Tom welcomes macro money manager, bond king, and financial planner Steven Van Metre back to the show.

He discusses why his macro thesis can be wrong in the short to intermediate-term but believes it will play out as interest rates collapse to zero. Those that are bullish on gold miners should also be bullish on bonds. He expects the GDX to fall and explains the relationship between it and the TLT. He believes bonds will rally, GDX will drop much lower, and then he can flip his portfolio into the junior miners.

Falling mining equities often are a leading indicator of a coming liquidity event and a move lower by the broader equities.

Steven discusses the broad money supply and why people thought it was signaling inflation. However, most of the stimulus money in April just went into people’s bank accounts. He believes that we are in a liquidity trap with too much liquidity and that the demand for money is outpacing the money supply. Low-interest rates have reduced consumer’s options for investing.

He believes the Fed needs to do the opposite to generate inflation. If the Fed flooded the economy with bonds from their balance sheet, that would drive up interest rates and get consumers to chase those returns.

He argues that the U.S. government can service its debt by merely raising the debt ceiling. He is anticipating a slowdown and a debt contraction. If the Fed raises rates, we will see consumers reduce their borrowing. In debt-based economies such as ours, it requires ever-increasing amounts of debt issuance. The Fed, therefore, is unable to raise rates because that will crash the economy.

He believes there is a risk of a massive short squeeze in bonds because many investors are short. The Fed will inadvertently create a short squeeze in bonds. The long-end of bonds will be driven to zero, and many may have to sell their equities to cover their bonds. He expects a crunch is coming unlike any we’ve ever seen before. If you want to find inflation, you need to watch the short end of the yield curve. If the two-year yields break overnight, he says, “you will see the definition of risk.”

Once you understand these relationships, you know exactly what to look for in the markets, and if you have a high conviction, you can make that bet.

From 2008 to 2011, GDX moved 300 percent, and that type of move could be a generational opportunity.

Time Stamp References:
0:00 – Intro
1:06 – Trends and Timelines
8:04 – Fed & Liquidity
17:00 – Fed & Inflation
23:15 – Fed & Higher Rates
26:12 – Bonds & Short Risks
36:10 – Preserving Capital
38:22 – GDX vs. Equities
40:12 – Long-term bullish gold
43:49 – Wrap Up

Talking Points From This Episode:

• His contrarian macro thesis.
• Fed actions, rates, and inflation.
• Coming liquidity crunch and opportunity.

Guest Links:
Website: http://www.stevenvanmetre.com/
Twitter: https://twitter.com/MetreSteven
YouTube: https://www.youtube.com/channel/UCRIQM-CUkxVazVPv980YZsw

Steven Van Metre is a Certified Financial Planner™ Professional and an Investment Advisory Representative with the registered firm Atlas Financial Advisors, Inc. He is also a financial planner and portfolio manager of President of Steven Van Metre Financial, specializing in retirement income strategies and the direct management of client assets.

Steven designed a planning process to help clients understand, prepare, and become active participants in creating their retirement plan. His method helps people understand what their retirement will look like, and what they need to do to make their retirement goals come true. Over the past 15 years, Steven has coached many people through to an entirely successful retirement.

His approach utilizes a sophisticated income planning spreadsheet that considers the client’s current age, retirement age, future income sources, inflation, and simulations under various historical stock market conditions. The ultimate goal is to provide peace of mind before and after retirement.

Steven creates and actively manages several risked based asset allocation portfolios. He uses a strategic asset allocation philosophy with a tactical focus to pick funds weighted towards the economy’s expected growth sectors. These portfolios are regularly rebalanced to ensure optimal sector position. Investors in these portfolios can expect long term returns consistent with their risk tolerance.

In addition to managing portfolios, Steven is one of the top annuity agents in the U.S. His approach to utilize annuities as part of income planning helps clients find the right annuities with the highest contractual guarantees to lock-in retirement income for life. This approach allows clients to invest the balance of their retirement savings in the market with less worry about market fluctuations than others who are fully invested in the stock market throughout retirement.

Steven teaches an adult education course on retirement planning for the Levan Institute for Lifelong Learning at Bakersfield College. Offered twice a year, attendees come away with a greater understanding of planning for retirement and making their investments last a lifetime.

Steven is sought by peers for advice and conducts webinars to educate other advisors on annuities and real-world expectations from them. He regularly follows a variety of economists to keep pace with changes in the marketplace. His insightful advice has been featured in print and on local radio and television.

A resident of Bakersfield for over 25 years, Steven graduated from National University with B.A. in Business Administration. He earned the Highest Award for Achievement from the Dale Carnegie Course.