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Richard Duncan

lines on the record: 67
first: 2022-10-30
most recent: 2022-10-30
sittings or episodes: 1
sources: podcast

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“Experiencing now. The US CPI peaked at 9.1%. We're also seeing falling commodity prices across most commodities that are pretty significant. And there are a lot of signs that the global supply chain bottlenecks resulting from COVID are being worked out, such as the Baltic freight index, which is plunged quite radically. So we should see significantly lower inflation going forward. The one thing that's holding it up, and another example, semiconductor prices have fallen a lot. That means that car prices should begin to drop and use car prices should drop a lot. So all of those things are pointing to lower rates of inflation. And if that occurs, then the Fed will be able to stop hiking interest rates so aggressively and at some point even begin to cut interest rates. So there will be a point beyond which things begin to improve rather than worsening, which is where we are at the moment.”
2022-10-30 · We Study Billionaires · TIP488: Current Market Conditions W/ Richard Duncan · IDENTIFIED FROM THE TRANSCRIPT
“Yes, to some extent, it is a canary in a coal mine. But looking ahead with some luck, the inflation rate will start coming down everywhere, at least starting in the US, perhaps more so than Europe, because Europe has such a crisis going on with Russia and the very high energy prices in Europe that's causing. But in the US, it's very reasonable to expect that the inflation rate will begin coming down for a number of reasons. Just for instance, the base effect, the year-on-year base effect. Oil shot up to 120 dollars a barrel. Now it's $85, let's say. So year on year, at some point, it will appear that there is deflation in oil prices. And even if it stays at $85 a barrel for the next 12 months, there'll be no inflation in energy if that's the case. So the base effect will bring inflation down from these extraordinarily high levels where...”
2022-10-30 · We Study Billionaires · TIP488: Current Market Conditions W/ Richard Duncan · IDENTIFIED FROM THE TRANSCRIPT
“Days ago for proposing this budget that resulted in such chaos, but the yields moved down some, but on Friday they were really quite high again, and it's possible they'll spike higher again when the markets reopen on Monday. So who knows how much exposure English banks have to that situation or Swiss banks or even US banks and what the knock-on spill-on effects of all of that could be. This could be the thing that breaks, but when it breaks, a lot of damage is likely to be done before the policymakers come to the rescue. So I don't think pre-break is the time to buy. I think post-break is more prudent.”
2022-10-30 · We Study Billionaires · TIP488: Current Market Conditions W/ Richard Duncan · IDENTIFIED FROM THE TRANSCRIPT
“Yields on those bonds went up, and the greater problems they all faced. And so at that point, the Bank of England broke, at least temporarily. They had intended to start quantitative tightening just around now, but instead they had to announce that they had to act as the provider of liquidity in the last resort because there was essentially a crisis in the UK pension fund market. So they announced that they would rather than starting to destroy money, that they would be willing to create an additional $65 billion over a relatively short period of time that they would use to buy UK government bonds to ensure that there was sufficient liquidity available to these pension funds needing to sell government bonds. So there was a real crisis in the UK markets, and it isn't over yet. Poor UK Treasury Secretary, Chancellor of the Exchequer, got sacked a few years.”
2022-10-30 · We Study Billionaires · TIP488: Current Market Conditions W/ Richard Duncan · IDENTIFIED FROM THE TRANSCRIPT
“So, I think the biggest point of concern right now in the UK, the recent budget proposals with very large tax cuts spooked the financial markets there and resulted in interest rates on 10-year UK government bonds, on GILTS jumping very sharply and very suddenly. And we discovered that apparently most of the UK pension funds had been using derivatives contracts to leverage up their potential profitability, but we're totally unprepared and vulnerable to such a sudden and unprecedented spike in 10-year government bond yields. Suddenly they started getting very big margin calls when the 10-year government bond yields spiked. And that forced them to start selling any kind of asset, including government bonds there. The more government bonds they sold, the more the”
2022-10-30 · We Study Billionaires · TIP488: Current Market Conditions W/ Richard Duncan · IDENTIFIED FROM THE TRANSCRIPT
“Well, the Fed's certainly facing a lot of challenges, but the government debt did fiscal year for the government just ended on September 30th. And the debt for the year that just ended was only half the budget deficit was only half as high as it was the year before. It was still a high number of $1.4 trillion. The year before it was two point eight trillion. And the year before that, it was $3.1 trillion. So the amount of money the government is borrowing is much less than it was a couple of years ago, of course, during the worst of the pandemic.”
