, just look at FedEx UPM. I mean, just seeing that, you're seeing some crazy performance there. And so it's. Those things tell you that something's wrong in the market.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“US economy and the banking system is probably more vulnerable now the population in election year is more vulnerable that's one thing PAL has to deal with so in an election year with a banking problem that you know with a commercial real estate problem and all this debt you know that's that's that's on the bank balance sheets they you know they really have a problem and they got to get rates down and i think that's where you could have some some like a year from today you're probably at least 100 bips of cuts and then that gets you a much weaker dollar”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“Hey, listen, the US has a banking system that's more sophisticated. We've got leverage finance, leveraged loans. All of our financing is more sophisticated in Europe. That's a huge part of why the U.S. has been far, far superior economy. And our government's been typically less big and less onerous than a lot of the European countries. But that's becoming less of the fact. The feds at a period where”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“But once the Fed, because it's holding up rates for so long and hurting so many people that are in the bottom 60%, and once they're forced to cut because of all kinds of things like the regional banks, then the dollar really gives way pretty quickly. So there's two trades. There's a short, the one, two, three-year trade of the dollar, and then it's the long-term trade of the dollar.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“Exactly. No, yes, short term is just Dollar's been on the high horse for a long time now, two, three years. The Fed's been, because the Fed, remember, one great lesson in investing, we talked about this in the book, there's different ways to figure out the dollar. When the Fed is more hawkish or holding up rates relative to the other central banks, that's a big factor in the dollar. And that's what's been happening. But the other factor is if the U.S. economy is much stronger than the rest of the world, and that was the case. say a year and a half ago, last year, that's also helping the dollar.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“You see a slow erosion of the dollar, but more in the short to midterm, you are much more concerned about the level of the dollar relative to other fiat currencies than you are about the relevance of the dollar. In other words, the decline of the US dollar as a reserve currency, that's a very long-term story, short-term, you're a dollar bear, but you don't think that it's going to be eroded anytime soon.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“And then you work out to patriotism, entrepreneurship, abundance. But then you, as the country flourishes, you come into this, what we call generational problem where the next generations are not as hungry. They need to be accommodated. I think you need to go into complacency and apathy and then back to bondage. And this is a cycle that has repeated itself many times in the last two, three thousand years. And so, and if you look at the United States today relative to where it was, say, 50 years ago, you can definitely see traces of this cycle. And so eventually, you know, in the next 50 years, probably use that. We probably lose that reserve currency status.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“Look at Venezuela, Puerto Ricos, but U.S. territory. But you could just see there's lots of societies that haven't lasted very long once the citizenry figures out that they can drain the public treasury. And you look what's happening in Washington. We're promising people that come into the country for five minutes, a huge goodie bag, right? And so we weren't doing that like 150 years ago. And so if you're doing that kind of deficit spending and you're raiding the treasury and you're building up the debt to unsustainable levels, that's why democracy don't last. And the last thing I'll say is the cycles of democracy that toteville and Titler talked about was countries typically start off in bondage. And think about that's where the US was during the Revolutionary War, I mean, where we were under the thumb of the king in the 1773.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“That front end up, right? Because the six month T-bill is paying 5%. That's sucking dollars into it, right? But the moment the Fed starts cutting in a multipolar world with high sanctions and everything we're seeing around global trade and confiscation of capital after the tragedy in the Ukraine with Russia, the dollar is going to come get hammered. And so that's why the dollar is essentially being held up in the Fed. Now, does the dollar lose its reserve currency? No, but remember, the oldest democracies, and that's what we talked about in the final chapters of the book, the oldest, like think about Totteville and Titler. This is Scottish historian. He goes back to Totfill and Titler. They'll go back to the 1800s, late 1700s, 1800s. And they looked at democracy. And you know what? You look around the world and like, you look at Argentina.