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Larry McDonald: The End of a Rate Hiking Cycle is Great for Gold

Tom welcomes back Larry McDonald to the show. Larry is a New York Times bestselling author, CNBC contributor, and Political Risk Expert.

Larry discusses the reach of his recent book, “A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers.”

Larry is concerned about the impacts of rate hikes in Japan and around the world. Central banks are very nervous because they can’t assess the damage inflicted by their policies for many months.

The Fed doesn’t want to admit that financial conditions can overpower them. We’re going to see a 500 billion dollar swing in debt servicing. They are trying to scare investors with rhetoric, but the math is stacked against the Fed.

The yield curve is showing that a recession is certain. They are trying to regulate the energy markets by drawing from the strategic reserves. However, prices are still continuing to rise.

Japan is entering a doom loop between yield differentials and the value of the Yen. This could be a very dangerous scenario, and the only way out is to get help from the Fed. There are of globally players very concerned about the speed of Yen weakening.

When markets see the end of a rate hike cycle, we see gold buyers do very well. Gold suffers at the beginning of these cycles.

There is a crisis in metals, and we’re going to be needing a lot more of them to roll out green energy. Silver is starting to now outperform gold, which likely means speculative money will come into the space.

Time Stamp References:
0:00 – Introduction
2:02 – Japan & Rate Effects
6:10 – Lagging Impacts
9:12 – Commercial Banks
11:20 – Yield Curves
12:33 – Midterms & Pivots
16:45 – Bank Of Japan & Risk
19:05 – Treasury Risks & Gold
25:57 – Fed & Miners
27:16 – Labor & Inflation
29:42 – Refilling the SPR?
32:40 – Resource Opportunity
33:56 – Rhetoric Reversal?
37:57 – Prospects For Silver
41:46 – Wrap Up

Talking Points From This Episode

  • Serious concerns with Japan’s financial system.
  • Energy and how will the strategic petroleum reserves be replenished.
  • The outlook for gold and silver when the Fed finally pivots.

Guest Links:
Amazon Book:

Larry McDonald is a New York Times bestselling author, CNBC contributor, and Political Risk Expert. He is also the creator of The Bear Traps Report, a weekly independent Macro Research Platform focusing on global political and systemic risk with actionable trade ideas.

Thought-provoking Larry McDonald presents his captivating views on the Trump Administration, U.S. Financial Crisis, European Sovereign Debt, and China’s Economic Meltdown – spiced with actionable risk indicators, risk management lessons, and sprinkled with humor.

In 2016, Larry McDonald joined ACG Analytics in Washington, D.C., as a partner with a unique skill set, as one of today’s leading political policy risk consultants and strategists. From 2011 to 2016, he was Managing Director and Head of U.S. Macro Strategy at Société Générale.

In 2010, he founded an investment research firm which publishes the Bear Traps Report, focused on Political and Systemic Risk with actionable trade ideas. Larry makes weekly appearances on CNBC as a contributor focused on political and economic risk and opportunities.

In late 2006, as Vice President at Lehman Brothers, he led his team into betting against the subprime mortgage market, profiting the firm over $2 billion before its demise. In 2009, he wrote the international bestseller A Colossal Failure of Common Sense, The Inside Story of The Collapse of Lehman Brothers – translated into 12 languages, selling over 400,000 copies.

Before working at Lehman, he was the co-founder of, a website that provided convertible securities information with news, valuation, terms and analysis tools for convertible bonds, convertible preferred stocks, and other convertible securities. Convertbond was acquired by Morgan Stanley in 1999.

Larry McDonald’s proprietary risk indicators and risk management lessons are designed for Family Offices, Sovereign Wealth Funds, Hedge-Funds, and any investment group working to avoid the dangerous pitfalls in the post-Lehman financial markets.

McDonald was featured in the Academy Award-winning documentary: Inside Job, and also featured in National Geographic’s award-winning documentary: The 2000s. He is a regular contributor on Bloomberg TV and Radio, Forbes, CNBC and Fox Business.

Larry has delivered over 125 keynote speeches worldwide. He details the complexities of the political policy implications of the Trump Administration and their relationship with Congress. Larry also adds the Lehman factor to his speeches, “why it was allowed to fail”, and above all – valuable risk indicators which help investors avoid the aftershocks that continue to rock the global economy until today. His presentations are thought-provoking and captivating.

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