2022-10-30 · We Study Billionaires · TIP488: Current Market Conditions W/ Richard Duncan · IDENTIFIED FROM THE TRANSCRIPT
“Above that average, as in 2000 with the NASDAQ bubble, two thousand eight with the property bubble, it pops, and it goes back to its average. Well, now, even after the correction in the stock market in the first half of the year, this average is 16% above its previous peak in 2008. So the average since 1950 has been 550. Currently, this ratio is 780. That's 16% above where it was in 2008. So this is telling us that asset prices are still very stretched relative to income and have the potential to fall much further. Now that's probably going to take a lot of decline in the property prices to pull that down. But I would also expect the stock prices to, I don't think we've seen the bottom. So rather than being brave and diving in now, I think it's best just to wait until something does break because when it breaks, then we'll probably see lower lows.”
2022-10-30 · We Study Billionaires · TIP488: Current Market Conditions W/ Richard Duncan · IDENTIFIED FROM THE TRANSCRIPT
“And credit default swaps are rising on the U.S. banks. So something could break. But until something breaks, then the Fed's going to keep tightening because the unemployment rate is still extremely low, 50-year low, three and a half percent. And the Fed needs to reduce demand in order to bring supply and demand back into balance and bring the inflation rate back down. So I think that's what they're going to continue to do. So even though the stocks have fallen so far, I suspect they'll fall further. Because if you look at the overall asset prices, they're still very inflated by historic standards. You know, I always talk about what I call the wealth to income ratio. That's household sector net worth, all the wealth of the Americans minus all their debt divided by disposable personal income. That's wealth divided by income. The Fed publishes this every quarter. It goes back to nineteen fifty. The average has been five hundred fifty percent. Well, every time he goes.”
2022-10-30 · We Study Billionaires · TIP488: Current Market Conditions W/ Richard Duncan · IDENTIFIED FROM THE TRANSCRIPT
“Funds right. And come November, it looks very likely they're going to do November 2nd. They're likely to announce another 75 basis points. And then in December, probably 50 basis points more, taking the effective federal funds rate up to 4.3% by the end of the year. And they're probably not going to stop there. I would expect that they're going to keep hiking and I wouldn't be at all surprised to see the federal funds rate move above 5% in the second quarter of next year, unless something breaks first, if we see very unorderly disorderly developments in the financial markets that threaten to destabilize the financial sector, then the Fed will have to stop or reverse course, or at least hint that it will. But unless that happens, and it very well could happen sooner rather than later, in fact, we're seeing all kinds of problems in the UK now.”
2022-10-30 · We Study Billionaires · TIP488: Current Market Conditions W/ Richard Duncan · IDENTIFIED FROM THE TRANSCRIPT
“Global supply chain bottlenecks that produced. And then just when there was some glimmer of hope that that was going to recede before too much longer, Russia invades Ukraine, causing a very big spike in energy prices everywhere in the world, but particularly in Europe. And also food spikes and food prices as well, which another big inflationary surge throughout the global economy. So the most recent inflation numbers were terrible, just not too many days ago. Headline CPI is still 8.2%. That didn't improve much. And core CPI, it moved up. It hit a new 40-year high of 6.6%. And so this is creating a disaster scenario for the Fed. The Fed looks like the Fed is going to be compelled to continue increasing interest rates. They've already hiked the federal funds rate by 300 basis points, essentially from zero now to 3.1% on the effective federal fund.”
