Diego Parrilla: Gold – The Anti-Fiat Bubble
Tom welcomes back Diego Parrilla to the show. Diego is an author, engineer and economist. He has an extensive background in commodities, having worked for several major banks.
Diego believes the Fed hiking cycle is approaching its peak as we enter next year. There are limits to how high they can go, and the rate of hiking cycles has placed a lot of pressure on markets. The dollar has been putting pressure on other countries. There are pockets of weakness in the system, and it’s difficult to know what might burst first.
How rapidly the Fed will pivot will depend on how markets react and the credit markets. Currency markets will also be a concern and there is excess hidden leverage in the system. Hopefully, central banks will learn the risks of zero and negative interest rates. The result is gross mis-allocations within the economic system.
Everything revolves around inflation and as we enter the next phase of markets, there is a perception that we will print less. Diego believes the inevitable result will be even more money printing. Eventually, the only way to sustain the system will be to grant central banks yield curve control. To prevent bubbles from imploding they will need to print more and that will result in further inflation. We’re just delaying, transferring, transforming, and enlarging the problems.
The energy situation in Europe is very interesting because it shows the problems that have built up. There is a reliance on Russia and a lack of capital investment. Governments want energy security, but the problems can be exacerbated by hoarding. Energy subsidies will only increase the problems of production capacity.
He explains why he likes gold and feels that it is an anti-bubble investment option, even though it’s been frustrating for many investors recently. He cautions that now is not the time to be using leverage and discusses how best to position one’s portfolio.
Time Stamp References:
0:00 – Introduction
0:44 – Q4 Outlook
3:50 – Lag Effects
10:06 – Fed & Wealth Effects
17:54 – Energy & Europe
24:24 – Russia’s Resources
32:25 – China Outlook
37:14 – Hong Kong Peg
45:30 – Gold the Anti-Bubble
50:48 – Gold & Hike Response
54:56 – Volatility & Rebalancing
1:11:08 – Wrap Up
Talking Points From This Episode
- The Fed is reaching its rate hiking limits.
- The speed of the Fed’s pivot will depend on the credit markets.
- Central banks will eventually be forced to use yield curve control as debts are unsustainable.
- Why gold is the ultimate anti-fiat bubble.
Diego Parrilla is Partner and Manager of Macro Commodities. He joined Quadriga in March 2017 with nearly twenty years of experience in macro, commodities, and sales and trading in London, Singapore, and New York. He has managed risk and global teams in prestigious investment banks, such as J.P. Morgan, Goldman Sachs, and Merrill Lynch, in various global leadership roles.
In 2011, Diego founded Natural Resources and Commodity Advisors (NARECO) in Singapore, advising institutional customers and managing macro strategies and raw materials.
He then joined the management team at BlueCrest as Portfolio Manager, managing $150m in macro absolute value strategies and raw materials. Later he led raw materials businesses at Dymon Asia and Old Mutual Global Investors in Singapore before returning to Spain to join Quadriga Asset Managers as Partner and Manager of Macro Commodities.