229921533 - 1_cfsoty7x - PID 1851201 Welcome to the revision daily briefing. It's Thursday, February 17, 2022. I mash Bennington, joined today by Jared Dalian, daily dirt. Now, let's take a look at US equity markets right off the bat. Not a good day across the board. Looks like S and P 500 bounce around a little bit, closing out down to 0.12%. That's down to 4380. Right now, big loser of the day, the biggest loser of the day, I should say nasdaq Composite off to spot 8, 8%, nearly 3%. Closing out the day at 13,716. Dow Jones Industrial Average also off significantly minus 1.78% on the day, closing out at 34,300, 11 gold price on the day, I think it's up about 1.5% closer looking at right now like 1880, excuse me, 890 at $1898 per ounce on gold geopolitics. Once again, in the headlines, US Secretary of State Antony blinking saying, the risk of Russian attack in Ukraine remains, quote, very high. Secretary of State offering a meeting to his counterpart, Sergey laser Rob lots to talk about. Lots of speculation about inflation and rate hikes. Couldn't be happier to have Jared Dylan with us today to talk about at all. Jared, welcome to religion daily briefing. You know, has a goal. God's great man, It's great to be back in the dude, I miss doing these shows with you. So we haven't done these for a couple of weeks, at least chart what's on your radar in terms of the big picture, 50 thousand foot overview of what's happening in these markets right now. You know, I spent a lot of time looking at charts today. And this is what I think is going to happen over the next couple of weeks. I think we have a lot more downside in stocks. I think bond yields of top, I think bonds are going to rip from here. We priced in too many Rey hikes, we priced in seven rate hikes. About half of those are going to get taken back. I think oil is going to correct significantly, and I think gold is going to continue up until about 1920, runs into some resistance at 920. But once you get through 920, the next stop is 2060, the previous highs. Then after that, who knows? What, what's your time horizon for that outlook? Jarrod, does he talk about and think about gold? I would say over the next six months. Once we get to the previous highs, It's going to be like a hot knife going through butter. The next stop I really think is 2500 announce. And I think we can get there this year. I think that's very possible. That's quite a call 2500 and outs on goal this year. It's interesting, Jared, if someone had given you the inflation data points that we've seen, print over the last, call it 60 days and told you that gold would still be under 9800. That would be a bit of a paradox. How do you think about that and how markets are pricing this inflation data, which has been pretty significant. Yeah, I mean, have them watch a goal for a long time and it didn't really respond to that, went up a little bit during the pandemic and it didn't really respond to inflation. So people got to a point where you just had this. People, they threw in the towel on gold. They said it's, it's useless. Inflation is 7.5% in Gold's not going up. What am I holding this thing for, right? But what you've seen in the past couple of weeks is a big reversal between crypto and gold. I mean, gold has gone straight up and crypto has gone straight down. I know it was the last couple of weeks, maybe it's this week. But I think that's going to continue in the future. And the thing about gold is that it really, I would say more than any other asset. It follows the charts. It really follows the charts. It like if you look at, you know, people look at money supply, they look at interest rates, negative interest rates, the budget deficit. And it'll, all this stuff has been screaming by gold for the last two years and it has worked. Well. It just, it, you know, it's going to work when it works and you just gotta wait for the chart to play out. And now that it has, I mean, this, this wedge pattern that gold has done over the last 2.5 years is one of the longest strongest consolidations and any chart I've ever seen, which means that the next move higher is going to be very impulsive. Yeah. So let me ask you also about these geopolitical tensions that we're seeing in Ukraine right now. How do you factor that into your models? How do you think about it and how do you process it in terms of its implications for markets? Well, in terms of the playbook I just gave you was stocks going down, a bond's going up and goal going up. I mean, all that, you know, the charts are telling me that there will be an in Beijing and I don't I don't know how serious it is going to be. I don't know if Ukraine is going to fight back or how, how many people are going to get killed. I really don't know. But I do think there's going to be innovation and I think that it was not going to happen during the Olympics because the Olympics or time of peace. So I think it's going to have to nap after the Olympics. The end of the Olympics is on Sunday. So I think perhaps it could happen next week. So that's what I'm thinking. Yeah. You mentioned cryptocurrency digital assets. Let's review a couple of these numbers here, particularly bitcoin. Trading right now at $40,993 on a trailing 24 hour basis, that's minus 7.2%. If theorem, trading at 29092909, 24 hour basis off 7.9% as well. It looks like that what we're seeing here is stocks are correlated with digital assets rather than the safe haven play, which is something that you were alluding to earlier, Jared, I I've even crypto correlated with Jimmy Crypto Crypto and stocks. Crypto trading