Forward Guidance

Latest Episodes:

Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston Sep 29, 2022

Show notes

Use code GUIDANCE250 to get $250 off tickets to Blockworks’ London Digital Asset Summit: https://blockworks.co/events/digital-asset-summit-2022-london/

Rory Johnston, investor at Price street and author of Commodity Context, joins Jack Farley to share his outlook on the price of oil, the commodity at the heart of the turmoil in financial markets and the global economy. Johnston explains why he thinks oil will trade “flat to down” in the short-term as he notes that China’s zero-covid policy has sharply curtailed oil demand but that may change in 2023. He argues that the release of millions of barrels of oil from the Strategic Petroleum Reserve (SPR), the U.S.’ stockpile of emergency oil reserves, has drastically changed the supply dynamics and has likely depressed the price. Johnston also shares with Farley his views on other important drivers of oil market such as the proposed price cap, sanctions on Russian oil, and the response function from U.S. shale oil producers and the Organization of Petroleum Exporting Countries (OPEC).

NOTE: This interview was filmed on September 23rd, a day where the price of oil fell by as much as 7%.

Follow Rory Johnston on Twitter https://twitter.com/Rory_Johnston

Follow Jack Farley on Twitter https://twitter.com/JackFarley96

Follow Forward Guidance on Twitter https://twitter.com/ForwardGuidance

Follow Blockworks on Twitter https://twitter.com/ForwardGuidance

Get top market insights and the latest in crypto news. Subscribe to Blockworks Daily Newsletter: https://blockworks.co/newsletter/

(00:00) Introduction

(00:13) Why Is Oil Crashing?

(05:41) Demand Destruction & Recession Risk

(12:46) Is The Backwardation In Oil

(16:44) Biden's Release of Strategic Petroleum Reserve

(27:21) Price Cap On Russian Oil

(36:18) The Gasoline Crisis

(39:56) Coal

(42:53) Volatility and Illiquidity In Oil Markets

(46:57) European Electricity Prices

(50:17) Natural Gas Unit Economics

(54:02) The Mechanics Of A Price Cap on Russian Oil

(1:02:18) U.S. Shale

(1:11:49) Is Oil Going To Go Up?

(1:14:21) How Would A Recession Impact The Price Of Oil?

(1:16:35) About Commodity Context

(1:18:43) Closing Thoughts On Twitter Sentiment

(1:20:57) Outro

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.

What Will Break First? | Joseph Wang & Peter Crane Sep 26, 2022

Show notes

With the Fed hiking interest rates rapidly in order to fight inflation, cash is finally earning its highest yield since before the Great Financial Crisis. Peter Crane, President of Crane Data, and Joseph Wang, former senior trader for the Federal Reserve, join Jack to discuss how the growing attractiveness of cash might cause markets to “break” as investors pull capital out of risk assets and deploy it in cash and money market funds, which harvest yields on cash by investing them in ultra-short duration loans to extremely safe counterparties, primarily the U.S. government and the Federal Reserve. Filmed on September 22, 2022.

Use code GUIDANCE250 to get $250 off tickets to Blockworks’ London Digital Asset Summit: https://blockworks.co/events/digital-asset-summit-2022-london/

Follow Peter Crane on Twitter https://twitter.com/cranedata

Follow Joseph Wang on Twitter https://twitter.com/FedGuy12

Follow Jack Farley on Twitter https://twitter.com/JackFarley96

Follow Forward Guidance on Twitter https://twitter.com/ForwardGuidance

Follow Blockworks on Twitter https://twitter.com/ForwardGuidanceGet top market insights and the latest in crypto news. Subscribe to Blockworks Daily Newsletter: https://blockworks.co/newsletter/

(00:00) Introduction

(02:10) Reflecting On the Fed's September FOMC Meeting

(04:48) What Is A Money Market Fund?

(14:37) What Will Break?

(18:41) Maturity & Composition

(25:31) Why Are There No Inflows Into Money Market Funds?

(27:37) Quantitative Tightening (QT)

(31:316) Who Invests In Money Market Funds?

(39:19) Offshore Dollar Money Market Funds

(43:03) New SEC Regulation on Money Market Funds ("Swing Pricing")

(51:45) What Part of The Financial System Will Crack First?

(1:05:12) How Bad Is Treasury Liquidity?

