Optimal Capital’s Post

Transcript

But let's say ask Francis Stacy, the optimal Capital director of strategy. Michelle Schneider, the Market Gauge Chief strategist. Michelle, what do you think a report like that? Like a June cut, better or less likely? Well, I think at this point it's still likely because there are other factors involved like the fact that the debt is so high in interest rate on the debt becomes extremely unmanageable at current rates. So there is talk that they may cut just on the basis of that. But really what's more important is whether they cut or not, is inflation starting to pick up and if so, will it continue on its own fumes to grow and create a bigger problem down the road? Francis, where are you on this? Well, The thing is, is that he's got to project that he's going to go a little bit easier rather than hire for longer because there are so many debt obligations that the market is going to start pricing in that risk. As Michelle said, however, he really has everything he says is is overdone and telegraphed and everything through the markets and they will, they will ease or tighten financial conditions for him. But the real problem on the long term horizon is the fact that foreign. Demand for U.S. Treasuries is falling down and he's got to keep these interest rates high enough to keep demand for treasuries so that we can continue this record amount of fiscal spending. You know what's kind of wild guys and I know we're waiting to see what the Fed does and how soon it presumably starts cutting rates, but market rates have been backing up. I was surprised to see just how much they've backed up the, you know, after the first quarter we ended last year at around 3.85, three-point 86 for a 10 year and now we're in and out of the four. .20% Neck of the woods What What do you make of that, Michelle? Well, actually right now I think what's even more important than the 10 year is what happens with the 30 year, the long bonds, that's where we're focusing on because they also have seem to have bottomed out in terms of the yields have come down while the long bonds, the TLT's, the instrument that's traded for that is going up, which means that what could happen is those interest rates on the back end continue to come down whether they cut or not cut. Essentially what it means is twofold. One is the confidence in the economy may not be as great, really because the flight to safety back to bonds is possible. And two is it will be a welcome cheer by commodities that are already starting to reinflate. Gold of course, being at the top of the list. But also, even if you're looking at miners, they've taken a big move this week. Silver looks like it could catch up. And of course some of the soft commodities have already gone crazy. Coco being at the top of the list. Yeah, I know you're right about that. And a lot of even the Easter Bunny is saying no mas. For God's sake, but, but Francis, I'd be curious what you make of how we did start the year the first three months of the year, pretty good clip for the S&P 500. Usually I think in about 88% of the time you have a good first quarter, you have a good first year. In other words, the whole year is, is is about the same. Do you buy that? Yeah. Because you have a re acceleration in global growth, you have a re acceleration in growth in the USA and that's what Paul was saying is that growth is getting stronger. And so the markets are going to be substantiated by that. They're going to be substantiated by higher fiscal spending. They're going to be substantiated by sort of eight sort of dovish talk without Powell having people just go crazy on loosening financial conditions. And so I agree unless there's something in the credit markets that that's going to continue but alongside of that. Commodity prices will rise. There is a lagging effect where commodity prices get pushed into inflation. You know, gas, it's like one to two months, but food, it can be 4 to 8 months. Shelter, it's 18 months, which is 1/3 of CPI. And so attendant to that, you will get a re acceleration in CPI and we'll have to see what Powell makes of that, you know, towards the back half of the year. Yeah, because it's the food area that's the most stubborn on that inflation front. I don't go anywhere, ladies, because I do want to get your, your take on the practical everyday stuff people buy and why that is such an. Adjutant for them, as well as what's been happening to the crypto arena. Remember, crypto is trading as it does 24/7 and it is making some unusual moves. I'm gonna tell you about that in a second.