relative to stocks rather than as a safe haven play like gold. I mean, Nasdaq is down 3% today. All it was, it's the same stuff that's been happening for the last couple of months ever since we put in the top and stocks, it's been all the unprofitable tech that's getting killed today. So yeah, I mean, I mean, I don't like I take a long-term view on crypto. You know, I hold some crypto. I have I have a portfolio of it, of a bunch of different stuff and, you know, I used to sweat about it. When I first bought it. I was checking it like every five minutes, but I honestly, I don't even really look at it anymore. I'll check it in five-years. That's a very philosophical position. You know, you mentioned the, the asset classes here. Let's take a look at stocks here. By g ICS classification. Precisely to your point, chaired big loser on the day, information technology minus one spot, 93 percent. So off nearly 2 percent on the tech stocks. On the flip side, energy up 4.7% on the day. So quite a dispersion there. After information technology, next biggest loser, communication services minus 1.69%. And then consumer discretionary minus 1.38% on the day Jared. Yeah, oil is do you know energy is due for a correction? It's had its had a, just a fantastic run. And, you know, I've talked to some people over the last couple of weeks, some people who work in the energy industry and they're telling me that, you know, oil is not done going up and they see a 150 or $200 oil in the long-term. But in the short-term, I think you're going to get a pretty decent sized tradable correction. I think crude could go down to blow AT over the next couple of weeks. So we'll see, yeah, let's take a look at crude prices are right now trading at 91 spot 60. Want a barrel on WTI us benchmark price out of Cushing, Oklahoma. I'm curious what you think about the natural gas phase neck asked is something that we've been hearing about here in regard to the Ukraine situation. Now the United States is the first largest producer of the largest producer. Second is Russia. Natural gas here on nymex, trading NG one at $4.52 off about 4%. It looks like here on the day. Yeah. I don't have any specific thoughts on them, but I will say, you know, the the whole energy complex is due for corrections. So I think that gas is going to go with oil and the short-term in the short-term and longer-term Jerne. Yeah. You know, one of the things I keep hearing is that there's really not a lot of investment in E&P even with oil prices at these levels. I mean, if he went back to 2014 and you had oil at a 100 bucks, like you had so much money pouring into the space for investment. And it's actually not happening this time and it's not happening because of ESG and the cost of capital is high. So I think, I think the price has to go higher in order to attract that investment. So long-term, it's actually, I think it's actually kind of scary with regard to oil, I think in the long-term. Pretty ugly. Yeah, just to impact. So the acronyms here for people who don't fall energy markets as closely as you do. Npv, of course, is exploration and production. This is the early stage development of, of natural gas, oil and other assets in the resources space and ESG, environmental, social and governance. The trend that we've seen toward wanting to reduce the carbon footprint of the world. And so you see these trends precisely as you say, playing out, with an absence of exploration and production, funds being committed, resources being committed. There's just simply not happening at the rate that you would expect given this market due to the social pressure from the ESG side? Yeah. I mean, a ESG is, I would say probably about 60 percent responsible for the oil prices that we are enjoying today. So how do you come up with that weighting? By the way, how do you, what makes you say 60%? I just pulled it out. Yes, I don't sounded great. And you can just pull it out of your aster. This is, this is years of watching. I know intuitions you've built up about this sector. I also something that you said earlier about the Fed and rate hikes. Boy, I think you're spot on there. I don't want you to actually take a look at a clip here that we run on revision today, a conversation between Alphonso Yellow and Jim Bianco talking about precisely that point. This is from a piece called Fed rates, inflation and recession. Actually, I should say it ran yesterday on the plus and pro tier here at revision. Let's take a look at that clip right now. In 2015, they started raising rates and all the way through the end of 2018, they raced rates to 2 and three-eights, broke the repo market in September of 2019. At every stage, it takes a lower and lower level to get to the point where you invert the yield curve and you break something. When I look at the terminal funds rate at 175 or two, I get the argument o, that this is a sign that inflation is going to come down. The Fed's going to be gradual. Everything's going to be okay. Stock school or 5300, while inflation is on its way down and it's all going to be good. I look at it and say, What that means is 6 rate hikes this year to more next year and you will be on breakage. Watch. That, that that's all you're going to need to basically invert the curve and break something. And why $30 trillion of debt, a highly levered economy, highly levered financial markets. I hear that Doug Leeds of the world say now we might have to take Funds Rate way above the churchill rate to like 45 percent. We're never going to get the 45 percent. We're going to have a complete mess on our hands long before