Doubling Down On Hard Landing: Signs Of Coming Bear Market | Lobo Tiggre

Summary

In this insightful discussion, the guest, referred to as Lobo, shares his outlook on the macroeconomic landscape, predicting a hard landing due to post-pandemic market distortions. He argues that while recession indicators suggest a downturn, the response from central banks and fiscal policy could mitigate the impact. Lobo also discusses the role of AI in the job market, the potential for a copper shortage, and the changing dynamics between gold and silver as investments. His views offer a blend of economic analysis and market speculation, providing a comprehensive look at the potential challenges and opportunities ahead.

Takeaways

• 📉 The speaker predicts a 'hard landing' for the economy, suggesting that post-pandemic market distortions have delayed an inevitable recession.
• 💹 The Bank of Japan's decision to raise interest rates for the first time in 17 years is seen as a potential indicator of an upcoming recession, based on historical patterns.
• 📊 Despite historical indicators like the leading economic index suggesting an overdue recession, the current 'uncharted waters' due to COVID-19 make it uncertain whether these patterns still apply.
• 💼 The speaker emphasizes the importance of distinguishing between a recession and a market crash, noting that they are not the same and can have different impacts on various asset classes.
• 📈 Recessions have traditionally been bullish for monetary metals like gold and silver, while industrial metals and commodities tend to suffer.
• 💭 The speaker questions the effectiveness of the Federal Reserve's tools in the current economic climate, suggesting that fiscal policy may be more impactful.
• 🤖 The rise of AI is causing a shift in the job market, particularly in tech roles, with a projected decrease in IT jobs in the US and a need for workers to adapt and learn new skills.
• 🥇 Gold has outperformed silver in recent years, which is unusual and may be related to changes in the use cases for these metals, with silver increasingly being used industrially.
• 🌐 Global economic trends and supply chain disruptions, such as those caused by the war in Ukraine, have impacted commodity prices, but these effects are not always long-lasting.
• 📉 The speaker suggests that the gold-silver ratio is not a reliable trading tool due to its volatility and the fact that it doesn't specify which metal will move in which direction.
• 📊 For investors, understanding the nuanced relationship between different asset classes and economic indicators is crucial for navigating market conditions effectively.

Q & A

What does the speaker believe is the impact of labor hoarding and post-pandemic distortions on the market?

The speaker believes that labor hoarding and post-pandemic distortions in the market have delayed the onset of a recession, potentially making it more severe when it does occur.

What historical pattern is mentioned regarding the Bank of Japan raising interest rates and its correlation with recessions?

The historical pattern mentioned is that every time the Bank of Japan has raised interest rates in the past, except during the COVID-19 pandemic, a recession has followed within 6 to 8 months.

What does the speaker suggest about the effectiveness of traditional economic indicators in the current economic climate?

The speaker suggests that traditional economic indicators may not be as reliable in the current economic climate due to the unprecedented circumstances and distortions caused by the pandemic.

What is the significance of the long-term unemployment versus current unemployment rates chart mentioned by the speaker?

The long-term unemployment versus current unemployment rates chart is significant because it has a 100% success rate in predicting recessions when a 'death cross' occurs, which the speaker suggests is imminent.

How does the speaker differentiate between a recession and a market crash?

The speaker differentiates by stating that a recession and a market crash are not necessarily the same thing. A recession is a decline in economic activity, while a market crash is a sudden and significant drop in financial markets. They can occur separately, and the speaker suggests that the market may actually respond positively to a recession if it anticipates a monetary policy response.

What is the speaker's view on the performance of gold and silver during a recession?

The speaker believes that historically, gold and silver, particularly gold, have performed well during recessions as they are seen as safe-haven assets. However, the speaker also notes that the relationship between gold, silver, and the market has changed recently, with silver showing more industrial characteristics.

What is the speaker's outlook on the copper market in the short term versus the long term?

In the short term, the speaker does not see a significant deficit in the copper market this year unless there are more shutdowns. However, in the long term, the speaker believes there will be a shortage due to increasing demand for electricity and the challenges in permitting new large mines.

What is the speaker's perspective on the impact of AI on the job market?

The speaker believes that AI is leading to creative destruction, where jobs are being destroyed, particularly in the tech sector. This is expected to continue, with AI requiring new skills and leading to a reduction in roles and potentially lower salaries for those without AI skills.

How does the speaker view the Federal Reserve's potential rate cuts in response to economic conditions?

The speaker suggests that while historically the impact of rate cuts on stock markets has been mixed, in the current context, investors have been trained to see rate cuts as a signal to take more risk. However, the speaker also notes that if rate cuts are a response to bad economic conditions, it might take some time for the negative reality to assert itself in the markets.

What does the speaker say about the gold-silver ratio as a trading tool?

The speaker does not recommend using the gold-silver ratio as a trading tool for making decisions on which metal to buy or sell. The ratio can widen or narrow due to movements in either gold or silver prices, and it does not provide clear guidance on which direction each metal will take.

What is the speaker's stance on the idea of agricultural commodities as a safe haven during a war?

The speaker is skeptical about the idea of agricultural commodities as a safe haven during a war, noting that while there may be short-term disruptions to supply chains, these effects tend to be temporary and do not necessarily lead to long-term investment safety.