Socio-Economics History Blog

Socio-Economics History Blog

Michael Gayed: The FedRes Has Destroyed All Stores of Value

by mosesman

  • Palisades Gold Radio
    Tom welcomes returning guest Michael Gayed, Portfolio Manager at Toroso Asset Management, to the show. Michael is the author and publisher of the Lead-Lag Report. To subscribe to our newsletter and get notified of new shows, please visit http://palisadesradio.ca​
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    Michael explains what most investors mean when they discuss risk on or off markets. There are leading historical indicators, and his whitepapers help investors understand where volatility will occur. Everything is a leading indicator in some form, and interest rates drive the entire capital system. He watches the behavior of utilities and treasuries to determine market conditions. They evaluate the signals every week and adjust their weighting, and they were able to avoid declines and get outsized returns last March. Utilities are a unique sector, being both highly regulated and very highly levered. This makes utilities highly sensitive to changes in performance. They will often outperform because everything else is doing poorly.
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    There has been a significant move from growth to value stocks and materials. Utilities may be beginning to bottom out, and lumber may have topped out. If lumber begins weakening, the housing markets may weaken, as demand may be dropping. Many people believe stimulus will continue the melt-up, but often the market does the opposite of what the crowd thinks. There could be a counter-rally that will surprise a lot of people. If we have inflation without inflation coming to wages, we will have more unrest and market uncertainty.
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    There are genuine dangers to the system considering the wage gaps. Copper is about industrial demand and infrastructure. He expects to see continued upward pressure on copper, and it seems like the cure for copper is higher prices. He discusses yields and credit spreads and what to watch for in the treasury markets. Michael argues that the most sensible thing the Fed could do is to hike rates. Controlling yields have all sorts of negative implications. He argues that rampant money printing and excess debt by the Fed only enrich the wealthy and bring out the worst in humanity. The very fabric of society is becoming at risk.
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    Time Stamp References:
    0:00​ – Introduction
    0:32​ – Risk On/Off Strategies
    2:53​ – Mutual Funds & Money Demand
    5:40​ – Utility Sector Sensitivity
    7:46​ – Current Market Indications
    10:16​ – A Deflationary Trade
    12:22​ – Inflation & CPI Metrics
    14:23​ – Hedging With Gold
    15:55​ – Copper & Commodities
    17:07​ – Yields & Credit Spreads
    19:34​ – Fed & Rising Rates
    22:47​ – Banks & Lending
    24:15​ – Australia & YCC
    25:30​ – Convertible Bonds
    26:49​ – 1.9 Trillion Stimulus
    30:29​ – Unintended Consequences
    34:42​ – Scarcity & Liquidity
    39:48​ – Stores of Value
    41:52​ – Concluding Thoughts
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    Talking Points From This Weeks Episode
    – Risk in markets and volatility.
    – Utilities and Treasuries as indicators.
    – Gold and actual diversification
    – Fed actions yields and credit spreads.

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