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Michael Gayed: Supply Chain Destruction will Continue to Drive Inflation Higher

Tom welcomes returning guest Michael Gayed, Portfolio Manager at Toroso Asset Management. Michael is the author and publisher of the Lead-Lag Report.

Michael discusses the inflationary picture for the economy and the hellish performance of the bond markets. We’re seeing large drawdowns in bonds and severe pain in fixed-income bonds. Negative real rates have been a problem for a while and the problems in this sector have broad implications. Yields spiking and bond sell-offs will increase the cost of financing. These costs will reduce the income of most companies and countries.

Europe is likely already in a recession and the United States may also have reached that point. He discusses the normal signs of recession and why the stock markets may not care.

We see a strong dollar with strong commodity demand which is an interesting phenomena. It seems unlikely that the Fed can control inflation and higher interest rates are not going to help countries get more grain.

Michael believes that unions are likely to make a long-term come back. It’s difficult for the United States to produce many products at reasonable prices due to the cost of labor. It takes years to build up resources and manufacturing sectors. Most people today are looking for instant gratification.

Rating agencies may be forced to begin downgrading companies, particularly in this environment. They are seeing a lot of abnormal market relationships but eventually, markets will correct for these conditions.

He discusses his expectations for commodities and further money printing. Michael notes there is considerable infrastructure crumbling around the world.

We don’t know the true prices for food given the current circumstances. However, we’ve been heading toward a food crisis for many years due to a lack of investment.

All of the current global problems will take considerable time to play out. Keep an eye on mortgage rates and housing because that may be the area where there is a considerable concern.

Time Stamp References:
0:00 – Introduction
0:41 – Inflation Factors
3:50 – Yield Curve & Recession
5:47 – Supply Chains & Rates
9:10 – Wages and Prices
11:46 – Rates & Debt Servicing
17:33 – Market Relationships
22:12 – Conflict Priced In?
25:19 – Institutions and Funds
28:42 – Commodity Demand?
31:52 – Sanction Consequences
34:09 – Housing Market Concerns
37:28 – Wrap Up

Talking Points From This Week’s Episode

  • Thoughts on how inflation will play out and the state of bond markets.
  • Why we may already be in a recession.
  • Lack of capital investment in resources and farming will take time to correct.
  • Keep a close watch on housing markets as a correction seems likely.

Guest Links:

Michael A. Gayed, CFA, is Portfolio Manager at Toroso Asset Management, an award-winning author and publisher of The Lead-Lag Report.

Michael is a well-respected results-oriented Investment Manager showcasing 15 years of successfully executing initiatives that result in significant revenue growth. In addition, he is known for identifying and implementing various investment strategies to capture market anomalies while maintaining a business mindset beyond portfolio management.

Michael offers a proven track record of evaluating business/investment opportunities, and quickly understanding market dynamics and relationships. He is also an out-of-the-box thinker committed to strengthening organizations’ financial performance through dedicated hard work and a passion for investing.

He is a graduate of (Cum Laude) NYU Stern School of Business with a Double Major in Finance & Management and has a Bachelor of Science in Finance & Management. In addition, he is a Chartered Financial Analyst from the CFA Institute.

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