Forward Guidance

Latest Episodes:

Will The Dollar’s Rise Crush Central Banks’ Plans? Feb 01, 2022

Show notes

Jack Farley welcomes back former senior trader for the Fed, Joseph Wang (“Fed Guy”), to analyze an action-packed week in which global central banks such as the Reserve Bank of Australia (RBA), the Central Bank of Brazil, and the European Central Bank (ECB) release their plans for forthcoming monetary policy. Wang explains why a continued rise in the U.S. Dollar relative to other fiat currencies would likely force other central banks to tighten at a rate they deem to be too fast. Farley fields questions from the audience regarding balance sheet run-off and pace of rate hikes, and he poses to Wang the eternal questions: “are reserves money”?

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

Joseph Wang’s Twitter: @FedGuy12

Jack Farley’s Twitter: @JackFarley96

Blockworks Twitter: @Blockworks_

Link to Blockworks’ newsletter: https://blockworks.co/newsletter/

Lessons From The Asian Financial Crisis | Russell Napier Jan 30, 2022

Show notes

Russell Napier of Orlock Advisors joins Jack Farley to share lessons from his experience as an financial analyst in Hong Kong during the Asian Financial Crisis. Napier notes that during the bull market in Asian equities of the first half of the 1990s, analysts attributed the boom to the high rates of economic growth in much of Asia. However, Napier tells Farley that the true cause of the dramatic bull market was the multitude of pegged exchange rates that did not allow Asian currencies to strengthen as foreign capital flowed in, boosting liquidity conditions.

However, once the tide of foreign capital reversed course, the “Asian miracle” became a nightmare.

Napier is the author of “The Asian Financial Crisis 1995-98: Birth of the Age of Debt.” https://www.libraryofmistakes.com/

Library of Mistakes Twitter: @EdinburghLoM

Jack Farley’s Twitter: @JackFarley96

Blockworks Twitter: @Blockworks_

Has the Fed Abandoned Risk Assets? | Joseph Wang Jan 28, 2022

Show notes

Jack Farley welcomes former senior trader for the Fed, Joseph Wang (“Fed Guy”) for a new show devoted to all things central banking. The two analyze the most recent FOMC meeting, after which Fed Chair Powell on January 26, indicated that the strong labor market and high inflation prints were leading the Fed’s FOMC members to contemplate removing monetary accommodation with more speed and vigor than previously anticipated.

Wang and Farley discuss the spike in Fed Funds Futures, quantitative tightening (QT’s) impact on the market, as well as the striking request of China’s leader, Xi Jinping, that the Federal Reserve not raise rates.

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

Joseph Wang’s Twitter: @FedGuy12

Jack Farley’s Twitter: @JackFarley96

Blockworks Twitter: @Blockworks_

Upcoming Risks for Stocks and Bitcoin | Lyn Alden Jan 25, 2022

Show notes

Lyn Alden of Lyn Alden Investment Strategy returns to Forward Guidance to give a much-needed update on her macro views as equity and crypto markets encounter intense selling pressure. Alden argues that stubbornly high inflation will cause rotation from growth stocks to value stocks to continue.

However, Alden argues that she’s more likely to buy than short beleaguered hypergrowth names (think $ARKK) - instead she sees the greatest weakness in the mega-cap “FAANG” names, which she compares to the “Nifty Fifty” stocks, a basket of blue-chip equities that seemed impregnable in the 1960s but ultimately fared poorly in the later inflationary decade of the 1970s. But it’s not the 1970s, where interest rates rose to meet inflation, that reminds Alden the most of our current era; instead it is the 1940s, where policies such as yield curve control ensured that bond yields remained well below levels of inflation.

Alden argues that in this environment of sustained negative real interest rates, commodities will perform very well, and in particular commodities of fixed supply like gold and Bitcoin.

Lyn Alden on Twitter: @LynAldenContact

Jack Farley on Twitter: @JackFarley96

Blockworks on Twitter: @Blockworks_

Lyn Alden’s investment analysis can be found at https://www.lynalden.com/.

If you like this episode be sure to subscribe to our newsletter at https://blockworks.co/newsletter.

Inflation or Recession - Which Will the Fed Choose? } Jared Dillian Jan 21, 2022

Show notes

Is the Federal Reserve stuck between a rock and a hard place? Jared Dillian of The Daily Dirtnap argues that the monetary tightening needed to tame inflation will inflict serious damage to the economic recovery, to the point that the Fed essentially has a choice between secular inflation and severe recession.

Which door will the Fed choose? Dillian is inclined to believe that the Fed will attempt to chart a “middle path” between both options that will actually result in the dreaded stagflation - where inflation continues to rise while economic growth slows down.

Dillian tells Forward Guidance host Jack Farley why he thinks the ongoing rotation from growth stocks to value stocks will continue, and why he in particular is interesting in buying the shares of “big and ugly” companies. Dillian also shares his views on crypto, gold, and bonds.