(1:06:33) Pete Crane on Stablecoins

(1:10:55) Joseph Wang On Sales of Mortgage-Backed Securities

(1:12:16) Outro

"I'm Surprised The Market's Not Down More" | Aswath Damodaran Sep 22, 2022

Show notes

When trying to find a culprit for the bear market in stocks this year, investors often point to the surging yields on U.S. Treasury bonds. But that’s only part of the story. Today Jack is lucky to speak to Dr. Aswath Damodaran, professor of valuation and corporate finance at NYU Stern School of Business, who is a pioneer in the field of valuation. Damodaran explains how the intrinsic value of a stocks is its future cash flows discounted back to the present with a “discount rate,” which is the sum of a risk-free rate on a Treasury bond and an “equity risk premium.” Damodaran notes that, in addition to risk-free rates surging higher, equity risk premia have expanded significantly. Damodaran also shares his views on inflation, the Federal Reserve, as well as currencies and crypto. Farley aFilmed on September 9, 2022.

Data sets can be found on Aswath Damodaran’s website: https://pages.stern.nyu.edu/~adamodar/

Lectures and presentations can be found on Aswath Damodaran’s YouTube page: https://www.youtube.com/c/AswathDamodaranonValuation

Follow Aswath Damodaran on Twitter https://twitter.com/AswathDamodaran

Follow Jack Farley on Twitter https://twitter.com/JackFarley96

Follow Forward Guidance on Twitter https://twitter.com/ForwardGuidance

Follow Blockworks on Twitter https://twitter.com/ForwardGuidance

Get top market insights and the latest in crypto news. Subscribe to Blockworks Daily Newsletter: https://blockworks.co/newsletter/

(00:00) Introduction

(00:35) The "Sleep Test"

(03:40) Inflation's Impact on Equity Valuations

(19:43) Equity Duration

(40:41) Cost of Capital for Individual Companies

(44:17) Commodity & Energy Stocks

(52:06) How Liquidity Increases Asset Values

(59:53) Crypto, Currencies, and Commodities: Why They Are Impossible To Truly Value

(1:11:29) Closing Thoughts On Overconfidence

The Sovereign Debt Crisis Is Coming | Brent Johnson Sep 20, 2022

Show notes

Why has the U.S. dollar exploded higher this year against other currencies, and what does its rise mean for the global economy? Brent Johnson, CEO of Santiago Capital and outspoken dollar bull, joins Jack Farley, host of the Forward Guidance podcast, to share his thoughts on what the strength of the greenback indicates about inflation, central banks, and growth rates. Johnson argues that a sovereign debt crisis for China and other emerging markets is within the cards. Filmed on September 14, 2022, on the second day of the Blockworks Digital Asset Summit.

Follow Brent Johnson on Twitter https://twitter.com/SantiagoAuFund

Follow Jack Farley on Twitter https://twitter.com/JackFarley96

Follow Blockworks on Twitter https://twitter.com/Blockworks_

Follow Blockworks Digital Asset Summit on Twitter https://twitter.com/BlockworksDAS

The Bear Market Has Only Just Begun | Ted Oakley Sep 19, 2022

Show notes

Use code GUIDANCE250 to get $250 off tickets to Blockworks’ London Digital Asset Summit: https://blockworks.co/events/digital-asset-summit-2022-london/

Ted Oakley, founder and managing partner of Oxbow Advisors, joins Jack Farley to argue that asset prices remain well above their fair value, and that the drawdowns investors have seen in 2022 are likely not over. Oakley shares his outlook on inflation, the business cycle, and the Federal Reserve, and he outlines where he is finding value and safety for his investors in this turbulent macro environment.

Filmed on September 6, 2022.

Follow Oxbow Advisors on Twitter https://twitter.com/Oxbow_Advisors

Follow Jack Farley on Twitter https://twitter.com/JackFarley96

Follow Forward Guidance on Twitter https://twitter.com/ForwardGuidance

Follow Blockworks on Twitter https://twitter.com/ForwardGuidance

Get top market insights and the latest in crypto news. Subscribe to Blockworks Daily Newsletter: https://blockworks.co/newsletter/

(00:00) Introduction

(01:38) Why Stocks Remain Overvalued

(11:04) Why A Deep Recession Is Imminent

(16:02) Energy

(20:52) Fixed Income

(28:14) Longer-Term Outlook on Inflation and Interest Rates

(32:32) Is The Fed Still Behind The Curve?

(41:44) Contrarian View

The Energy Trade Has Gone Too Far | Jared Dillian Sep 15, 2022

Show notes

Use code GUIDANCE250 to get $250 off tickets to Blockworks’ London Digital Asset Summit: https://blockworks.co/events/digital-asset-summit-2022-london/

Jared Dillian, publisher of The Daily Dirtnap, joins Jack to argue that European energy inflation will not, as many believe, cause an economic crisis. Instead, Dillian contends that, no matter the long-term consequences, governments will find solutions to the energy shortage such as price caps on commodity prices, which Dillian says will “crush” speculators. Dillian shares his framework for evaluating investor sentiment in order to discern the mood of the market and identify ideal turning points to take on contrarian positions.

