The Pomp Podcast - #802 Inflation Continues To Hurt The Poor The Most w/ Darius Dale

Starting point is 00:00:00 What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Darius Dale is the founder and CEO of 42Macro, the leading macro risk management advisor. In this conversation, we talk about what's going on in the macro economy, what's happening in the financial markets, how Darius is looking at various metrics, and also what you at home should be thinking about as you invest your capital. I really enjoyed this conversation with Darius, and I hope you do as well. Before we get into this episode, though, I want to quickly talk about our sponsors. Today's episode is brought to you by Abra.

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Starting point is 00:02:30 your crypto by linking to btcs staking pools this groundbreaking dashboard is currently in beta mode test out the btcs data analytics dashboard now by visiting btcs.com again that's btcs.com go check it out. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only. All right. We have our friend Darius coming to join us, 42 macro one of my favorite and probably one of the best macro analysts in the world darius how

Starting point is 00:03:18 are you my friend i'm good man appreciate the very kind uh intro how you doing brother of course yesterday is like the super bowl for a macro analyst uh you know the real super bowl is in a few weeks we'll be there no no no uh no flex there but uh in terms of but in terms of uh uh the fed meeting yesterday just give us your kind of high level thoughts in terms of uh what's going on? Should we read into anything? What's the big takeaways? Yeah, absolutely. So there was two Fed meetings yesterday. There was the statement based on the FOMC, the Federal Open Market Committees. This is the group of people who sit around in that dark room and determine the price of money for everybody in the global economy. Their statement was effectively what the market

Starting point is 00:04:00 wanted, which was essentially, hey, look, we're tightening monetary policy. We're draining liquidity from the system. We're taking away the punch bowl. But hey, don't worry. The party's still going you know there's still just your booze in the punch bowl uh the second fed meeting yesterday sort of started with jay powell's press conference jay powell being the chairman of the federal reserve and you know effectively relative to that punch bowl analogy not only did jay powell say hey look yeah we're going to take away the punch bowl i might actually call the cops you know like imagine being at a high school party or a college party where not everyone is 21 and you know that's like the number one fear for anybody who's ever been to a kegger it's like the cops

Starting point is 00:04:36 get called, right? He's like, yeah, I might call the cops too. So like, you know, it's a weird dynamic where the markets now have to price in this sort of persistent uncertainty of the cops showing up. And that to me is the big issue for markets and ultimately will be a big issue for the economy later this year. So of course, he's talking about interest rates rising soon, I think was the word he kept using. Let's talk first about this idea of narrative and also inflation. So obviously, if people start saying, I think inflation is coming, I think inflation is coming, investors, they move their capital before the inflation shows up. And also people in the business world, they start to increase prices and kind of act before that inflation

Starting point is 00:05:15 shows up. So you can, in some way, talk inflation into existence, whether you mean to or not. What my view is, is that they are trying to do the opposite. Now, they're basically trying to talk inflation down without actually doing anything yet. Is that your read as well with this tough talk, but no action yet? Yeah, 100%. And that's why they've taken so long. So they have acknowledged that there's been an inflation problem really going back since the late summer and ultimately in their statements over the last two or three statements. The issue is that they don't want to crash markets. They prefer not to. Ideally, the markets in the economy remain very robust throughout 2022, despite all their tightening initiatives. The problem is you

Starting point is 00:05:57 can't get inflation under control without tightening financial conditions. And if you tighten financial conditions, you're obviously going to slow down the economy. And the issue is the Fed doesn't have a great track record. In fact, I think it's like 0 for 12 or 0 for 13 at sort of trying to slow down the economy to beat inflation and actually not catalyzing recession. So what the market is ultimately really concerned about, not yet, but will be increasingly concerned about as we progress throughout 2022 and into the early part of next year is that, hey, look, at some point, the market's going to realize the Fed has overdone it and the market will absolutely realize the Fed has overdone it before the Fed realizes.