we ever got to that kind of a rate. To try and reign in an accelerated inflation will go to two and we'll break things. And then we'll get demand will slow, inflation will come down. The federal state C, We fixed inflation. Yeah, it fixed inflation by causing a recession. That's my other analogy. And that was like, you know, I go to the doctor and say, I've got an infection by weighing and he pulls out the bone saw. It says it works every time. I was like, well, that's kind of not the way I wanted you to fix my infection while that's the way the Fed is, you want to get rid of inflation will just crash the economy. Never. There you go. No more inflation. Jimmy OCO says it so well, they're talking about the balance of risk between inflation and recession. Jared, give us your sense on what's happening with federal funds rate, how the FOMC is thinking about this economy, and what that balance of risk looks like in your analysis and assessment. Well, one thing you have to remember is that there's still like the Fed is not unanimous in calling for rate hikes. I mean, there's a lot of Fed members that are dovish. I mean, we saw Mary Daly. I don't know if it was this week or last week, but she wanted to hike 25 and then pause. And there's other people on the Fed who don't want to hike 50. And I really, you know, I, this is my call. I think the Fed's going to hike 25 in March. I don't think they're going to do 50. I really don't. We just look, I was a big proponent. This was months ago. I said the Fed is behind the curve. They're embarrassed. I was talking about Fed embarrassment. I said they've been embarrassed by this inflation. They're gonna, they're gonna hike a bunch of times to catch up. Pal was concerned about his legacy. But at the end of the day, it's not unanimous within the Fed and I don't think they're going to do it. So I think at most we might get for rate hikes this year, maybe less than that. So I've totally I've totally change my tune just in the last week or two. Yeah. And does that suggest, chair, this perception that markets simply cannot handle 50 basis points of the US economy simply cannot handle 50 basis points. I think that perception exists. I mean, it absolutely exists, but I don't think it's true. I think the market can handle it just fine. I mean, if you really like the only time in recent history and when I say recent history, the last 50 years, that a Fed rate hike cycle crash the market and caused the recession was in the early eighties. And like every other time, I mean, even the 990 for the Fed started hiking in February of 1994. They hiked about two or 3%. And remember the exact number in the bond market it caused, it caused a lot of problems in the bond market, but stocks really didn't go down that much. So the market can absolutely handle a 50 basis point Ray hike, can handle a lot of them. But we have this perception that it can. Yeah, it's interesting sort of basis for comparison. You're talking about a period when I think September 1981, ten-year treasury bills were at over 15.5%. Imagine that. Yeah, I mean, it's in the short-term. I think bonds are going to do very well. Let's put it that way. I think it's going to surprise a lot of people. I think he could get tens back to 1.6 by the middle of March. I think that's I think that could happen. Hey, do me a favor, unpack that logic. That reasoning for people who are relatively new to the fixed income space, who are just thinking about this in terms of equity markets. That's a, that's a pretty striking call. Us 10 year treasury yield it at 1.6%, give us a sense of what that means and how you're getting there. Well, really how I'm getting theirs was sentiment. I mean. You know, the, the treasury market operates on sentiment just like stocks do a lot of people, a lot of people think bonds are rational, they're mathematical. Nothing could be further from the truth. You know, so I mean here with tens, around 2%, you know, people think, Okay, like rates are gonna go to 2.5. Mortgages are going to go above four. It's going to choke off the economy like people are telling me stories. And just when everybody goes to one side of the boat, then they go the other way. So this is just a short-term call. This is just over the next two to four weeks. Yeah. If you've ever spent a Thursday night out with bond traders out, you know that they're not math professors. I'm looking at the comments here. I just saw Matt Hayes wrote, There's no gold of like gold. And that really is the sentiment we're seeing being price into markets today with golden and the relative differential in terms of daily trade action on, on cryptocurrency. Yeah, I mean, look at, you know, I've I've greatly increase my gold holdings and it's my biggest position. And I have, I have that much conviction on it. I know. It's funny because I have a portfolio full of crap. I have I have a bunch of stocks that I don't really have strong feelings about. But you know, this, this chart in gold, this breakout is, is one of the most powerful breakouts I've ever seen. And the interesting thing about it is that, you know, as, as, as a read through the comments on Twitter like not that many people believe it. They're like, Oh, I'm just going to wait for another opportunity to short it. I my guys. Have you seen the chart? Have you seen the chart? It is it's it's it's a thing of beauty. Yeah. Lots of questions coming in right now to his chair and any other topics you want to hit on before we switch over to questions. Now let's do questions. Great. So here's a quick question from Ralph humphrey. This is