Inside the Macro Mind of David Hunter (Little By Little)

Summary

In this insightful discussion, David shares his unique perspective on the economic landscape, forecasting a deflationary bust followed by a massive inflationary spike. He explores the effects of monetary policy, commodities, and market dynamics, including predictions for significant price movements in oil, gold, and silver. Emphasizing the importance of asset accumulation and understanding the Cantillon effect, David advises on how to navigate potential financial turmoil. While acknowledging the challenges ahead, he also offers optimism, focusing on the future opportunities in commodities and industrial sectors, making this a must-watch for investors seeking to understand the next economic shift.

Takeaways

• 😀 The upcoming economic bust is anticipated to involve severe volatility in currencies and commodities, with inflation expected to spike sharply, possibly reaching up to 25%.
• 😀 The Cantillon Effect, where those closest to the money printer benefit the most, highlights the importance of owning assets rather than holding cash during inflationary periods.
• 😀 Commodities such as gold, silver, and oil are predicted to see massive price increases, with gold potentially reaching $20,000 an ounce and oil hitting $500 a barrel.
• 😀 The deflationary bust will initially lead to a decline in commodities, but after the bust, a massive commodity boom will ensue due to massive money printing and supply shortages.
• 😀 There is a time frame of about 12-15 months for accumulating commodities before the boom begins, with copper potentially reaching $6 and silver going to $75.
• 😀 Treasuries, particularly government bonds, will be the safest investment during the bust, with yields dropping to near zero due to central bank interventions and demand for government guarantees.
• 😀 The housing market is expected to suffer greatly during the bust, with real estate values potentially dropping by 30-40% as interest rates rise significantly.
• 😀 After the bust, the demand for commodities will ramp up rapidly due to reshoring efforts, which will include bringing manufacturing and industries back to the U.S.
• 😀 Financial institutions and pension funds are at risk of significant losses due to their investments in leveraged private equity, which is vulnerable in the upcoming bust.
• 😀 The best sectors to focus on for the next few years will be commodity-oriented investments, particularly in precious metals, energy, and industrials, which are expected to outpace inflation and offer significant returns.

Q & A

What is the Cantillon Effect, and how does it relate to inflationary environments?

The Cantillon Effect explains how those closest to the money printer, such as banks and government insiders, benefit first from the creation of new money. In an inflationary environment, instead of holding currency, it is beneficial to acquire assets, as they tend to retain value better than currency itself, which is devalued due to inflation.

What is the predicted economic cycle described in the script?

The predicted economic cycle involves a deflationary bust followed by a significant inflationary spike. The bust could hit the economy by the end of the year, lasting 12-15 months, with inflation potentially peaking as high as 25%. A massive commodity boom is expected in the following years, with prices of gold, silver, and oil seeing massive increases.

What role does the Federal Reserve's balance sheet play in the predicted economic cycle?

The Federal Reserve's balance sheet is expected to increase substantially, possibly reaching $30 trillion, which would result in a massive influx of liquidity into the market. This influx would drive inflation and commodities, as supply struggles to meet the surge in demand caused by both inflation and reshoring efforts.

How does the speaker see the commodities market evolving?

Commodities are expected to experience volatility, with prices initially rising before the bust, followed by a significant deflationary period. After the bust, prices for commodities like gold, silver, and oil are predicted to skyrocket due to supply shortages and the economic aftermath of the crisis.

How long do individuals have to accumulate assets before the major commodity boom occurs?

Individuals have some time to accumulate assets before the bust hits, as commodities are expected to rise before the bust. There is still a window of opportunity to invest in commodities like copper, gold, and silver, which may see price increases in the near future before the economic collapse takes place.

What will the economic landscape look like after the bust, especially in relation to inflation?

After the bust, inflation is expected to rise rapidly, potentially reaching double digits by the late 2020s and even exceeding 20% by the 2030s. This inflationary surge will be driven by massive money printing and reshoring efforts that increase demand for commodities and industrial production, outstripping supply.

What are the risks for pension funds and other institutional investors during the bust?

Pension funds and institutional investors are at risk because many have invested heavily in private equity, which is often leveraged. In a bust, these leveraged investments are vulnerable, and such funds could face significant losses. The speaker suggests that these funds will struggle to recover during the economic collapse.

How will government bonds perform during the bust, and why are they considered a safe investment?

Treasury bonds are expected to perform well during the bust due to increased demand for safe assets. The government will likely conduct massive bond purchases, creating a yield shortage. This would push bond yields lower, potentially to zero, making them a relatively safe haven for investors seeking stability during the crisis.

What is the speaker's view on the future of the housing market?

The housing market is expected to suffer greatly during the bust. With rising interest rates, home values could drop by 30-40%. Real estate, traditionally viewed as an inflation hedge, is not expected to perform well in this cycle due to the economic dislocation caused by the bust.

What opportunities exist for investors looking to thrive during the economic turmoil?

Investors can potentially thrive by focusing on commodities and industries that can outpace inflation, such as precious metals (gold, silver), energy (oil, natural gas), and industrial commodities. These sectors are likely to see substantial gains as the economy recovers from the bust, driven by both money printing and reshoring efforts.