Forward Guidance

Latest Episodes:

What This Fed Watcher Is On The Lookout For | Colby Smith (February 2023 FOMC) Jan 31, 2023

Show notes

With the February Fed meeting rapidly approaching, Jack Farley welcomes Colby Smith, U.S. economics editor for the Financial Times (FT), to share her expectations for the February meeting, and her insights about the transmission of the Fed’s policy to the market and the public. She argues that the disconnect between the rate cuts being priced into the interest rate futures market and the Federal Reserve’s own forecasts will be one of the most salient issues at tomorrow’s press conference with Fed Chair Jay Powell. Smith and Farley also discuss the latest economic data, the politics of the Fed, and the looming issue of the U.S. debt ceiling.

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This episode is sponsored by Curve. Curve is unlike any other credit card. It gives you the power to connect multiple credit and debit cards into one, convert your cashback into crypto rewards, Go Back in Time ®, create Smart Rules, and more. Apply now through https://link.curve.com/forward_guidance, you’ll earn $20 in Curve Cash after your first transaction. So sign up today! Terms and conditions apply.

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Disclaimer: Nothing discussed on Forward Guidance should be considered as investment advice. Please always do your own research & speak to a financial advisor before thinking about, thinking about putting your money into these crazy markets.

Timestamps:

(00:41) Expectations For The Fed's February FOMC Meeting

(09:24) Are Financial Conditions Too Loose?

(18:26) "The Fed's Threshold For Pain Is A Lot Higher"

(25:48) Forward Guidance

(30:55) Curve Ad

(32:00) Employment Costs & Other Economic Data

(37:09) Will The Fed Hike Again In May (After It Likely Hikes Again in March)?

(40:12) New Voting Members on The FOMC

(43:26) Will Powell Be In "Attack Mode" Tomorrow?

(47:49) The Fed's Balance Sheet & Quantitative Tightening (QT)

(51:14) The Debt Ceiling

(53:34) The Fed's Reverse Repo (RRP) Facility

Earnings Season Is Strong (So Far) | Sam Burns Jan 31, 2023

Show notes

Sam Burns, founder of Mill Street Research, explains why he thinks the bull market in stocks can last for much longer. He notes that many companies are still growing their earnings substantially despite inflation and economic uncertainty, and argues that the outperformance of cyclical stocks over defensive stocks is an indicator that the bull market in stocks has legs. Filmed on January 26, 2023.

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Use code GUIDANCE10 to get 10% off Permissionless 2023 in Austin:

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Timestamps:

(00:00) Intro

(00:35) Outlook for 2023

(06:00) Cyclical Stocks Are Outperforming Defensive Stocks

(11:37) Stocks vs. Bonds Valuations

(17:17) Earnings Growth Outlook for S&P 500 Stocks

(20:46) Incentives of Sell-Side Analysts

(28:35) Earnings Revisions By Sector

(31:30) Permissionless Plug

(32:33) China, Gold Miners, and Airlines

(37:06) European Stocks

(43:35) What Is Sam Most Bearish On?

(45:53) The Fed

(55:40) Inverted Yield Curve

The Bear Market Ended Months Ago, Says Master of Turning Points | Milton Berg Jan 26, 2023

Show notes

Milton Berg is a quiet legend of technical analysis whose work is regularly used by the world’s most accomplished investors. He joins Jack Farley to share his reading of specific patterns in the market that to him are strong bullish indicators. Berg argues that the recession already occurred in 2022 and that the best time to buy stocks is coming out a recession. Berg shares with Farley in-depth analysis of the breadth and volume characteristics of recent price action that make him think that the bear market is over. Berg is particularly constructive on China and gold miners, and in addition he and Farley debate the meaning of the steep yield curve inversion.

Milton Berg Advisors is a boutique consulting and research firm that offers investment advisory services exclusively to institutional investors. More info can be found at https://miltonberg.com/.

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Timestamps:

(00:00) Intro

(00:34) Milton Berg's Way Of Analyzing Markets

(09:31) A Transition From Inflation To Recession Is Bullish For Stocks

(12:13) Comparison To Dot-Com Crash

(17:24) "The Market Bottomed In June"

(21:12) Bullish On Chinese & U.S. Stocks

(29:37) Permissionless Plug

(30:39) But What About Bear Market Rallies?

(42:58) "I Have Zero Sell Signals"

(45:08) But What About The Inverted Yield Curve?

