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Luke Gromen: U.S. Treasury Market Continues To Dictate Dollar Liquidity Policies

Tom welcomes back Luke Gromen of Forest for the Trees to the show. Luke discusses the outlook for U.S. debt and the interest, which is projected to exceed a trillion this year. He explains that the U.S. government will need to borrow more money to cover the interest expense, indicating a debt crisis. According to Luke, we are essentially insolvent and running out of time.

Luke does not anticipate a recession in 2024 because he believes the Fed will prevent the treasury markets from crashing. He predicts that the Fed will take action this year, even if it means deviating from their core mandate. Luke emphasizes that the functioning of the treasury market is the Fed’s primary goal. He advises investors not to hold long-term debt, as sentiment towards treasuries will eventually reach a breaking point, causing a major problem in the bond market.

Luke asserts that as the country moves closer to a wartime-style economy, traditional GDP metrics become less relevant in that type of fiscal environment.

He shares his approach to long-term wealth preservation, which involves investing in gold and Bitcoin. Luke highlights that gold has limited downside volatility, while a small exposure to Bitcoin can protect a portfolio.

Luke believes that the demand for oil will continue to surprise investors for the next few years.

Lastly, he discusses the numerous issues facing the electrical grid, which are often overlooked by investors and politicians. He points out that there will be a significant need for metals to maintain and expand the existing infrastructure.

Time Stamp References:
0:00 – Introduction
0:54 – Why Debt Size Matters
5:06 – No Recession in 2024!
7:45 – Feds Policy Options
15:45 – Powell & Ol’Yellen
17:56 – Bond Bubble & Investors
22:46 – Powell’s Dovish Turn?
24:06 – Xi & Biden Meeting
28:33 – Red Lines & Saudi/China
31:15 – Yields & Liquidity Actions
35:14 – Rapid Financial Loosening
36:10 – GDP Metric Usefulness?
39:55 – Shift To Preserving Wealth
44:00 – Perception Vs. Hopium
45:20 – Gold & BTC Usefulness
50:20 – Oil, Recession & Demand
56:46 – Peak Oil & Electrification
1:14:05 – Wrap Up

Talking Points From This Episode

  • Luke warns of a looming debt crisis in the US, as the government struggles to cover its interest expenses.
  • He explains why a recession is unlikely during 2024 and why the Fed will act to prevent it.
  • He advises investors to consider gold and Bitcoin for long-term wealth preservation amidst bubbles in treasuries and the dollar.
  • Luke highlights the surprising demand for oil and the overlooked problems facing the electrical grid and infrastructure.

Guest Links:

Luke Gromen began his career in the mid-1990s in Research at Midwest Research before moving over to institutional equity sales and becoming a partner. While in sales, Luke was a founding editor of Midwest’s widely-read weekly summary (“Heard in the Midwest”) for the firm’s clients. He aggregated and combined proprietary research from Midwest with inputs from other sources.

In 2006, Luke left FTN Midwest to become a founding partner of Cleveland Research Company. At CRC, Luke continued to work in sales and edit CRC’s flagship weekly research summary piece (“Straight from the Source”) for the firm’s customers.

In 2014, Luke left Cleveland Research to found FFTT, LLC (“Forest for the Trees”), a macro/thematic research firm catering to institutions and individuals that aggregates a wide variety of macroeconomic, thematic, and sector trends in an unconventional manner to identify investable developing economic bottlenecks.

Luke also provides strategic consulting services for corporate executives. He is a graduate of the University of Cincinnati and received his MBA from Case Western Reserve University and earned the CFA designation in 2003.

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