Starting point is 00:06:35 And that's a problem. So when you think about asset prices themselves, right, we've obviously seen tons of tech stocks sell off significantly over the last few months. We've seen Bitcoin go down 50 percent. We've seen a kind of cooling off across a lot of these various aspects of the market. But we've also seen Berkshire Hathaway hit an all time high and kind of a lot of the value type stuff do well. How do you look at the impact of these Fed decisions on the actual asset prices across various sectors? Yeah, so that's a great, phenomenal question. That's a high level finance question there. So I'll unpack. And so you said a few things that are really important. The types of stocks that are outperforming, the types of assets that are doing well,

Starting point is 00:07:15 or relatively well, not everything's doing well in absolute terms, but relatively well, have been these sort of kind of real economy stocks like banks and energy stocks, you know, things that you can physically touch and taste and hold. Those types of stocks tend to be less influenced by the direction of interest rates, either short-term interest rates or longer-term interest rates. And all the things that have been sort of more correlated to longer-term interest rates correlated to kind of narratives around sort of future growth prospects, future prospects of adoption, anything that is sort of has a very strong growth curve has really been hit. So that obviously includes Bitcoin, includes a lot of tech stocks, just includes a lot of higher beta assets

Starting point is 00:07:57 in general. So the fact that we're seeing that rotation is suggestive that the market is not ready to sort of go at this particular time and juncture and go all the way down and actually start to crash. Because typically what you see is that whenever the market rotates in what we call a pro-cyclical manner in a correction, it usually leads to a sort of recovery. You know, that's a dip that you generally want to be bought. What you don't want to buy, the kinds of dips you don't want to buy are when the market is getting defensive, i.e. buying sort of boring companies like utilities, like consumer staples, like Walmart and things of that nature. Those are the kinds of dips you don't want to buy. So things are fine for now, but the window for them to not

Starting point is 00:08:36 be fine, it continues to shrink. So let's talk about the Fed's impact on individuals themselves, Right. Earlier this year or at late last year, a couple of months ago, there was this famous quote that Jerome Powell was asked, you know, hey, do you think the Fed is contributing to wealth inequality? And he was like, well, nobody's coming to my office and told me that. And we were I mean, we had a field day like we absolutely had a field day at the fact that he said that we pulled up the picture of the office. We were like, how do you even get into that building like the whole thing? Right. And so obviously, I think that maybe he misspoke. Let's give them the benefit of the doubt there. But how much should we be blaming the Federal Reserve or other types of monetary and fiscal policy kind of overseers on things like the wealth inequality gap, which is now at the kind of widest range that it's ever been? Is there a way to kind of quantify that or should we actually go and kind of point the finger at them or is that unfair? No, no, they're certainly, in our opinion, the number one culprit. Now, they're not the only culprit. Sort of you could sort of I would point to sort of kind of two big things, actually three big things that have really catalyzed this sort of widening income dispersion and wealth dispersion we've seen in the U.S., U.S. of A.

Starting point is 00:09:42 And really throughout the global economy, because what I'm about to say is not endemic to the U.S. One sort of globalization. You know, we've shipped a lot of our jobs to sort of lower cost producers, namely China, particularly when China joined the WTO back in, I want to say, November 2001. In fact, I remember when I was a kid, this must have been when I was sixth or seventh grade, the WTO riots were a huge deal in Seattle, from Seattle. And, you know, needless to say, like, you know, 20-something years later and, you know, 50% of our manufacturing jobs having been offshore, I could see why that people were having a riot back then. So that was kind of foreshadowing to where we are today. But you kind of digress. So that was the number one, globalization and the kind of hollowing out of our manufacturing base and our middle class. Number two, I would argue, obviously, the proliferation of technology.

Starting point is 00:10:31 You just need less people to do stuff. It's just a lot easier for one person or a small group of people to accomplish the things that a lot more people historically had to. You needed more manpower to get accomplished. And then lastly, the Fed. I wouldn't say last of the Fed, because I think the Fed is probably the overwhelming driving force here, which is the more you cut interest rates, the more likely it is it favors the existing players.

