Chase Taylor: The Pain for Equities Isn’t Over
Tom welcomes back Chase Taylor to the show. Chase is a macro strategist and editor of Pinecone Macro Research.
Chase discusses the energy trade and why it may be getting a bit crowded. It’s probably time to take some profits. Taking the opposite view of Jim Cramer is often a good contrarian play.
We’re seeing demand destruction beginning for commodities as we enter into recession. We see that with copper at the moment.
It’s important to understand the differences between prices of crude and refined products. Refinery capacity influences prices and the China has been growing its refinery capacities. He expects further declines in fuel prices and a decline in inflation prints.
His April newsletter was the most bearish, and it’s clear the Fed wants equity and asset prices to decline. Nominal consumption numbers look acceptable, but people are using up savings. Moving forward, growth will be questionable until things bottom out.
Currently, demand destruction is occurring fastest in the housing market. We’re seeing new home supply exploding. There are rapid price drops occurring in the market. Higher rates have an outsized effect on mortgage payments, and therefore fewer people can get loans. We’re likely to see year-over-year declines in housing prices.
Lumber is a good indicator of how the economy and housing is performing.
Energy prices are likely to remain high for a few years. We’re not seeing much investment into the oil sector, which will continue to add some inflationary pressure.
Consumers are finding everything more expensive, and most investors are probably hurting. This will change spending patterns at some point as their bank balance drops. The real pain could be this fall, when everyone realizes just how broke they are.
A large news event will be required for the dollar to begin to reverse. We’re seeing a rather dire industry outlook for Europe and Germany in particular. Energy shortages could cause shutdowns of manufacturing. Europe has put themselves in a very difficult position with their energy policies.
Gold needs rates to stop moving higher and the Fed to at least pause. We also need the dollar to stop its rampage higher. The macro picture shows that this will all happen. Then the upside potential for gold is significant.
Time Stamp References:
0:00 – Introduction
0:34 – Energy, Prices, & Consensus
6:00 – China Imports & Oil
8:05 – Crude, Refining, & Inflation
12:12 – Fed & Market Outlook
15:09 – Fed Reversal & Labor
20:30 – Housing Demand & Lumber
29:45 – Will Inflation Return?
34:36 – Inflationary Demographics
38:10 – Defining Recession
40:56 – Consumer Health
44:00 – Safe Sectors?
49:46 – Dollar Factors & Europe
53:31 – Precious Metals Outlook
55:58 – Turnaround Ideas
57:30 – Cryptocurrencies
1:01:04 – Wrap Up
Talking Points From This Episode
- Energy trade may be getting crowded, take some profits.
- Equity prices are likely to continue declining.
- Housing market expectations and the impacts of higher rates.
- Thoughts on the dollar, precious metals and crypto.
Chase Taylor is a macro trader and the global macro strategist and editor at Pinecone Macro Research. Chase launched PMR in 2018, where he provides unique macro insights and analysis in a weekly and monthly research product.
Chase does not come from Wall Street or business school, but the military. He prides himself on being a self-taught macro thinker and practitioner. Chase started in the Air Force working on B-1 Bombers, but spent most of his career as a geospatial intelligence analyst, working on strategic and tactical intelligence problem sets. He has also worked in acquisitions at a research laboratory focused on rocket propulsion.
Chase combines the analytical techniques he learned in the intelligence community with a unique focus on history and nature to create a distinctive macro framework. He combines technical analysis, fundamental changes, and the power of narratives and reflexivity to uncover asymmetric investments.