Forward Guidance

Latest Episodes:

The Fed Doesn’t Have What It Takes To Fight Inflation | Joseph Wang & Mish Shedlock Sep 01, 2022

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NOTE: This interview was filmed on August 23, 2022, days before Fed Chair Jay Powell’s remarks at Jackson Hole.

Jack welcomes former senior Fed trader Joseph Wang and Michael “Mish” Shedlock, economic blogger and investment advisor, to analyze the twin threats of inflation and recession, and the challenges investors and the Federal Reserve face as they try to navigate both. Shedlock argues that the economy is slowing rapidly and the Federal Reserve will likely overtighten which could “kill” the stock market. Wang argues that the risk is that the Federal Reserve is too loose, and notes that an excerpt from the July FOMC minutes which Wang saw as “cowardly” caused Wang to be more open to the view that Powell will cave to dovish political pressure. In his own words, “this is the Fed of Arthur Burns.” NOTE: This interview was filmed on August 23, 2022, days before Fed Chair Jay Powell’s remarks at Jackson Hole.

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Mish’s article on housing: https://mishtalk.com/economics/new-home-sales-crash-accelerates-sales-down-12-6-percent-in-july

July FOMC minutes: https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20220727.pdf

(00:00) Introduction

(01:37) Are We In A Recession Already?

(05:48) Housing

(15:00) Stagflation

(19:58)The Stock Market

(21:12) The Wang Pivot

(29:27) The Commercial Banking System

(35:16) Asset Allocation

(36:51) Gold

(39:53) The Pension Crisis

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.

Convertible Bonds: The Everything Asset Class | Paul Latronica Aug 29, 2022

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On this episode of Forward Guidance, Jack is joined by Paul Latronica to discuss convertible bonds as an asset class, and more.

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(00:00) Introduction

(01:08) What Are Convertible Bonds?

(05:00) An Example

(19:56) Correlation Between Convertible Bonds and Equity

(33:13) Current Valuations

(50:44) Finding Alpha In Convertible Bonds

(55:20) Current Outlook

(1:01:51) Avoiding Pitfalls

(1:05:24) Greatest Risk For Convertible Bonds

(1:09:33) The Federal Reserve

(1:17:32) Most Frequent Mistake

The Global Shipping Crisis Is Not Over | Sal Mercogliano Aug 25, 2022

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In today's episode of Forward Guidance, Jack Farley is joined by Dr. Sal Mercogliano, maritime historian and shipping expert, who discusses the current global shipping crisis and its trajectory for the future.

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(00:00) Introduction

(01:09) Shipping As The Ultimate Driver Of Inflation

(15:15) Consolidation In The Shipping Industry

(22:11) Are There Enough Ships? (Answer: Yes)

(23:38) Emission Reduction Goals In Shipping As A Headwind To New Supply

(29:11) Liquified Natural Gas (LNG)

(33:30) Learning From History

(38:28) Recession's Impact on Shipping Rates

(44:50) How Profitable Is Shipping Now?

(47:11) Non-Owner Operators

(52:26) Cruise Lines

(1:00:50) Futures On Freight Rates?

(1:03:08) Individual Stocks

The Fed’s Ticking Time Bomb Is About To Explode | Joseph Wang & Chris Whalen Aug 22, 2022

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In September, the Federal Reserve is set to remove even more liquidity from markets by taking its Quantitative Tightening (QT) program to the next level. Joseph Wang, former senior trader for the Federal Reserve, and veteran banker Chris Whalen, join Jack to explain how this additional wave of monetary tightening will send shockwaves through markets, particularly the two assets that comprise the Fed’s balance sheet: U.S. Treasuries and agency Mortgage-Backed Securities (MBS).

Joseph argues that the U.S. Treasury will likely enact a “buyback” program of its longer-duration securities in order to dampen QT’s volatility, and Whalen contends that if the Federal Reserve sells Mortgage-Backed Securities (as opposed to merely letting them mature), armageddon will ensue.

Filmed on August 17, 2022.

Read Joseph Wang’s latest piece, “The Marginal Buyer”: https://fedguy.com/the-marginal-buyer/

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Chris Whalen’s work can be found here: rcwhalen.com

(00:00) Introduction

(01:32) The Effect of Quantitative Tightening (QT) On Commercial Banks

(21:00) Vulnerabilities in The Treasury Market

(25:15) The Conundrum in Mortgage-Backed Securities (MBS)

(32:30) The Fed's Banking "Stress Test"

(43:43) Swelling Reverse Repo Facility

(48:22) The Fed's Giant Mortgage Problem

(59:53) How Far Will The Fed Go In Hiking Rates?

(1:02:03) Why Is The Fed's Balance Sheet Not Going Down During QT?

Why Risk Appetite Is Back | Alfonso Peccatiello, Michael Kantrowitz, Andy Constan & Jack Farley Aug 18, 2022

Show notes

This is a recording of a Twitter spaces in which Jack Farley exchanges macro views with Alfonso Peccatiello, in a preview to their conversation at the Blockworks Digital Asset Summit in September 2022, which will feature Mike Green, Danielle DiMartino Booth, and Jurrien Timmer. This recording also featured Andy Constan and Michael Kantrowitz.