Starting point is 00:10:54 You know, the existing players can sort of raise debt very cheaply and build very large moats around their businesses. And more importantly, not only do they build boats around the businesses, you know, they can start acquiring other businesses and doing things like that. And that acquisitions, obviously, you tend to see less innovation, you tend to see less new business formation and all the good stuff that comes along with that. So the economy itself just becomes less dynamic. Got it. And so when you start to think about like inflation, how it impacts various kind of cohorts of the American population. Right. I think it's very clear that inflation made rich, richer and made poor, poor in the sense that a lot of the inflationary goods, especially the most severely affected inflationary goods, is a large portion of monthly expenses for the least fortunate or the most vulnerable in our society. And so when you start to think about this, is this one piece of like the positive side of inflation coming down, of this monetary policy kind of tightening, is that there will be some relief for those folks that are the most vulnerable? Or are we reading too much into it and actually prices that went up, they're not coming back down. And so maybe there's not an increasingly worse situation, but they're pretty much in a bad situation and they're stuck there because those prices that went up aren't going to be brought back down over time.

Starting point is 00:12:10 Yeah, no. So prices almost never go down. Right. Deflation is a very rare occurrence. It only happens in recession where you actually see prices go down and not and even not all recessions have actually seen the price overall price level, the price index level of CPI go down. What we're talking about when we say the word inflation is not akin to prices, it's akin to the change in prices. And so right now, on a year over year basis, per the most recent headline CPI statistics, the amount of price, whatever you're paying for something has gone up 7% on a year over year basis. So, for example, if you bought a bag of chips that cost a dollar in December of 2020, it now costs a dollar seven, a dollar and seven cents in December of 2021. So that doesn't seem like a big deal. But the reality is when you're living on a budget and you're already living paycheck to paycheck and, you know, when one cost go up, you're hopeful that, you know, another cost goes down so that your overall living situation and quality of life doesn't change. But what happens with inflation is that everything is going up all at the same time and it's going up faster than your wages. And so that your overall purchasing power and the quality of your life goes down. I certainly understand that better than most. Yeah. And so when you start to think also about kind of the Federal Reserve, one of the things that I always, you know, kind of balance in my head is they have official mandates and then they have these unofficial things that people kind of try to label or throw onto them.

Starting point is 00:13:32 So the official mandates of stable prices and maximum employment. Right. And that's their goal is how do we get to full employment? How do we get stable prices? For the last two years, for the most part, they failed at those two things. Now, there have been these external kind of reasons why and people can debate all day long. Are we heading the right direction, wrong direction, whatever. But it also seems like the Federal Reserve is now being asked, whether it's by politicians, by the American public, by the media, et cetera, to start to weigh in on other issues as well, not just stable prices and full employment. So two examples that I'll use is global warming or climate change and racism, right?

Starting point is 00:14:09 And so let's start first with the global warming type stuff, which is we've seen multiple calls, both from politicians, media, and also the American public of the Federal Reserve should, you know, basically come out publicly, make a statement and commit to actually addressing climate change or global warming. How do you think about that type of stuff? Is that a distraction for the Federal Reserve? Do they actually have an ability to impact that stuff? Or is this like classic virtue signaling of those various groups just trying to point a finger at, oh, nobody likes, you know, central banks. Let's just blame it on them. Yeah. Well, no, I think it's a bug of the overall system.

Starting point is 00:14:39 Right. The Federal Reserve monetary authorities have no business dealing with these types of issues. The issue is that we actually can't get anything done in Congress. And so we punt these big major societal issues, these big debates of our time onto the only sort of, you know, policymaking board that is not as hostage to the election cycle, right? The Supreme Court's got its own, you know, it's busy doing its own thing. So like the Fed is like, all right, well, you guys don't have to get elected. You deal with this. And that's exactly what's happening when it comes to global warming. What was the other one? It was global warming and oh, and sort of racism and things of that nature. And so the Fed, going back to the summer of 2020, changed its mandate a little bit, amended it slightly to include sort of maximum inclusive employment.