a fun one. I don't know about this. I'm curious to get your thoughts on it from the RV site. Can elaborate on his thought that Warren Buffet tells people to do the opposite of what he preaches. Yeah, I tweeted that out a couple of days ago. So I guess Buffett has invested in a Bitcoin exchange startup. I can't remember the details. But of course I know Brazilian Neo bank, right? Something like that. Yeah. Well Buffet, he says, everybody should be an index funds. And hedge funds suck. And he runs the biggest hedge fund in the world. You know, like he said for 20 years, that airlines were terrible, that they should have shot down Orville and Wilbur Wright. And then he invests in airlines, by the way, three years too late. He was like, he did it in like 2016, he should have done it in 2013. Does this all the time like he's, so don't listen to what Buffett says. Like watch what he does, watch what he does. Here's a question that comes to us from Achilleus, from the exchange, this is revisions internal social network. The question feature it is, what sectors are you bullish on for 2022? For the whole year? It's kinda hard to look out that far. I mean, I said energy is going to have a pretty big correction, but I think energy still could be the top performer for 2020. Although I will say, I will say that over the next couple of weeks, I think we have about 10 percent downside and stocks. I think the the nasdaq is going to get hit worse. There's going to be a buying opportunity in not, like, not nasdaq broadly, but a lot of these unprofitable TAC, I mean, they're really getting down to bombed-out levels. So I think in a couple of weeks to three weeks, you might have an opportunity to take a shot, you know, so the kathy would names. That's what we're talking about here. They're happy with names. So yeah. I mean, talking of Kathy, what names? I think Zoom is off about 50 percent from its highs. How do you know when these start looking like buying opportunities? It's kinda got, you know, it's it's a good question. I, you know, I don't know. It's really it's really subjective. I did see interesting chart today, Michael bad neck over withholds. He posted that. He put he put up a chart of Zoom and Exxon Mobil. And at 1 last year, Xoom was worth more than Exxon Mobil. And now ExxonMobil is worth 10 times more than Zoom. So I mean, that's just a crazy ratio, right? I mean, just, I mean, if you just look at the at the gross revenue that those companies generate, the differential is just extraordinary. Yeah. I wish I had seen that chart last year. Let's put it that way. Very well said. Very well said, Hey, listen, I wanted to come back to go because I know it's something that you've been thinking about. How do you own goal, Jared. What do you think of the miners? What do you think of the complex in general? And relative to the physical commodity itself, for example. I mean, it's a combination of the ETF and the minors. You know. I mean, I've here's a story. So back when I was running the ETF to ask at Lehman Brothers, there was a guy that came by from the world go council. It's name is Stuart something or other. And he was with a guy from states tree and they wanted they wanted to start this gold ETF and this is like 2004. Yeah. So I sat in a conference room with this guy and he pulled out a 10 ounce bar and put it on put it on a table and any gave it to us and, you know, you could hold it. And he says, this thing is worth 6 thousand bucks. And of course now it's worth 19 thousand bucks, right? But anyway, so in order to launch the DLD ETF, we had to sign off sign-on as an authorized participant. So I had like 500 pages of documents I had to read through and stuff like that. But we were one of the first banks to sign up as APs. And I was, you know, after reading all this stuff, I was like This is such a great product. As soon as it went public, I immediately bought some for myself. And I have not sold in 17 years. I still have it. So I have a question for age. I was that guy George milling Stanley from State Street, who was actually just on religion, I think yesterday could have been. I don't I don't remember the State Street guy's name but could have been. Yeah, he's a really interesting guy. I've interviewed, had the pleasure of interviewing it myself and I is really interesting insights and thinks about this in a very deep way. In terms of optimal portfolio balance as Sharpe ratios and some other attributes of investing in gold. It's a great interview if you haven't checked it out on religion, he's actually on with I think Rick Rule, I believe, who is obviously a very well-known name in the gold space. Lots of questions. Jared, keep coming in. Here's went from Hannah f from the exchange. This is a really interesting one. Once the Fed winds down the purchasing of mortgage backed securities, who's going to buy all that NBS? I don't know. I think that I think the private sector can absorb it. You know, there's, you know, mortgage mutual funds, pension funds, stuff like that, Like it for sure mortgage rates are gonna go higher, I would say and I'm gonna pull something out of my ass again. But I would say that the Fed buying mortgages, his probably lowered mortgage rates by 30 or 40 basis points. So you will see mortgage rates go up. Not egregiously. But yeah. Some more comments coming in. They're actually flowing so fast. It's tough to follow them. I here's when it comes to us from an Yasi from YouTube. Hello, What's Jared's opinion on Russia? Perhaps the, the cheapest stock market in the world. Extremely low valuations, very low debt