Filmed on September 8, 2022.

Follow Jared Dillian on Twitter https://twitter.com/dailydirtnap

Follow Jack Farley on Twitter https://twitter.com/JackFarley96

Follow Forward Guidance on Twitter https://twitter.com/ForwardGuidance

Follow Blockworks on Twitter https://twitter.com/ForwardGuidance

Get top market insights and the latest in crypto news. Subscribe to Blockworks Daily Newsletter: https://blockworks.co/newsletter/

(00:00) Introduction

(00:33) Measuring Sentiment via Twitter

(04:08) Why Jared Thinks Europe Can Handle Its Energy Situation

(06:08) "Speculators Will Get Crushed"

(08:08) The Low Cost Basis Fallacy

(14:43) Natural Gas

(16:30) Price Caps In Energy May Be Coming

(21:07) Why Jared Was Bullish on Oil in early 2021

(25:30) The Bubble In Macro Doom

(27:12) Central Banks Can't Print Oil

(31:43) Outlook on Housing & Stocks

(36:22) Jared Dillian As Head Of The Federal Reserve

(40:06) "Why Are You Not More Bearish?"

(48:25) The Dollar

(56:22) Longer-Term Outlook on Inflation

(58:40) Jared's Book & Concert

False Dawn: Why The Rally Is Over | Andy Constan & Joseph Wang Sep 13, 2022

Show notes

Use code GUIDANCE250 to get $250 off tickets to Blockworks’ London Digital Asset Summit: https://blockworks.co/events/digital-asset-summit-2022-london/

Today Jack welcomes Andy Constan, macro investor and publisher of The Damped Spring Report, and Joseph Wang, former senior Fed trader and author of Fedguy.com, to discuss how the Fed’s reduction of its balance sheet via quantitative tightening (QT) is impacting market liquidity and future returns.

Constan argues that favorable market conditions that allowed risk assets to rise during the summer are no longer present, and that this “false dawn” is over. Wang argues that QT will drain the banking system of reserves and the Fed may have to plug “leaks” in the financial plumbing.

Filmed on September 7, 2022.

Follow Andy Constan on Twitter https://twitter.com/dampedspring

Follow Joseph Wang on Twitter https://twitter.com/FedGuy12

Follow Jack Farley on Twitter: https://twitter.com/JackFarley96

Follow Blockworks on Twitter: https://twitter.com/Blockworks_

Get top market insights and the latest in crypto news. Subscribe to Blockworks Daily Newsletter: https://blockworks.co/newsletter/

(00:00) Introduction

(00:44) Quantitative Tightening's (QT) Impact on Markets

(10:38) Equity & Bond Market Flows Over The Past Few Months

(15:46) Volatility (Vol) Targeting

(24:18) Equity Risk Premium Model

(32:13) The "False Dawn" In Asset Prices

(38:28) Joseph Wang on Treasury Issuance

(43:58) Joseph on "The Reserve Gap"

(53:50) The Fed's Ample Reserve Regime

(57:11) Andy Constan's Outlook on Bonds

(1:02:02) How Far Can The Fed Go In Hiking Rates?

The Rise of "Legal Fraud" | Bethany McLean Sep 12, 2022

Show notes

Use code GUIDANCE250 to get $250 off tickets to Blockworks’ London Digital Asset Summit: https://blockworks.co/events/digital-asset-summit-2022-london/

On today's episode of Forward Guidance, Jack interviews prolific author and journalist, Bethany McLean. McLean's known most prominently for her 2003 book, The Smartest Guys in The Room: The Amazing Rise and Scandalous Fall of Enron. With her coverage of financial scandals in the early 2000s, no one is better equipped for today's discussion about fraud, loopholes, and more.

McLean interprets the seismic disruptions in the housing and energy market through her prior work on mortgage-securitizing giant Fannie Mae and on the American shale revolution. McLean argues that financial crimes always require the complicity of the victim, and contends that anyone who thinks they can predict the energy markets or inflation is sorely mistaken.

Follow Bethany McLean on Twitter: https://twitter.com/bethanymac12

Follow Jack Farley on Twitter: https://twitter.com/JackFarley96

Follow Blockworks on Twitter: https://twitter.com/Blockworks_

Get top market insights and the latest in crypto news. Subscribe to Blockworks Daily Newsletter: https://blockworks.co/newsletter/

(00:00) Introduction

(00:31) How Was The Enron Fraud Allowed To Happen?