Starting point is 00:15:24 And that and inclusive part means that, hey, look, we understand or based on our analysis of our own mistakes in years past and cycles past is that we always sort of take the punch ball away from the party too soon. Like right when the black kids and Hispanic kids show up, they take the punch ball out of the party. And so the Fed effectively changed its mandate, its inflation mandate, to allow for more black kids and Hispanic kids and people who have historically been disaffected or sort of always showed up to the party late in terms of the economy, getting wages, all that other stuff, you know, to give them an opportunity to get in and have some fun. The reality is they sort of did that at precisely the wrong time as it relates to the fiscal policy agenda. The fiscal policy agenda basically said, hey, no, look, we're going to give everybody a bunch of money, even though the productive sector of the economy, the productive capacity of not just our economy, but the whole global economy is actually reduced. So we created this gigantic supply and demand imbalance. At the same time, the Fed was saying, hey, no, look, we want everybody to come into the party and have a good time. And so the Fed complicated matters with respect to fiscal policy.

Starting point is 00:16:27 what they should have been doing, you know, a year ago. There are a lot of really smart people in and around the Fed, former Fed presidents and chairman, sort of my man from New York Fed, I'm blanking on his name, but he's been scathing them for like a year now in terms of like, hey, look, you should be taking the punch bowl away if the fiscal authority is, you know, sort of supplying more punch, right? Imagine like, you know, like the Fed, there's like a bottle of Jager and a bottle of like grain and the bottle of vodka and they're all like just double-fisted pouring stuff into the into the punch bowl and the punch bowl got so over full that it created a lot of these inflation

Starting point is 00:17:03 problems that we see today so now effectively the pow j pow and the federal reserve now is saying hey look we realize we got to take this punch bowl away now and it's becoming an issue for markets but the problem the bigger issue and i think we will talk about this in a few months as we progress throughout the year but the bigger issue is now they're both taking it away and that's going to become a big problem for markets yeah one of the things as i was uh kind of thinking through this and and i remembered that they had this whole series so i went uh this morning and i went way down a rabbit hole that frankly i probably spent too much time uh going back and reminding myself what happened but uh back in 2021 over the summer there was basically 12 district

Starting point is 00:17:38 banks the federal reserve system they came together and they hold this whole series they called it racism and the economy and a lot of what you're talking about here's what they were trying to figure out and they did a number of things so wealth divide health criminal justice entrepreneurship economics uh housing education employment etc and a lot of it was like look we can't have full employment if we don't do a good job educating people right if everyone is sick and doesn't get access to health care services that's a problem in terms of the economy etc and so as i started to kind of break down and read through a lot of this stuff it seemed like the federal reserve in a lot of these comments and a lot of these articles and talks was seen as kind

Starting point is 00:18:12 of the central heartbeat for the economy and a lot of the monetary policy drives this and stuff And so how do you think about the Federal Reserve and like, is it racist? Is it not racist? Is that even a fair question to ask of those people? Should they just not be paying attention to it? Like, it's such a nuanced conversation. Like, how do you think about that? And like, if you were the Federal Reserve chairman, would you do anything differently in terms of impacting the economy? Or do you just focus, you know, kind of blinders on monetary policy and our job is stable prices and full employment and that's what we're going to focus on? Yeah, no. So so that's a loaded question. So I'll start by saying the Fed's focus on on sort of these sort of the sort of compositional effects with respect to the labor market, people's wages, people's sort of quality of life, their ability to purchase and afford homes where they can purchase and afford all that stuff. again, the fact the Fed has to address any of this is a bug of the system. This is again, this is squarely the types of things that elected officials should be debating, discussing and ultimately designing and enacting policy for. The problem is, is our congressional, our Congress has become so dysfunctional. And, you know, I would loop the White House as well if we learned anything from the past, you know, five or six years. Look, there's so much dysfunction in D.C. that we