Dillian on Twitter: @dailydirtnap

Farley on Twitter: @JackFarley96

Blockworks on Twitter: @Blockworks_

Stock & Crypto Options Have Exploded - What’s Next? | Imran Lakha & Ming Zhao Jan 18, 2022

Show notes

Imran Lakha and Ming Zhao join Jack Farley to make sense of how the proliferation of options has changed the investing landscape in tradfi and crypto. After discussing the role of memestocks like GameStop and AMC, as well as structural vol selling call overwriting, Lakha and Zhao share the dos and don’ts of buying and selling options, such as why investors should never exercise options, and how investors should think about whether implied volatility is rich or cheap. Lakha and Zhao also catalog the explosion of crypto options, both via centralized exchanges such as Deribit as well as the emergence of DeFi Options Vaults (DOVs).

Zhao on Twitter: @FabiusMercurius

Lakha on Twitter: @options_insight

Farley on Twitter: @JackFarley96

Blockworks on Twitter: @Blockworks_

The Powell Put Won't Save Stocks | Joseph Wang Jan 14, 2022

Show notes

In this episode of Forward Guidance, Jack once again sits down with former senior Federal Reserve trader Joseph Wang, more commonly known by his moniker “Fed Guy.”

In the interview, the two go deep into the leadership, policy, and future of the Federal Reserve, as well as look at how textbook concepts such as the Fed controlling inflation through the federal funds rate are outdated at best. Joseph takes his years of experience and impressive knowledge of modern financial systems to critique how central banks run the economies of today. Jack and Joseph question if the Fed is on the right path to end inflation and if the current regime even knows how to combat the problems of an economy overheated by fiscal stimulus. Don’t miss this important and thought-provoking interview.

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

Joseph Wang’s Twitter: @FedGuy12

Jack Farley’s Twitter: @JackFarley96

Blockworks’ Twitter: @Blockworks_

Can Earning Season Save Growth Stocks? | Sam Burns Jan 12, 2022

Show notes

In this episode of Forward Guidance, host Jack Farley sits down with Sam Burns, the founder and chief strategist of Mill Street Research.

In addition to general macro trends in the economic and financial world, Sam and Jack discuss Sam’s MAER model (Monitor of Analyst Earning Revisions), which uses the insight of market analysts to judge how the markets will move. Using the research of analysts, Sam is able to buck the predictions of the crowd and come to his own well-formulated conclusions on markets. Jack and Sam delve into complexity sometimes required to grasp today’s difficult-to-understand swings in finance. The two question and rethink traditional narratives within finance in this high-level discussion.

Don’t miss this talk with a heterodox thinker in the financial industry.

Mill Street Research on Twitter: @MillStResearch

Jack Farley on Twitter: @JackFarley96

Blockworks’ Twitter: @Blockworks_

The Crisis Brewing in Energy Markets | Tracy Shuchart Jan 07, 2022

Show notes

In this episode of Forward Guidance, host Jack Farley and guest Tracy Shuchart discuss the tumultuous past two years of the energy market. Since 2020, the markets for oil and natural gas have hit historic points, most famously when the futures price of oil went negative in April of 2020. Tracy gives expert insight into how the energy sector’s adaptation to massive shocks in demand, production, and financial credibility have affected the price of oil in the spot market and the futures market. The interview delves not only into the superficial price movements of the recent past, but into powerful decision makers such as OPEC as well.

Additionally, Tracy and Jack look at exogenous factors causing price movements, such as a move towards green energy and recent geopolitical tensions in Europe and Central Asia. The conversation delves into the current reality of the energy market, as well as its potential future.

Hedge Fund Telemetry: https://www.hedgefundtelemetry.com/author/tracy-shuchart/

Tracy Shuchart on Twitter: @chigrl

Jack Farley on Twitter: @JackFarley96

Blockworks’ Twitter: @Blockworks_

There’s A Bubble in The Inflation Narrative | Darius Dale Jan 04, 2022

Show notes

Darius Dale, founder of 42Macro, joins Forward Guidance to share his outlook for 2022. Dale explains why his business cycle framework, which tracks the rate of change in growth and inflation in order to forecast and risk manage asset allocation, is signaling that the bloom may be off the rose for high-beta assets such as speculative growth darlings, crypto-assets SPACs, as well as reflationary stocks in the materials and energy space.

Because the rate of change of economic growth is falling, Dale expects “safer” assets like mega-cap tech (FAANG) and long-term government bonds to outperform on a relative basis. Dale notes that his framework is probabilistic in nature, not deterministic, and he argues that investors are better served by weighing the likelihood of relative outcomes rather than looking into their crystal ball for certain outcomes. Dale also cautions against becoming wedded to narratives that promise assured outcomes.

42Macro website: https://42macro.com/

Darius Dale on Twitter: @42macroDDale

Jack Farley on Twitter: @JackFarley96

Blockworks’ Twitter: @Blockworks_

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