(12:18) The Rise of Legal Fraud

(19:07) Dotcom Bubble 2.0 and Private Equity

(23:53) The Housing, Mortgage, and Mortgage-Backed Security (MBS) Markets

(31:55) Inflation And The (Reverse) Wealth Effect

(34:34) The Energy Crisis

(46:00) Green Energy

(48:20) McLean's New Book

(49:26) Fictitious Billionaires And Other Hangovers From The 2020 Money Printing Bonanza

The Eurodollar Market Is “Dead,” Says Godfather of Financial Derivatives | Dr. Richard Sandor Sep 08, 2022

Show notes

Use code GUIDANCE250 to get $250 off tickets to Blockworks’ London Digital Asset Summit: https://blockworks.co/events/digital-asset-summit-2022-london/

Every day, trillions of dollars worth of interest rate derivatives are traded back and forth. And yet despite its stunning size today, 50 years ago the interest rate derivative complex did not exist at all. Today Jack interviews Dr. Richard Sandor, chairman and CEO of the American Financial Exchange (AFX), who is known as the “father of financial futures” because he created the world’s first interest rate and bond futures in the 1970s. Sandor explains how the relentless inflation of the 1970s caused wild swings in interest rates that jeopardized financial stability, and how the financial futures he created helped tame (or at the very least, transfer) these risks.

Sandor argues that the London Interbank Offering Rate (LIBOR) to which many interest rate futures (often called “eurodollar futures”) are still pegged has been “discredited” by the schemes of banks to manipulate it (see link below on LIBOR scandal). Sandor shares his vision for the forthcoming LIBOR replacement in June 2023, and tells Jack about his company’s benchmark, AMERIBOR.

Article on LIBOR scandal: https://www.investopedia.com/terms/l/libor-scandal.asp

More info on Dr. Richard Sandor: https://en.wikipedia.org/wiki/Richard_L._Sandor

Follow Dr. Richard Sandor on Twitter: https://twitter.com/drrichardsandor

Follow Jack Farley on Twitter: https://twitter.com/JackFarley96

Follow Blockworks on Twitter: https://twitter.com/Blockworks_

Get top market insights and the latest in crypto news. Subscribe to Blockworks Daily Newsletter: https://blockworks.co/newsletter/

(00:00) Introduction

(00:40) Creating The World's First Interest Rate Future

(18:16) Creating A Two-Sided Market

(24:10) Paul Volcker's Role In Creating Interest Rate Volatility

(27:00) Eurodollars: "LIBOR Is Dead, The Emperor Has No Clothes"

(35:21) Replacements for LIBOR (London Interbank Offered Rate)

(47:44) Carbon Futures

The Plumbing Of Global Finance Is Clogged | Joseph Wang & Daniel Neilson Sep 05, 2022

Show notes

Use code JACK250 to get $250 off tickets to Blockworks’ New York Digital Asset Summit: https://blockworks.co/events/digital-asset-summit-2022-new-york/

Use code GUIDANCE250 to get $250 off tickets to Blockworks’ London Digital Asset Summit: https://blockworks.co/events/digital-asset-summit-2022-london/

With the summer rally in risk assets two weeks in the rear view mirror, Jack welcomes two experts on the plumbing of the monetary system, former senior Fed trader Joseph Wang and Daniel Neilson, economist and author of “Minsky” and writer of the “Soon Parted” newsletter. Neilson and Wang exchange views on just how high the Federal Reserve will hike rates in order to tame inflation, with Wang calling Fed chair Powell’s speech at Jackson Hole a “great performance.”

Neilson shares insights on the changing size and composition of the European Central Bank’s balance sheet, and then he proceeds to teach Jack about what the relative levels of various “repo” rates indicates about the supply and demand for Treasury collateral. Lastly, Neilson shares his views on government crackdown of crypto mixer Tornado Cash. Daniel H. Neilson is the principal of Neilson Macro Advisors and author of Minsky from Polity Books, and his newsletter is called Soon Parted.

Filmed on August 31, 2022.

Link to Daniel Neilson’s piece on the balance sheet of the European Central Bank (ECB): https://www.soonparted.co/p/defrag

Link to Daniel Neilson’s piece on Tornado Cash: https://www.soonparted.co/p/tornado-cash

Follow Daniel Neilson on Twitter https://twitter.com/dhneilson

Follow Joseph Wang on Twitter https://twitter.com/FedGuy12

Joseph Wang’s writings can be found here: https://fedguy.com/

Daniel Neilson’s writings can be found here: https://www.soonparted.co/

Get top market insights and the latest in crypto news. Subscribe to Blockworks Daily Newsletter: https://blockworks.co/newsletter/

(00:00) Introduction

(00:30) Analysis of Powell's Remarks at Jackson Hole

(09:54) Inflation Expectations

(17:17) Just How Far Behind The Curve Is The European Central Bank (ECB)?