Starting point is 00:19:29 actually can't tackle some of these great issues of our time. These aren't great issues of our time. These issues have been around for an extended period of time. But now that the younger cohorts, the Gen Zs, the millennials are really focused on this and looking for solutions for this as part of the fourth turning, that's a great book written by my former colleague, Neil Howe, that talks about these big generational cycles. And we're currently in one that demands great political change, great societal change. And that's why you're starting to see a lot of this stuff, get dumped on the Fed's lap. Because those cohorts, those younger generations, they're demanding solutions for big problems like global warming, big problems like racism and

Starting point is 00:20:08 disparate economic outcomes and economic and health outcomes in society. And so the Fed kind of sitting here after a decade of QE, which has basically inflated the stock market and not inflated the incomes of the people who don't own stocks, which is the vast majority of Americans, or sorry, not the vast majority of Americans, the vast majority of Americans don't own a significant amount of stocks. They might own $500,000 here. But most of the wealth in this country, if you look at the wealth dispersion statistics, 65% of the overall wealth in this country is held by the top 10% of households by wealth. So that means the rest of the 35% is splitting up. The bottom 90% is splitting up the rest of the 35%. If you look at the bottom

Starting point is 00:20:48 50% of households, it's just about 2% of all the wealth in the United States in this country. So the Fed is well aware that it's made that problem worse by its quantitative ease, its persistent balance sheet expansion since the global financial crisis. It's made everyone that's watching this show and folks like you and me rich at the expense of people who can't afford to watch the show and probably getting on a bus to go to their second job. And the Fed is aware of that. And so I think there's a little bit of guilt associated with the decade plus of QE. And I think they're doing their best to sort of unwind some of that. Yeah, it's fascinating to kind of think through this and and uh what i appreciate about your perspective i think is that uh you

Starting point is 00:21:24 kind of run the gamut right uh your story is so incredible and also you understand uh how the economy works right and i think that the key piece to it as you and i have talked offline about is like education is a great equalizer if we can teach people this stuff and they understand how this works hey you can also benefit as well right just don't go consume uh goods instead go invest in assets and and ultimately they'll do the same thing for you so i think it's uh it's very interesting. Before my brother's asked a couple of questions, I want to go through these two charts. So you've got this one chart that shows if inflation continues to surprise the upside, risk assets could crash. Explain what exactly happens here if we continue to see higher than

Starting point is 00:22:00 7% CPI over the next couple of months. Yeah. So consistent with our forecast, economists consensus forecast, the Fed's forecast is that inflation is peaking out right around here and should sort of start to trend down as we progress throughout the year with a real step function lower starting in around Q2. That's sort of the baseline scenario. We all kind of have similar frameworks. The problem is we've been all surprised by inflation at various intervals throughout this pandemic. A lot of it stemming from supply chain disruptions, supply demand disruptions, the latter. The issue what I'm showing in this chart here is the blue line shows the earnings yield. So that's the earnings of the S&P 500 divided by the price. And so the blue line,

Starting point is 00:22:41 as you can see, that is as negative as it's ever been. So the earnings yield, the real earnings yield, if you subtract CPI, so that 7% CPI or whatever CPI is at any interval from that time series, you wind up with the real earnings yield. So what are investors getting out of being long stocks on a real basis? And what they're getting is as negative as it's ever been. And historically, the reason I bring that up is so you go back over the last 60 years and look at every time this line has gone negative, this blue line has gone negative, it's been ahead of a pretty material correction in the stock market. So in terms of this back test, there have been two 10 percent corrections. There have been one 20 percent correction and there have been three 50 percent

Starting point is 00:23:22 corrections in the S&P 500. You know, so each of those corrections has obviously been catalyzed by Fed policy tightening. And so the setup today is exactly the same as it's been in each one of those previous instances. So that's an issue as it relates to the stock market. We talked about the risk to high beta risk assets last week when we were on the program. This is another way of looking at that from the avenue of policy, because we were looking at it from the avenue of growth slowing in the most recent one. And the second chart shows the quits rate in the jolts time series. So the BLS keeps the blue line. That's a statistic that, sorry, the BLS keeps both of these statistics, but the blue line shows the percent of people who are willingly quitting

