Show notes
On today’s episode of “On the Margin,” former senior Federal Reserve trader Joseph Wang joins the show for a discussion on quantitative tightening. Citing Joseph's most recent piece "Turbo Tightening,” Mike and Joseph walk listeners through the monetary mechanics driving the Fed's balance sheet and the $2 trillion at the reverse repo. They then break down what this means for markets, specifically risk assets.
As the Fed begins its quantitative tightening program, Joseph shares the scenarios which could lead to both a soft and hard landing for the Fed. As economist Lacy Hunt recently pointed out, “Since the Fed's founding in 1913, monetary tightening has resulted in hard landings in all but about 10 % of the cases. Some of the soft landings avoided a U.S. recession but still caused a financial crisis."
Upon sharing his outlook for equities, bonds, inflation and risk assets, Joseph says there’s “a lot more pain to come.” This is a conversation you can't afford to miss as we wade through uncertain markets. To hear Joseph's thoughts, you'll have to tune in!
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Referenced In The Show:
Turbo Tightening: https://fedguy.com/turbo-tightening/
Charlie Rose: Sir James Goldsmith Interview - 15.11.94: https://www.youtube.com/watch?v=wwmOkaKh3-s
Fed Governor Christopher Waller says he's prepared to take rates past 'neutral' to fight inflation: https://www.cnbc.com/2022/05/30/fed-governor-christopher-waller-says-hes-prepared-to-take-rates-past-neutral-to-fight-inflation.html
Monetary policy normalization in the euro area: https://www.ecb.europa.eu/press/blog/date/2022/html/ecb.blog220523~1f44a9e916.en.html
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Timestamps:
(00:00)・Introduction
(00:50)・Quantitative Tightening
(08:07)・Soft Landing For Quantitative Tightening
(13:05)・Hard Landing For Quantitative Tightening
(21:21)・"A lot More Pain To Come" For Risk Assets
(28:41)・Fireblocks Ad
(29:58)・Raising Rates To Destroy The Wealth Effect
(37:40)・Treasury Market Liquidity
(42:01)・The End Game For The QE Era
(45:32)・De-Globalization
(47:14)・Expect a 30% Correction In Stocks
(50:47)・Will Something Break & Powell Be Forced To Pivot?
Listen to this episode on Apple or Spotify.
Apple: https://tinyurl.com/mry8y4k3
Spotify: https://tinyurl.com/3vnnkrkw
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Disclaimer: Nothing discussed on On The Margin 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.
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