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“Well, listen, we're not going to, the US is not going to lose its status as the reserve currency in our, probably in my lifetime. I don't know about yours, Leoniger. The bottom line is what we talked about in the book is when you use the club, imagine like a bully club of sanctions, you're supposed to use this club once every 10 years. But when you use it over and over again, you hit multiple countries over the head. You just build up a resistance of countries and all the other emerging market countries are looking at you hitting those countries over there building club. I mean, you take Russian assets, Putin's a bad guy. You know, you're going after oligarchs. You're taking Russian, you're seizing Russian capital. So that's driving people into things like Bitcoin and hard assets. And so you can say that the dollar has been strong, but the dollar has only been strong because the feds holding.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“You get a revenge shop, and that's why you get this all this wacky data in the economy. It's so obvious, Jack. It's just like, because that top 20% of people, of husbands, wives and children, they're doing revenge travel, revenge shopping. They just have extra money that they never had when the Fed was suppressing rates, never had it before in terms of that incoming interest. But the bottom 30% that according to the New York Fed, according to them, not me, the bottom 30% of Americans only have $400 in their checking account for emergencies. Those people are getting annihilated. And that's why in our election year there's so much pressure on the Fed to cut rates. And that gets back to if they cut rates with inflation starting to bounce, that's going to just drive money. So that's what's going to trigger this colossal migration of capital. One of the biggest trades of our...”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“Huge divergences, right? So it's just boom, boom, boom, where it's the Tomp group is actually in a bull market economically. The bottom 60% are in a bear. But if inflation rips one more time, then what happens in like a 1980 style recession is it basically starts to move up from lower middle class to middle class and then eventually gets to the upper class. So at some point. But think about it. If you're in Palm Beach, Jack, Palm Beach and USA, this is a high net worth person, but just to keep it simple, you had $10 million in a money market fund, right? Powell just gave you a 300% and 400% raise because you were getting 80, 70 to 80,000 a year in 2021. And now you're getting 500,000 a year, right? 450. So that is making, you know, you're going to travel with that money.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“As we soften, the economy softened a couple times in the last year, and we didn't really get that big bond rally. Now, this is where you got to think about the 1980 style recession. So in 1980 style recession is not that it's more like when inflation rips. See, right now inflation's ripped and it's hurting the bottom 50, 60 percent of people. You could see in McDonald's numbers recently. You can see it in pet care. You can put so many companies, Dollar Tree stores. There's so many companies that are suffering coals. I mean, just company after company after company that sell products to the bottom 60%, but companies that sell products to the top 20%, 40%, 30%, your Ferraris of the world, your LVMHs, I mean, these stocks have gone on an incredible runs. Your American Express versus, say, Discover, these are huge divergences.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“Right, and that's exactly what's going on. All the economists like Rosie, Lacey Hunt, I mean, he's a great, great guys, Ralph Paul. And so Rosie and Lacey have been extremely bond bullish because they're thinking, they're using that kind of recency bias where if the economy starts to slow down a little bit in 2008, that 2008 and also in, say, 2020 In both of those situations, the long end ripped and you get this incredible rally in bonds, right? But this time around, because the fiscal and monetary is $16 trillion versus four in the previous regime, and because of all the things that are going on with labor unions and like I said, multipolar world and global conflicts with wars, you've got all this upward pressure. And so you're not getting that chip.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“This dynamic is like you know you have banks that are mismarking their books. There's a lot of interest rate stress there and clients are talking about that and they think that the regulators are going to go after this this problem if rates don't come down. And so people are looking like hedge funds, pension funds, hedge funds are really starting to circle the wagons and the underperformance of the banks over the last 12 to 16 months speaks to these piranhas of shorts coming in and they're trying to find the next victim.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“Yes, it's fault. So, what we've seen, and we talk about this in the book when Markets Speak, the performance of the banks this year, and remember, there's two different types of banks. The regional banks are tiny, right? But companies like U.S. Bank Corp are the fifth largest bank in the United States. And Comerica and Zion's, these are not little tiny banks. But these banks, the performance of these banks since last January, so a little bit more than a year, your underperforming the S&P by 50 between 30 to 50% like that's something you've never seen outside of a financial crisis. And I was in a meeting yesterday with a big hedge fund in New York, and I'm staying here at the Harvard Club, as I told you, we're doing events, I'm on the road. And so”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“Alteration, yeah, but well, that's the problem with commercial real estate. You've got credit and duration. And so you just have, if you have that kind of an energy move, the probability that we lose a Komerica or a Zions that have another kind of banking crisis, I think it's pretty high.