Starting point is 00:24:02 their job. And obviously, if you willingly quit your job, it's not to go sit on the couch. It's usually to go get a job that pays better or is in a more desirable location or has a better hours of work-life balance is usually a reason. And nine times out of 10, the reason is you go get to pay more. And so as you can see, there's a pretty tight relationship between the blue line and the red line. And the red line is the employment cost index. That's the broadest measure of wages that we track in the economy. And so this is an issue for the Fed is because, hey, look, the Fed now only acknowledges that it's taking the punch bowl away. We know it's taking the punch bowl away, but they might actually even call the cops. And they will

Starting point is 00:24:37 call the cops if these lines continue to ascend higher as it relates to the Fed getting incrementally hawkish from here. And hawkish means they're tightening policy at a faster rate. And so to me, I think this is kind of the issue of the day, which is the Fed has no off ramp. The Fed not only has told us it's taken away the punch bowl and it might call the cops, they can't do anything other than that for several quarters, in our opinion, as a function of a lot of these dynamics. So those are issues for asset markets that we're going to have to chew through as investors. As I said, 2022 is going to be very different than 2021. It could potentially be the exact opposite.

Starting point is 00:25:10 So stay tuned for the updates there. Joke, John, what questions you guys got? Darius, what's up, man? What's up, boys? How you doing? Good. So my question would just be around the balance sheet, right? It more than, I think, more than doubled over the pandemic. It's kind of near $9 trillion now. They said that they're going to start to reduce this soon.

Starting point is 00:25:27 They're going to let the program finish out in March, and then they're going to start to let bonds mature and roll off the balance sheet. just talk me through kind of how you see all this playing out do we get much like aggressively lower do we stay kind of consistent like do they change their mind etc yeah absolutely great question excellent question and so that's all i asked areas indeed so i think so it's so let me start take a step back and say they outline sort of these principles for balance sheet reduction yesterday um you know in and around the fomc statement and kind of the main thing that we They sort of told us is that, hey, look, number one, we're going to do this by just letting things roll up, letting bonds mature, roll up the balance sheet and not reinvesting that those principal payments.

Starting point is 00:26:09 So that number two, where they want the balance sheet to be mostly focused on treasuries as opposed to mortgage backed securities, which obviously are perpetuating a bubble in the housing market. Actually, I wouldn't say bubble. Sorry, that's the wrong word. It's just perpetuating excessive supply, a demand relative supply in the housing market. And so those are the first principles. Second principles are not principles, but this we know the Fed is going to lose about one point three trillion dollars on its balance sheet, you know, in the year kind of in the year from today. Right. And so if that's in terms of the speed of the balance sheet contraction, we know it's going to be at least, you know, kind of one one point three trillion dollars. Now, could it speed up? Yeah, that's what Jay Powell told us in terms of he can call the cops on us. Right. Like like if he if he calls the cops, that'll be like either the balance sheet gets sped up because they think they're not making enough progress on inflation soon enough. Because don't forget, inflation is a political issue. There's a midterm election coming up in November and the Democrats are well on their way out. Both both houses of Congress, if they don't get this inflation issue under control.

Starting point is 00:27:07 And I would argue they're probably well on the way out of both houses of Congress, even if they get it under control, because the path they're going to have to take to get it under control in terms of actually having those statistics on hand for the campaign trail would be one that's very negative for a stock market and things of that nature. So they're kind of damned if they do, damned if they don't in that regard. John, what questions you got? Darius, can you just talk about like what you expect to see later on this year? So the Fed's obviously laid out a plan for the rate hikes in March. They said there's a possibility they do more than three. Like, can you just talk about like stocks and everything and what's going to happen for the rest of this year, you think?

