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Kevin Muir: Are We Heading for a Decade of Inflation?

Tom welcomes back private trader and newsletter publisher Kevin Muir of “The Macro Tourist” to the show.

Investors seem to be having problems understanding the current economy and inflation. Those in charge are arguing that this past month had no inflation. The reality is that month over month figures may be indicating that inflation has peaked. This may cause the Fed may to be less hawkish than most investors are expecting.

Kevin argues that bond markets are assessing the economy and the possibility of a recession differently than stocks. Kevin cautions against selling stocks at this point. Over the long-term, stock markets should reflect the economy, but over shorter periods they can get ahead of themselves.

Kevin is more of a bull on the real economy because of our past monetary policy. We’ve forgotten that fiscal policy can provide some benefits to the economy.

Inflation can’t be fixed by spending more on fiscal policies. He expects inflation to continue for at least a decade, and this will be a big factor that investors will want to consider.

He’s more concerned with bonds than the stock market. Should the Fed decide they don’t need to reduce growth, then we could see a huge shift away from bonds. We could have a 1987 style setup with bonds triggering a crash. Bonds aren’t providing the safety hedge that they did historically. The monetary environment is shifting rapidly, and investors may be overlooking this looming issue.

Kevin contrasts the differences between the Canadian and U.S. housing markets. Canada appears to be contracting, but the United States could see higher prices.

He believes the only way the Fed is cutting over the next year is if something critical breaks.

Gold has a role to play as a way of mitigating risk and hedging low real rates. Gold has suffered for the last few months because of Fed policy on rates and the dollar’s rise.

Lastly, he outlines why this coming inflationary decade may be an opportunity for carefully positioned investors.

Time Stamp References:
0:00 – Introduction
0:34 – Markets & CPI
2:08 – A Turning Point?
6:24 – Stocks & Growth
9:36 – Bearish Sentiment
12:50 – Pandora’s Box
16:25 – Stimulus & Recovery
18:24 – More Bond Concerns
25:20 – Counterpoints
30:04 – Housing Bubbles?
32:52 – Tech Equities Sell-Off
35:08 – Crypto Thoughts
37:00 – Fed Objectives
41:55 – Supply Chains
45:37 – Inflationary Opportunity?
51:54 – Golds Role & Doom
59:06 – Wrap Up

Talking Points From This Episode

  • Inflation outlook and the market’s expectation of a recession.
  • Why bond markets are carrying considerable risk.
  • Differences between the Canadian and U.S. housing markets.
  • Golds role of mitigating risk, and it’s ability to hedge rates.

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Kevin Muir started as an institutional equity derivative trader for a big Canadian bank in the 1990s. In 2000, Kevin decided that bank-life wasn’t for him, so he traded his own account for the next two decades. Along the way, he started writing the MacroTourist newsletter, which he describes as an “almost daily” letter about the markets that still manages to have fun. The MacroTourist newsletter attempts to bring a unique take on a variety of different financial topics. Kevin’s tagline is, “All I Bring to the Party is 25 Years of Mistakes.”

Kevin Muir is a CFA and a graduate of the University of Toronto economics program.

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