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“Oil demand, it's like a 1960s, 1980s world, multipolar. You get that move up in oil and all of a sudden the long end of the curve started, the Fed loosely control that. And next thing you know, if you have, there's an Apple bond jack. You got to focus on this. There's an Apple bond that's backed by Apple. And it's a long-duration bond. So it's a long maturity. It traded in the last like six months. It's in the last six months in 56 cents on the dollar.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“These banks have departments that are massively long commercial real estate, massively long mortgage-backed securities, all kinds of interest rate sensitive assets. And if rates don't come down, you've got CFOs and financial teams in these organizations that are just been really begging the Fed for rate reliefs. It's one of the reasons why the Fed has been turning dubbish, because they know they could create not a Lehman event, but definitely an SNL crisis event. And so that's the thing about oil is oil and drones potentially have colossal impact on the banks because drone strikes hitting refineries, drone strikes, you know, basically closing down transport in Suez Canal.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“Driving season coming in, and you've got global demand coming back. You get a $20 moving oil because of where rates are and inflation expectations all of a sudden everything around rate cuts now comes into question because oil goes up. It's going to take up CPI again. So you have this big inflation revival. That's where your interest rate sensitive stocks like your regional banks. I think that there's, if you look at New York Community Bank, Jack, and we talk about this in the book when markets speak. The way they mark the book and the way the stock went to zero that fast. And same thing around Silicon Valley Bank, these banks just have horribly mismarked books. And right now, after what's happened at Silicon Valley Bank and New York Community Bank and all Signature Bank, you've got regulators that have with egg on their face, Jack. And they're looking around the country for the next victims. And if right now, if you just look at Comerica, you look at Zion's, you can look at a whole bunch of different banks, look at US Bank Corpor.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“How this couple answers to that one is I think my big thesis that we talk about a little bit in the book, but I'm more confident now than ever the oil market's pretty tight. The curve is recently went in backward nation again. So your background just means your front months are higher than your outer months. The major thesis of the end of the book and the major thesis I think is going to play out this year where high conviction thesis in when markets speak speaks is that if the oil market's so tight and the labor market is supposedly even a decent economy especially in the high end where a lot of travel and you got a tight oil market you can look at backgradation, the oil curve and all that means that the front month's more expensive than the other months that typically bullish seasonalities coming back oil's performance between March and say September is pretty very good you get a summer drive.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“Inflation is four and real rates are three, then you're in that neighborhood. But it's a very weird science because there's some historical data around it. Like picking what is financial repression. The bottom line is the definition is just holding rates below inflation. So just say keeping rates at three when your inflation is four. And so there you're in slowly monetizing the debt.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“You know, that's one way to get out of this mess. It's a big gamble because if you do that, if you do it now and you say that's what Biden essentially is doing, but he's not doing through tax cuts, he's doing through spending. So there's two ways to do MMT, modern monetary theory. One is, you know, just juice your fiscal stimulus. I mean, Biden's doing $2 trillion a year of deficit spending, which is almost 6% of the budget, you know, normally in a peacetime full employment, well, not I shouldn't say peace time, but full employment, that should be. Two to three percent of the budget. And so we're doing these both presidents potentially doing this gamble, which is very dangerous because if you spend that much and you don't get the growth, then you go into a real financial repression regime”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“The modern monetary theory crowd, and I think Trump is a closet MMT or they think that, yeah, if you do enough fiscal or if you do enough, say, tax cuts, this is another crazy thing about Trump. If Trump wins the election, he wants to basically extend those tax cuts from 2017 tax cut 2017, I think, or passed. maybe 2018, but those tax cuts, if he extends it for 10 years, that's $350 billion. It's a large amount of money. And so it just gets into a dynamic where, and then he wants to cut the corporate tax. So if you're growing it, if you somehow, if you were to be able to cut taxes or you will do a lot of fiscal spending and you can grow at. Six, seven, consistently seven percent.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“So just below 5% by the end of this year, what is the sort of real inflation adjusted level of interest rates that would have to exist to inflate away the debt? Because let's say inflation is at 3.5%. If interest rates are at 3.5%, you're flat. Maybe that's not enough to inflate away the debt.