levels. I don't know. Do you have the stomach to get into Russian equities at this moment? So I actually bought RS XS, I want to say two years ago. And I didn't have any patients with it and I sold it. There's there's absolutely going to be a good time. And maybe it's after the invasion. Assuming the invasion happens, maybe it's two weeks, four weeks after the invasion. I mean, yeah, russia trades at a big discount for good reason. But talk about cheap stocks and big, big dividends and exposure to energy and EM. I mean, it really, really has a lot of things going for it. Interesting that while we're talking international, here's a question that comes to us from Daniel. White, cows keep from revisions exchange and the questions to you. What do you think of the thesis for going long China, because they're easing into what looks like a pick up in credit growth while the US will likely be hiking in a slowing growth environment. I mean, I just as a general rule, don't touch China. But that is that is kind of interesting. I mean, look like in, in one of my newsletters, I have an EM fund, but it's a DMX China fund. It's, the ticker is FR DM, it's the freedom weighted index. I don't know if you've heard of that ETF. It's pretty interesting, but it basically leaves out all the bad human rights actors. So it's not just China, it leaves out Russia and stuff like that. And in that ETF, I would say over the last four or five months has outperformed EM by a lot. So I don't know if that performance is going to reverse. I really don't. I just don't have an opinion. Yeah. What is it about China that makes you not want to get involved with is transparency and the data issues or there's some other It's it's a transparency in the data issues mostly. I mean, I remember when I was a Lehman and this is in the mid 2000s and China's GDP was printing 8% quarter after quarter after quarter. And we're like, What the hell is going on. I mean, this is like made off It's like made ofs returns. And I mean, it was because eight was a lucky number. And I'm like this is, this is a joke. Like how can anybody analyze this? So people were people at the time, I mean, is the mid 2000s, people were looking at like electricity usage. Two numbers that you can't fake to determine GDP grow, you know. So I yeah, I just, I can't do it. Yeah, One of the great interviews that we've done it real vision is, and I'm blanking on his name at the moment is the gentleman who runs China beige book. Who does the analysis on exactly those questions that you were talking about, things that you can't fake, like electricity and some of the other aspects that you can you can get some transparency on without relying necessarily on the state sponsored data? Yeah, I would love to. I actually, I'm really interested in that, so let's talk afterwards. I want to I want to learn more about that. Yeah, that would be fun. Maybe we'll get you guys on together. Yeah. So Jared, as you look out to the future here, what are you looking for over the next, say 30, 60, 90 days with regard to markets February policy, which I think you've already talked about a little bit. And just the general outlook that you have for this investing environment. Well, like I said, I think things are going to get a little untidy over the next couple of weeks. Probably because of the eminent Bayesian. I think it's going to get a little bit ugly, but I you know, I never I never believed that this correction would turn into 2008, a 2000 a 50 percent down correction? I never really saw that. I I've I've the whole time I've been thinking that this would be about a 20 percent correction and that would represent a really good buying opportunity. So I think that is actually going to play out. Well said, by the way, Girard, You know what's cool about doing the show in the YouTube comments, make Z told me Leland Miller, before I could Google it, Leland Miller of course runs China page book. A great interview, a number of great interviews, I should say here on revision. Chaired as we come to the conclusion of this conversation, final thoughts, key takeaways that you'd like to leave our audience with? Yeah. I mean, I think, you know, I think there's still a lot of complacency out there. You know, the this, the initial decline which is band, I think we're down about 8% or something like that from the highs. The decline has been pretty orderly. When you saw stocks decline, you really didn't see ball spike. You really didn't see the skew get expensive. Credit never credit has widened a little bit, but certainly not to panic levels. So this has been a pretty orderly decline, which leads me to believe that the next leg down is going to have an element, a panic to it. Okay, in which is good, which is absolutely good. That's opportunities, but That's what I think's coming next. And how we know when that trade is N, what would you be looking for in terms of panic? What would it look? I mean, you know, at the end it was a Monday. I don't remember the date, but we know the day that we had where we were down 4% and up 4% in a single day. It was on a Monday. Do you remember that in an intraday move? Like that's that's the type of price action I want to see like for 56 percent moves in the index, BICS above 40, stuff like that. Yeah. Chart crisply said, thank you again for joining us. Always a pleasure. Do this show with you. Thanks a lot. Thanks for watching everybody. Great questions. Maggie will be back tomorrow with Christian Alexander on religion daily briefing. As always, the conversation continues on the exchange. Thanks for watching.