2022-10-30 · We Study Billionaires · TIP488: Current Market Conditions W/ Richard Duncan · IDENTIFIED FROM THE TRANSCRIPT
“I think something more ominous is happening. A major theme that's run through my career over the last thirty five years is globalization and growing US trade deficits, growing US current account deficits. And as the US bought more and more goods from low wage countries, that was extremely disinflationary. That drove down the inflation rate from 15% in 1981 to not too many years ago it was negative in early 2015. We had deflation most recently. And that was all because of globalization. And so as the interest rates, as the inflation rate came down, then the interest rates came down and moved lower and lower. And the Fed reduced the federal funds rate to roughly 0% and held it there for most of the time now since 2008 until very recently. But now what we were seeing is a partial reversal of globalization, both resulting from COVID and the”
2022-10-30 · We Study Billionaires · TIP488: Current Market Conditions W/ Richard Duncan · IDENTIFIED FROM THE TRANSCRIPT
“So we've got not only credit contracting, we've got a negative wealth effect. And moreover, the Fed is tightening monetary policy very aggressively with aggressive rate hikes, which we'll see more of.”
2022-10-30 · We Study Billionaires · TIP488: Current Market Conditions W/ Richard Duncan · IDENTIFIED FROM THE TRANSCRIPT
“Growth wasn't particularly strong after 2009. It was just ranging between 2% or 3% a year after adjusting for inflation, despite the government's massive budget deficits all during that period in the government borrowing and government debt going up so sharply. Government debts roughly quadrupled since two thousand eight. And that's been driving a lot of the credit growth, but even still the credit growth was weak. And the Fed intervened to support the economy through very low interest rates and round after round of quantitative easing. And that pushed up asset prices and that created a wealth effect. So the total wealth of the Americans more than doubled between 2008 and the end of last year. It rose eighty trillion dollars between 2008 and the end of last year to $150 trillion. But so far this year six trillion dollars had been wiped out.”
2022-10-30 · We Study Billionaires · TIP488: Current Market Conditions W/ Richard Duncan · IDENTIFIED FROM THE TRANSCRIPT
“Just growing by roughly let's say $6 trillion. So I always talk about this 2% adjusted for inflation as the recession threshold. If we don't have 2% credit growth adjusted for inflation, then we go under recession. So I call the 2% credit growth the recession threshold. Well, we've now been below that 2% recession threshold for the last five quarters. for the last three quarters, credit has actually contracted. This is year on year. In the second quarter, total credit adjusted for inflation was down 1.2% year on year. So this is creating a very perilous moment for our economy since our economic system, I call it creditism, since it's driven by credit growth, this poses a real challenge to creditism. Creditism is verging on the brink of crisis and is not at all helped by the fact that asset prices are also now falling.”
2022-10-30 · We Study Billionaires · TIP488: Current Market Conditions W/ Richard Duncan · IDENTIFIED FROM THE TRANSCRIPT
“nine anytime total credit adjusted for inflation grew by less than two percent, the US went into recession. That happened nine times between nineteen fifty two and 2009. Every time credit grew by less than two percent, adjusted for inflation on an annual basis, the U.S. went into recession. So now here we are, with $91 trillion of credit. If you need that to grow by two percent, adjusted for inflation, if we assume quite generously that the inflation rate will average seven percent this year, then seven percent plus two percent means that before adjusting for inflation, total credit has to grow by 9% and 9% of $91 trillion, which is how much debt we have now, is $8 trillion over the next 12 months. And currently, as of the second quarter at least, total credit.”
2022-10-30 · We Study Billionaires · TIP488: Current Market Conditions W/ Richard Duncan · IDENTIFIED FROM THE TRANSCRIPT
“Know, I believe that after dollars ceased to be backed by gold, our economic system changed and it started being driven by credit growth. Instead of being driven by investment and savings, the way capitalism had worked forever, suddenly the new growth dynamic was driven by credit creation and consumption. And total credit in the US is also equal to total debt. This is all the debt of all the sectors of the economy. So the government, the households, the corporations, the financial sector, all the debt, it first went through one trillion dollars in nineteen sixty four. This now increased to $91 trillion. And that credit growth has been the main driver of economic growth in the United States and all around the world. And if you look from 1950 roughly to 2000,”
2022-10-30 · We Study Billionaires · TIP488: Current Market Conditions W/ Richard Duncan · IDENTIFIED FROM THE TRANSCRIPT
“We didn't know Russia was going to invade Ukraine Was just winding up quantitative easing, hadn't started quantitative tightening yet. And interest rates were still very close to 0%. Feels like a lot.”
2022-10-30 · We Study Billionaires · TIP488: Current Market Conditions W/ Richard Duncan · IDENTIFIED FROM THE TRANSCRIPT