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“The way that you get out of very high nominal debt is just by holding interest rates lower than inflation or lower than growth. So the denominator grows and likewise just to explain this to the audience, like people can put up a doom, a very scary looking chart of credit card debt in the US. But if you divide it by personal income or GDP or any sort of denominator, what used to be a very high level debt is now not so that you got to always adjust things. So Larry, you know, I've had people come on my program, very smart people and talk about this financial repression narrative when interest rates were at zero and inflation was going up. They said, oh no, the Federal Reserve, they can't raise interest rates that much because there's just too much debt. But here we are at five and a half percent. As you notice, S&P stocks at all time highs. No imminent sign of crisis on the fiscal front. If you think inflation is going to be at 3% to 4% and the Federal Reserve is at now at 5 and 3 eighths on the Fed funds rate, likely has indicated that's going to do three cuts.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“Where you're holding interest rates below inflation. And that's the way you get out of a $35 trillion debt hole, a $35 trillion. It's a very enormous hole and you get out of it through financial repression or a debt you believe.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“So you go back the last 3,000 years of civilizations, people get rid of debt by what we call debt jubilees. They just do a debt reset. The other way for civilization to get out of this kind of hole is what we call financial repression. And that's where you, at some point, the Fed gets forced to hold its rates down. By the end of this year, we have to go back to QE. So what we talk about in the book is we're going to have to go from QT quantitative tightening to QE very fast because we've got less friends buying our bonds in the world. The U.S. economy is slowing down a little bit, but our interest costs are now $80 billion a month, 80 billion a month. That's up from $25 billion a month two, three years ago. And so 80 billion a month starts to really eat up at a lot of the budget. And so at some point, the Fed gets forced in a financial repression.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“It's number one on Amazon right now in finance, in all the financial categories. You got to buy it today because what's about to happen is this financial repression decade where the Fed's going to get forced to hold interest rates below the rate of inflation. And that's where you get, if you're holding your interest rates below the rate of inflation, that's where you get a very substantial, that's the way they get rid of the debt. So what we talked about in the book is, and you and I have talked about this in the past, debt jubilee.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“Why look at these student loan things, right? So, this is what we talk about in the book. If the government all of a sudden giving student loans or providing, look at SNAP benefits, look at the percentage of Americans that are getting snap. That's food stamps. It was like three, four percent of Americans in, say, the 90s or even 2000. Now you're up near 13, 14% in some parts of the country. And so your social safety net in an inflationary regime for a whole bunch of different reasons gets locked heavier. That creates more demand for federal spending. At the same time, your interests are high. The bottom line is the only way to get out of a 35 trillion dollar hole where your social safety net is a lot larger and your debts are that high. $35 trillion hole is what we call financial repression. And that's what we talk about in our book, When Markets Speak.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“Book, I'm careful around that. I think it's possible, but there's a lot of factors aging population in the world, aging population in China and certain countries that might prevent the crazy 9%. Well, sustained 7%. And by the way, I mean, you look at history, civilizations break down after like, because people don't understand like if you bought $100 worth of groceries in that 2019's come down a little bit over the last year, that $100 of groceries in 2019 is like still $120, $125. So in other words, it breaks down a society. That's why the bottom 30% of Americans, the New York Fed told us they only have $400 in their checking account, right? And so the higher inflation goes, the more support you need.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“A percentage of the SP 2007 2008, they were enormous. I think it's like, and I think it was something mid 20s. And so maybe mid to low 20s. That's still an enormous amount for the financials. And so in different bull markets, energy at one point in time was a very high percentage of the S&P. Like ExxonMobil was the largest stock in the S&P. So you have these periods where they go on for long periods of time. We've gone through a very long, that's my whole point of the book. We go through a very long deflationary, disinflationary period. And if inflation normalizes at three, four percent versus one, two. That's what triggers a lot of this migration. Like I said, it's not going to go to, you're not going to see these things come back to 49% of the S&P, but do they go from 14% of the S&P? 30 32 35”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“Well, so think of the last time we had a multipolar world commodity bull mark 1968 to 81 So 1968 to 81 multipolar world commodity, we had a commodity bull market in there. And so industrials, metals, oil and gas, uranium, those groups, materials, those groups were 49% of the S&P, 4-9. Now they're like 14. So your industrials, your metals, your oil and gas, your materials, all those are like 14% of the S&P versus 49% in, say, 1980, 81. The highest conviction, and that's why you have to buy this book to prepare yourself, we're probably going back to like 30% of the SP 32, not 49, but those groups are going to command a much larger percentage of the S&P. And right now, and that's what we've seen, like in all crazy bull markets, like 2007, look how big the financials were.