Kevin Muir: MMT, the Bond Bubble, and the Golden Insurance Policy
Tom welcomes a new guest Kevin Muir of “The Macro Tourist” to the show. Kevin is a private trader with his own newsletter. Kevin has recently sifted through the theories behind MMT and discusses why it’s primarily an economic theory and not necessarily political.
Kevin is cautious of the current bond markets, as investors may have placed too much faith in them. The coming period will likely be one where previous monetary policies are no longer effective. As a result, central banks are more likely to adopt direct fiscal stimulus and may even recommend lowering taxes. Trump seems to be utilizing these policies more than previous administrations and is currently building up a huuge general treasury account. That account now has over 1.5 trillion dollars, which Kevin feels will be utilized when it’s most convenient likely before the election. As a result, investors may want to avoid getting overly bearish on the markets during the coming months.
Understanding MMT could be important for investors because this is the direction the world appears to be heading. MMT will work well at first, then become abused, and finally, inflation will set in. However, Kevin doesn’t believe that it will lead to hyperinflation.
Kevin’s investment strategy is focused on owning assets like gold that will do well in an inflationary environment. He believes that stock markets will continue to head higher.
Time Stamp References:
0:47 – Concerns about bond ownership.
3:00 – Fiscal versus traditional stimulus.
8:00 – MMT theory and Trump.
18:00 – Long-term consequences of MMT.
21:00 – Treasury General Account is Unspent 1.5T
26:55 – Hedging against MMT (gold).
32:30 – Negative outlook for bonds.
37:30 – Short and mid-term outlook.
41:40 – Watch and learn about new ideas.
Talking Points From This Episode
• Bonds and central bank printing.
• Central banks will stimulate with fiscal policy.
• MMT Economic Theory principals
• The long-term trend with inflation is shifting.
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 proceeded to trade 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 tag line is “All I Bring to the Party is 25 Years of Mistakes.”
Kevin Muir is a CFA and a graduate of University of Toronto economics program.