David Hay: The Fed is Going to Overwhelm the Bond Market with Supply
Palisades Gold Radio: 10-19-2023
Tom welcomes back David Hay author, Co-Founder and Co-CIO of Evergreen Gavekal. David discusses various economic indicators that may signal the beginning of a recession.
Tightening of credit conditions, with credit spreads expanding rapidly, and how the recent events in the Middle East have affected the safety trade for US Treasury bonds.
David expressed concern about the current federal fiscal funding situation and its potential consequences. He also mentioned the conflicting views in the market between short-term investors and long-term investors, which is creating tension in the bond market.
They discussed the Federal Reserve’s policies and how they have continued to increase interest rates despite the slowing economy, which is starting to impact the real economy with higher borrowing costs and tighter credit conditions.
David also shared his observations about the job market and the economy, noting the strength of nominal GDP but attributing it to the large deficit spending.
They also talked about the current trends in the nuclear energy industry and how China and Russia are leading the way with new technologies, while the US is lagging behind.
Environmental policies and the importance of separating fact from fiction in the green energy transition. Additionally, they touched on the current state of the oil industry and how it has managed to maintain record levels of production despite lower drilling activity.
Lastly, David highlighted the importance of having dry powder, or cash, to take advantage of opportunities during market crashes.
Time Stamp References:
0:00 – Introduction
0:45 – Credit Contraction
3:36 – Bonds As Safe Havens?
5:41 – Treasury Demand
10:28 – Investor Sentiment
12:34 – Policy Lag & Labor
15:30 – GDP Strength/Deficits
18:25 – Fed & More Q.E.
21:20 – Dollar Strength & Gold
27:16 – Tech Bubbles & A.I.
30:00 – Energy & Nuclear Outlook
36:56 – SMR & Public Opinion
40:20 – Renewables & Realism
45:29 – Oil Industry & Drilling
50:40 – Natural Gas
52:49 – Bonds Now & 1987
55:06 – Wrap Up