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“I'm just kind of putting the puzzle pieces together. Nvidia is 5% of the SP 500, Apple, other tech stocks really dominate the SP 500. As you say, energy three to four percent materials, you know, a small percentage of a fraction. So if the things that you think will outperform energy, gold miners, commodity producers are so small within everyone's investments. And that's going to, those are going to do well, but they're small. So whereas so much of the S&P 500 are things you think might not do that well, you talked about NVIDIA, which you said is the screaming cell. Would that lead you to be bearish on the entire index? Because what you think will underperform just is so large as a percentage of the index. And, okay, great. You love energy stocks and you love gold miners, but what? There's one gold miner in the S&P 500 and there's only a handful of energy companies and material copper producers and the like.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“A day. I think it was like within two days, it was like 13, 14. So over the period, it was even bigger. But the single day candle was like 240 billion. Nothing's even close to that. I mean, that's like the size of most, I mean, most of the companies in the S&P are less than that. You know what I mean? So, seeing amount of speculation.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“Calls when someone buys a lot, you have like 3,000 people in one day buy calls, to give you an example. The street has to buy stock to hedge. If you're a dealer, you get lifted on those calls, and then you have to buy stock to hedge those calls. And so that creates this, what we call this blow off top. And I think Nvidia, remember two Fridays ago, NVIDIA had a 250 billion dollar candle jack.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“Only certain size, right? It's very difficult when you get to two trillion dollars, 2.3 trillion for NVIDIA. So the most Apple got above its 200-day moving average when it was $2 trillion was like 63%. And the most Amazon, Amazon got up up to $2 trillion. Amazon, think about Tesla, never really reached $2 trillion. That was the big fair-haired boy, right? So Amazon really never cracked $2 trillion. These are really great growth stocks, right? And so Amazon, the most it ever traded, Jack, above its 200-day moving average was 54%. And when it was that big, right? So my point is when you have a 2.3 trillion dollar company that's 80% above its 2008, it's a screaming sell. It just literally there's not enough. It's all call buying. It's not real. It's not like real pension funds are buying it up there. It's just a bunch of speculators that are all trying to buy.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“A massive explosion yet in electricity usage from artificial intelligence yet. So you see it, but it's not like it's nowhere near what NVIDIA's growth rate is. So there's clearly hoarding going on and it's basically a circular thing where the fangs, certain members of Mag 7 are like trying to front run the next one. And all the time these chips get higher and higher in price, it just incentivizes all the competition to invest. So their moat that everybody talks about is just going to get smaller and smaller and smaller. And at $2.3 trillion trading 82% above the 28 moving average, Apple in its best day, Jack, in its best day, September 2020, when it was at $2 trillion. So don't think of NVIDIA in a stock price, right? Always think of it as like market cap. So when you get a two trillion, it's very difficult, Jack, because GDP.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“Revenues that come like if you look at Facebook, how much Facebook spent and how much Facebook's CapEx budget went to NVIDIA? It's very clear that these companies really aren't using these chips yet. They're just hoarding them because they want to prevent their competitors from getting an advantage in artificial intelligence. And so everybody's like trying to front run the other guy. And if electricity, if just look at electricity usage, you know, lasts like three or four months we don't really see.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“NVIDIA management team. is famous for i mean these guys are pump artists they were they literally two years ago the conference call not even first of all they didn't buy any of their stock a year ago in the first you look at the fourth quarter of 23 fourth quarter of 22 Very little stock. And so they were pumping meta chips. They were pumping crypto chips a year and a half, two years ago. No mention. You know, no mention of artificial intelligence. And so now you've got to be very careful with these guys. They tend to very over pump a upside of a bull market, which is fine. A lot of companies do that. But that's what they do. When you pump up something like this and then you look at the circular.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“Is it a bubble? Yeah, it's a bubble in the sense that everybody's crowded into the most obvious trades and nobody really owns the trades that are going to benefit from artificial intelligence for the next 10 years.