Ted Oakley: We are Nowhere Near a Bottom
Tom welcomes back Ted Oakley, Managing Director and Founder of Oxbow Advisors.
Ted believes the Fed will push the economy into a recession to mitigate inflationary pressures. He explains how rising rates effect many markets and economy. These rate hikes are slowing the housing market. In addition, consumers are beginning to cut back on expenses and many will start losing jobs as the economy contracts.
He discusses how some investors take loans out against their stock portfolio. This area of credit is huge, but exact figure are hard to come by. These loans can become problematic when stocks decline significantly.
The Fed continues to put the wrong people in positions. Too many lack business experience, and instead we have mostly academics. These types are completely disconnected from the man on the street. He notes that the Fed’s calls are only correct about a quarter of the time.
Any time there are major bubbles, the cause is usually massive leverage. Eventually, all the bubbles will have to deleverage until they reach normal levels.
The E.U. is composed of many countries with different economic capabilities, which is difficult to balance. ESG policies have definitely worsened the energy problems in the West. Shutting down pipelines while over regulating the carbon energy is a direct attack on that industry. It did not have to be this way if we had better leadership.
If bond markets begin to seize up, the Fed will intervene because that would lock up the economy. In addition, there is a lot of political pressure to alleviate inflation before November.
He cautions that the current rallies should be sold at least until investors are completely sick of these markets.
We’re in an incredibly unprecedented speculative time, and this means the pain will continue for a considerable period.
Lastly, Ted discusses how China will deal with their real estate situation.
Time Stamp References:
0:00 – Introduction
0:35 – Inflation & Rates
4:00 – Consumer Outlook
5:34 – Markets & Margin Calls
7:22 – Fed Academics
10:06 – Feds Dual Mandate
14:36 – Fed & Easy Money
15:58 – Japan’s Debt
17:29 – Normal Times?
20:30 – Europe Outlook & Energy
24:25 – Make the Fed Pivot?
28:10 – What is Worth Buying?
31:08 – Speculation Abounds
35:54 – Real Estate & China
38:08 – Wrap Up
Talking Points From This Episode
- Why the Fed intends to create a recession.
- The effects of leverage on the blowing up of asset bubbles.
- The E.U.’s complex economic structures and the effects of ESG on energy markets.
- Why credit markets may cause the Fed to pivot.
J. Ted Oakley, CFA, CFP, is Managing Director and Founder of Oxbow Advisors. Ted has over thirty-five years of experience in the investment industry. The “Oxbow Principles” and the firm’s proprietary investment strategies were developed as a result of the unique perspective Ted gained throughout his almost four-decade tenure advising high net worth investors.