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Liquidity Has “Dried Up,” Says $100 Billion Investor | Jeffrey Sherman Aug 18, 2022

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Jeffrey Sherman, Chief Investment Officer of DoubleLine Capital, joins Jack to discuss how fixed income markets are handling a slowing economy and the Federal’s Reserve’s withdrawal of monetary accommodation.

Sherman breaks down how bond values over 2022 have dropped as credit spreads have widened and interest rates have risen. Sherman shares his outlook on the corporate bonds, collateralized loan obligations (CLOs), and mortgage-backed securities (MBS). Sherman is circumspect after a strong two-month rally but thinks at this stage there is value to be found in agency & non-agency MBS as well as long-duration Treasury bonds. Filmed on August 10, 2022.

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Timestamps:

(00:00) Introduction

(06:02) Are We In A Recession?

(14:01 )The Inverted Yield Curve

(22:25) Liquidity

(33:09) The "End" Of Forward Guidance

(41:17) Outlook on Long-Term Treasury Yields

(46:55) Mortgage-Backed Securities (MBS)

The Fed Is Not In Control Of The Eurodollar System | Hugh Hendry Aug 15, 2022

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Hugh Hendry, macro investor and former chief investment officer of Eclectica Asset Management, joins Jack Farley to make the case that central banks are not in control of the global monetary order. Hendry argues that an inverted yield curve is showing that the Federal Reserve is making a severe policy error. He insists that the rises in consumer prices is not “inflation” as he defines it because they are not due to the extending of credit by commercial banks.

Hendry passionately exhorts the Chinese ruling class to empower the Chinese consumer and allow the Chinese Yuan (“RenMinBi”) to strengthen to what Hendry thinks is its true market value. Hendry tells Farley he expects commodity prices to remain high due to bad energy policy and he thinks that portfolio managers who are fueling the recent rally in risk assets are making a mistake. Filmed on August 4th, 2022.

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Timecodes:

(00:00) Introduction

(09:56) Why Rising Consumer Prices Is Not Inflation

(11:06) The Energy Crisis

(19:13) Paul Volcker

(21:56) China and the Global "Glut of Saving"

(28:09) The Eurodollar System

(34:08) Is The Fed Effective

(39:31) Did the Fed save the world in 2020

Real GDP Lending on Blockchain Could Be A Gamechanger | Bill Wolf Aug 11, 2022

Show notes

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Use code “guidance” to get 50% off Blockworks Research: https://www.blockworksresearch.com/si…

Bill Wolf, Chief Investment Officer at TrustToken/TrustLabs joins Jack Farley to talk about all things blockchain: his journey into this new form of currency, real GDP loans, and stablecoins.

Bill and Jack talk about TrustToken and the services its business offers in the trading and lending space. What red flags does TrustToken find to help other firms who are looking to invest or take out loans? While struggling lenders in the CeFi space had no choice but to declare bankruptcy, Bill tells Jack that his company TrustToken has never had a single default on its platform. Watch to find out how his company avoided risks that have taken many other companies out.

Filmed the afternoon of August 2, 2022. Be on the lookout for The Investors Guide to TrueFi Capital Markets, coming out soon on Blockworks.co.

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(00:00) Introduction

(00:55) Bill's Journey into Blockchain

(07:58) Real GDP Loans on Blockchain

(17:05) Stablecoins

(23:26) Tether

(26:08) TrustToken's Structure

(38:05) Lending Terms

(47:34) Interest Rate Risks

(49:13) Fee Structure

(53:15) Definition Of A Credit Loss

(57:25) Lender Protections

(59:45) Correlation Risk

(1:08:47) "We're All Going To Pay For The Sins of Others"

(1:10:24) The Future Of Blockchain Lending

(1:13:57) The Fed

Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami Aug 09, 2022

Show notes

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Logan Mohtashami, Lead Analyst at HousingWire joins Jack Farley to talk all things housing: how has the housing market changed since 2019 and what will happen to homes as we approach a recession?

Logan and Jack talk about inventory and rates in the housing market, as well as the challenges homebuyers may have entering this space. Does Logan think we will be able to get out this unhealthy real estate market soon? You need to watch to find out!

Filmed the afternoon of August 1, 2022.

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(00:00) Introduction

(00:58) The Current Health of the Real Estate Market

(12:37) Inventory

(16:30) Building Homes in the Early 2000's

(22:06) Rates

(31:51) Signs of a Recession

(48:44) Challenges in the Housing Market

(55:38) The State of Housing

(1:04:16) Effects of a Housing Recession

Pelosi’s Visit To Taiwan Has Angered China | Jacob Shapiro Aug 04, 2022

Show notes

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Jacob Shapiro, partner and director of geopolitical analysis at Cognitive Investments, joins Jack Farley for an impromptu bonus episode to cover how tensions in the South Pacific are rapidly ratcheting up. Shapiro explains the potential economic and geopolitical consequences of ongoing conflict between China and Taiwan, and he and Jack also dive deep into the Chinese real estate crisis.

Filmed on August 4, 2022.

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