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“Well, the point of my book is the Bitcoin NVIDIA thing is pure idiocy because it just doesn't work without a power grid. It doesn't work without. A very cheap energy source. And so it's just like the dot-com thing. I created a website. We talked about this in my first book. But my partner, Stevel and I, we created ConvertBond.com. We were lucky enough in the 90s to sell it to Morgan Stanley. And it was a nice transaction. But, you know, back then, the most obvious trades jack that all the young people and all almost every investor was involved in were the obvious trades like loosened JDS Unifays, Cisco, and Global Crossing. And these companies were like the obvious trades, like just like the way NVIDIA is today. But it's the second and third tier trades that nobody played through, like natural gas or like biotechs, companies that are going to benefit from this new artificial intelligence revolution.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“Of Taiwan and helping the United States. I mean, if you or China, wouldn't you, you know, at some point potentially want to do something about that if the US is really gaining a technological advantage so they could create a sea lane restrictions or they can try to create all kinds of restrictions on what type of technology is coming out of Taiwan? That's probably the first thing you do before you invade, right?”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“China just could literally create a naval blockade in Nvidia, like NVIDIA's got all this technology. Like I said, 5%, think about passive messing, how dangerous. 5% of all American IRAs, there's $35 trillion, Jack, that's tied to passive investing, maybe probably more if you calculate that penning, how you calculate it. And it's 5% of the S&P is in NVIDIA, which is trading a crazy valuations, you know, 82% above its 200-day moving average and 5% of everybody's retirement account is in NVIDIA that is massively exposed to it's a fabulous company, a semiconductor makes it. So if something were to ever happen in Taiwan, NVIDIA, we could get cut down by 60, 70, 80 percent. And China doesn't have to invade. They just have to maybe, okay, maybe they're just concerned about the amount of technology that is coming out.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“Is growing, just not growing as fast, and it's hard to calculate. The rate of growth because nobody can trust the data. But these companies are just so cheap. I mean, and that's why Charlie Munger was, before he passed away, of looking at stocks like Alibaba, I mean, at one point in the last year, you could fit 14 BABA's an apple. And people are talking about like, oh, this China economic risk to Alibaba. I mean, who are you kidding? I mean, Apple does $20 billion a quarter of sales in China. $80 billion a year. And that's actually down 3% year over year. So Apple's performance over the last couple months, which is really bad. Apple started to really, that whole China thing is starting to catch up with Apple. And then if you look at NVIDIA, the whole invasion of Taiwan thing from China has been out there and everybody talks about, but there doesn't have to be an invasion.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“So Chad is a tough one because the contrarian in me and we run a Bloomberg chat with institutional investors in about 20 countries. And there's a number of investors that were really bearish on China that are now bullish because just because of the lack of the underinvestment is so off the charts. I mean, I know personally a couple of different fund managers that run portfolios, major portfolios that people know about and are very well hired branded names. And so when they go over to Europe or they go to conferences, normally there's like standing room only. They run out of coffee and muffins. And now, you know, my friend just got back from Europe and he runs a China fund. And he's like, you know, there's four people in the room. And you've got plenty of bagels, muffins, and coffee. So it's tough because it's 14 trillion of GDP.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“China. That's why if you look at Latin American, they're dramatically outperforming China. But the theory is that China is going to say and reinvest at home and less in infrastructure and more try to create a real consumer-based economy. And that handoff is kind of unknown whether or not they're going to be able to pull it off. And that's what's causing that's one of the things that's causing this massive underinvestment to the last year and a half. I guess deinvestment, I guess people moving away from.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT
“That's why China's spending had a problem the last couple of years because this is, we've started, that's why just look at Mexico, right? Look at the peso. You can see that we're starting to create a backup supply chain. Andreas Stefes talks about this in our book. So Andre said, you know, the East West supply chain that was incredibly fluid after COVID and after a multipolar world, Suez Canal, you've got drone attacks in the Suez Canal, all these things in a multipolar world where it's more global conflict, less friendly sea lanes, it's more inflationary. And so China, we've already seen so far Mexico benefit from this potential Andreas Stefan in my book talks about a North South supply chain that backs up the east-west. So basically the world got too addicted to an east-west supply chain. And so that's her.”
2024-03-29 · Forward Guidance · Inflation Isn’t Going Away And Investors Own The Wrong Assets | Larry McDonald on “When Markets Speak” · IDENTIFIED FROM THE TRANSCRIPT