Starting point is 00:27:41 Yeah. So I'll start with the Fed policy. They're definitely going to do four hikes. I mean, I think that's a baseline. The market has already pressed that in in terms of where the bond, not bond markets, but where rates markets are projecting that. So that that's a done deal. The only thing that would stop that from being a done deal is like the stock market is down 30, 40 percent, which, you know, it could be. But I don't think that's the baseline scenario. It's more it's increasingly likely that the sort of dovish pivot side of the equation is increasingly a low probability event, Whereas the hawkish right tail I've been talking about in our research is actually the probability associated with them doing more than four hikes, potentially five hikes or six hikes, or potentially accelerating balance sheet expansion by pulling it forward and actually selling securities. Again, we're not there yet. I think there's some big hurdles that they probably have to meet before that occurs, but it's now a rising probability that it does occur. And so the fact that is a rising probability that it does occur means that, hey, look, if we see the wrong stuff on the wrong data on inflation, as that first chart or as that first chart suggests, they're going to do more and they're going to do more is how you get the bigger, big, bigger crashes as opposed to the more manageable corrections in terms of that back test. So you're kind of like my base case scenario on how this all plays out. You know, you do have a window of time for things to get a little bit better here. Obviously, Omicron had some impact on the economy. We're observing this.

Starting point is 00:29:06 throughout a lot of the data that we track. And so as Omicron starts to recede in terms of case counts and sickness and hospitalizations, all that stuff, it's likely to see some bounce in the data. That bounce in the data could be met with a positive market response. But at some point the next few months, there's no way that positive market response can be sustained in the context of growth slowing back to trend, inflation potentially being stickier than the Fed wants to be and more importantly the folks down in dc want it to be in terms of their uh agenda and then second thirdly there's just very clearly a lot of positioning that's still very on one side of the trade right the reason you're seeing such aggressive selling it's not even aggressive

Starting point is 00:29:47 selling in cryptocurrency it's because we don't have buyers i don't think there's any more sellers than there were you know six months ago it's just that no one's stepping up to buy because they're all they were previously on one side of the trade and they have not seen enough confirmation from either the growth impulse, the credit impulse, the monetary impulse, or the fiscal impulse to say, I need to go buy this today. And that's the issue. We're creating a lot of supply and demand imbalance in asset markets in the same way that we did it in reverse for goods and services. Daris, last question for you, and then we'll let you go. When you think about moving forward over the next three months or so, are you doing anything different in your portfolio based on

Starting point is 00:30:24 the meetings yesterday? Yeah, absolutely. So we got about just shy of 40% of the exposures in our portfolio need to go. We do plan to be selling into strength. That's our game plan is to use any market strength over the next couple of months to get rid of that stuff. And so that will obviously be, you know, get us to some, some, some are just shy of, you know, 50% cash in the portfolio. I think that's a reasonable kind of baseline to kind of wait out what could be a much, much bigger, which should be a much bigger correction, kind of, you know, my expectation is it start in the springtime and maybe persist throughout the summer. But, you know, maybe it's actually even sooner than that. So I, I, I'd be, I'd be cautious for the sooner than that and the later

Starting point is 00:31:04 than that. And that's what we learned from Jay Powell yesterday. Awesome, man. Where can we send people to find you or find more about a 42 macro if they, if they want to subscribe? Appreciate you, brother. I'm at a 42 macro.com. That's our website. Come check us out. We have a sample reports and stuff in terms of the research we publish on a daily, weekly, monthly basis for our subscribers. And then I'm at Twitter on a 42 macro detail. Appreciate you guys. Thank you. You're a legend. One of the best macro investors in the world. Not just because he's my friend, not because he's a good looking dude, not because he knows how to party

Starting point is 00:31:31 like with the best of them. He's an absolute animal. Appreciate you. And we'll see you next Thursday. See you next Thursday, guys. Later, buddy. Thanks so much for listening to today's episode. I really hope you guys enjoyed this one.

Starting point is 00:31:42 Make sure you're subscribed on Apple, Spotify, or your favorite podcast player. And if you're looking to try to transition to get a new job in the Bitcoin or crypto industry, we've got you covered. Head over to palmscryptocourse.com. We've developed a curriculum with the top teams across the industry.

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The Pomp Podcast - #802 Inflation Continues To Hurt The Poor The Most w/ Darius Dale

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