(47:44) The Unemployment Rate

(56:53) China Stocks and Gold

(01:04:44) Milton Berg's Outlook on Treasury Bonds

Dusting Off The Recession Playbook | Tian Yang Jan 23, 2023

Show notes

The last time Tian Yang, founder of Variant Perception, appeared on Forward Guidance in August 2022, he gave viewers a well-timed warning that the commodity supercycle was “on hold.” Now, he returns to argues that the world is well on its way to a global recession that will provide a hostile environment for risk assets. Yang shares his “equity bottom checklist” with Jack Farley to argue that equities have much more down to fall, and he explains why he thinks risk-off assets like bonds will perform well. Yang expects a “blow-out” of credit spreads and he thinks that the U.S. dollar will perform less well against other currencies than it does in a typical recession. Filmed on January 12th, 2023.

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Timestamps:

(00:00) Intro

(01:36) Base Case For 2023

(04:14) Where's The Recession?

(08:11) Liquidity

(18:25) Housing and Manufacturing Are Weak

(24:21) Interest Rates

(28:05) Cruve Ad

(29:08) China

(33:36) Underweight Equities (Asset Allocation Part 1)

(43:03) The Checklist For A Market Bottom

(47:19) Incredibly Rare Set-up in Gold"

(48:43) Overweight Bonds (Asset Allocation Part 2)

(55:19) Neutral On Commodities (Asset Allocation Part 3)

(01:02:26) The U.S. Dollar

(01:05:13) The Most Crowded Trade In Macro Right Now

(01:11:22) The VIX in 2023

“Transitory Goldilocks” Is Here | Darius Dale Jan 19, 2023

Show notes

Darius Dale of 42 Macro once again joins Jack to share his macro view for 2023. Dale argues that, while inflation and growth are falling, inflation is falling so much faster than growth is falling, and economic resilience is rearing its head in many areas. As a result, it may appear that the so-called “soft landing” could be achieved this year. At least that’s what many asset markets that Dale tracks closely are indicating.

This environment is conducive to risk assets rallying and volatility abating - at least in the short-term. However, Dale shares his own view that this current period of economic moderation is likely only a “transitory goldilocks” that will give way to a recession that begins in the fourth quarter of 2023. Dale also shares his outlook on China, bonds, and Bitcoin. Filmed on January 12, 2023.

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Use code GUIDANCE10 to get 10% off Permissionless 2023 in Austin:

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Timestamps:

(00:00) Introduction

(00:19) Have The Odds Of A "Soft Landing" Increased?

(06:59) Transitory Goldilocks"

(13:53) The Fed Is Focused More On Wage Growth & Labor Market Now Than Inflation

(20:20) Odds Of The Fed Cutting Rates

(27:17) Permissionless Ad

(28:17) But Isn't Growth Falling Rapidly?

(40:13) Is Inflation Eating Away At Wealth?

(44:59) Is Liquidity Turning Up?

(53:53) Asset Allocation

(01:02:27) "Tons of Upside In China"

Bank of Japan Widow-Makes Once Again | Weston Nakamura Jan 18, 2023

Show notes

The last time Jack Farley had Tokyo-based, global macro markets trader and Bank of Japan aficionado Weston Nakamura on Forward Guidance - the BOJ had shocked the world with a sudden unexpected major change in their Yield Curve Control policy.

At the January Monetary Policy Meeting held today, the BOJ once again shocked markets and caused mayhem in bond and FX markets - but this time, by doing nothing. Despite the unprecedented scale of record-setting JGB buying (or, foreign and domestic investor selling pressure), the Bank of Japan delivered a unanimous vote of no change in Yield Curve Control policy for Governor Kuroda's second to last meeting of his historic, and dramatically controversial tenure of radical policy experimentation.

Ahead of today's policy release, Weston had been discussing his outlook for a "no-change" BOJ policy outcome, and had positioned for the event against market consensus, using the same framework that he and Jack had discussed at the end of December of market functioning and financial stability to determine policy outcome (as opposed to inflation-combating).

In addition to the Bank of Japan and the most intense market pressure they are currently under, Weston also explains what is behind the remarkable strength in the yen as of late, how it is possible for JGBs to yield above the so-called Yield Curve Control upper ceiling, and what's next for the "least predictable" major central bank, as we head into the critical end of Governor Kuroda's era.

See Weston and Jack from the previous December 2022 BOJ Day: Bank of Japan’s Capitulation Perturbs Global Bond Market | Weston Nakamura Dec 21, 2022: https://www.youtube.com/watch?v=hYR34YbXMvY&t=157s

Listen to Weston Nakamura and Emma Muhleman, CFA discuss the Bank of Japan in full detail on Twitter Spaces during live Japan trading hours ahead of the BOJ decision here: https://twitter.com/i/spaces/1BdGYyNpYAyGX?s=20

–

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The Soft Landing “Blue Pill” Is Overpriced | Andy Constan Jan 16, 2023

Show notes

Andy Constan, veteran macro investor and founder of Damped Spring Macro Research, joins Jack to share his macro framework for 2023. Looking at rallying risk assets and an interest rate futures market that is pricing in over 200 basis points worth of cuts by the Fed, Constan argues that the market is assigning too high a probability to two “blue pill” scenarios - a soft landing or a Fed pivot. Constan says he is positioned to fade these two scenarios by being short everything - namely, stocks, bonds, and commodities. Constan explains why he is betting on red pill scenarios of either a severe recession or “higher-er for longer-er” interest rates. Filmed on January 11, 2022.

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Timestamps:

(00:00) Intro

(00:47) "I'm Short Everything"

(08:24) Blue Pill Scenarios (Soft Landing Or Fed Pivot) Are Less Likely Than Market Is Pricing In

(15:19) Betting Against Rate Cuts

(23:06) Curve ad

(24:08) Are Stocks Expensive Relative to Bonds?

(30:51) Equity Risk Premium (ERP)

(40:36) In China, Cash Is Trash

(49:08) Views on Commodities

(54:28) Can the Superb Macro Returns of 2022 Be Repeated?

The Big Bank Deep Dive | Alex Gray Jan 13, 2023

Show notes

Use code GUIDANCE10 to get 10% off Permissionless 2023 in Austin:

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As big banks start to report their earnings, Jack turns to banking specialist Alex Gray for insight. Gray taps her prior experience both as a commercial banking underwriter and as a senior analyst of large cap banking stocks to glean insights from the fourth quarter reports of JPMorgan Chase & Co ($JPM)., Bank of America ($BAC), and Wells Fargo ($WFC). Gray navigates the delicate balance between loan growth and credit quality, evaluates the cumulative effect of the Federal Reserve’s rapid rate hikes on the profitability and balance sheets of the nation’s largest money centers. As disclosed in the interview, Alex Gray currently serves as the director of finance for Blockworks.

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Timestamps:

(00:00) Intro

(00:59) How To Value Bank Stocks

(03:10) Bank Profitability When Interest Rates Are At Zero

(10:07) How To Measure Credit Losses

(14:09) Commercial Lending Is In A New Bull Market

(21:17) The Importance of Collateral

(26:20) Permissionless Ad

(33:55) Current Default Rates Are Low (But Rising)

Will The Fed Get Their Soft Landing? | Jeff Snider & Bob Elliott Jan 12, 2023

Show notes

Use code GUIDANCE10 to get 10% off Permissionless 2023 in Austin:

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With U.S. monthly inflation coming in negative, what’s in store for the future economy and interest rate path? Bob Elliott, chief investment officer at Unlimited Funds, and Jeff Snider, chief strategist at Atlas Financial and host of Eurodollar University, discuss.

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Timestamps:

(00:00) Introduction

(00:55) December CPI Report

(08:45) Is There Monetary Inflation?

(11:45) The Labor Market Remains Strong (Or Does It?)

(32:37) Personal Income

(34:43) Permissionless Plug

(35:43) Biblical Levels of Yield Curve Inversion

(54:25) Consumer Spending & Bank Lending

Jacob Shapiro on Russia, Ukraine, and China Jan 10, 2023

Show notes

Use code GUIDANCE10 to get 10% off Permissionless 2023 in Austin:

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Jacob Shapiro, partner and director of geopolitical analysis at Cognitive Investments and

geopolitics editor at Lykeion, joins Jack to share his geopolitical outlook for 2023. Jacob tells Jack why he thinks that Russia’s war again Ukraine will sadly continue for some time, and he explains how the war is impacting global supply chains, commodity prices, and international relations. Jacob also shares with Jack his take on China’s economy, which is at a crossroads between a slow-motion train wreck of its collapsing real estate sector, and the reflationary tailwinds from the end of its zero-Covid policy. Filmed on January 10, 2022.

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Timestamps:

(00:00) Intro

(00:43) Russia's Invasion of Ukraine

(06:07) Economic Consequences of The War

(13:35) China and India Are Buying Russian Oil In Bulk

(15:42) European Price Cap On Russian Oil

(19:47) Who Are Russia's Allies?