The Pomp Podcast - #987 Darius Dale On The Chain Reaction Of A Recession

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.

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Starting point is 00:03:15 This podcast is for informational purposes only. Darius, what's up, man? How are you? Welcome back. Oh my God, that was so entertaining. What's up, dude? How you doing? I missed you.

Starting point is 00:03:24 I missed you too. How was your trip? Dude, it was fantastic. Everyone needs to go to Paris and spend at least a week there before they die. All right, let's jump in. Maybe the first place we could start is Jamie Dimon. I think it was yesterday or the day before.

Starting point is 00:03:37 He came out and he said that he believes there's an economic hurricane on the horizon. And he basically said, look, nobody knows how big it'll be, how bad it'll be or how long it'll last. We're going to be super conservative with our balance sheet. Uh, and I suggest, you know, basically everyone else follow the same thing. So it wasn't some like big prediction, uh, but it definitely was like, Hey, you guys should be paying attention to what's coming down the pipe. And we're going to be more conservative than we have in the past

Starting point is 00:04:00 because we want to be able to withstand it. What's your general reaction from the CEO of one of the largest banks in the world talking like this, uh, so openly, is that something that we should read into or should we just expect them to do this? So I'll start by saying the great, great starting point. I'll start by saying these guys are only as good as their models and their forecasters and the people who work for them that forecast the economy. I'm not making any representations about how good the JP Morgan economist team is. All I'm saying is you shouldn't take their words more than their words, their worth. They're just, it's just the guy who has a view on the world that we have a view on the world. But I do agree with this view on the

Starting point is 00:04:37 world. We are heading to something that could look like a hurricane. Now, whether it's a category two or Category 5 is yet to be determined, but it's at least going to be a hurricane. And right now, we are still on the beach in bright and sunny conditions. And so in our opinion, I think Jamie Diamond is appropriate. He's being a good steward of capital and try to help investors prepare for that. So you've got a chart that kind of leads into this. It's the financial conditions remain uncomfortably loose, which is very different story than what I think we're hearing in the kind of public narrative, right? Everyone's talking about quantitative tightening. They've started to conduct that. They're raising interest rates. There's been tough talk since November of

Starting point is 00:05:16 last year by the Federal Reserve. But this chart's telling a little bit of a different story. So explain kind of what this is showing us and why is the data showing us something different than maybe the public narrative? Yeah, no, 100%, man. So this is a really important chart and I want everyone to sort of take some time to kind of understand this. The red line just shows the Goldman Sachs Financial Conditions Index, basically how to interpret the chart is when it's low, that means conventional conditions are loose, they're very accommodative. And when the index is high as a high value, that means conventional conditions are very tight. We've seen a decent tightening off the lows in the red line. But if you look at it on a historical basis, I mean,

Starting point is 00:05:53 we're basically about as loose as we were at the peak of the dot-com bubble. So if you think about this in terms of the Fed's inflation fighting directive, they haven't really done anything to get growth to slow down enough to cause inflation to slow down, which tells you that, hey, as an investor here, we might have, you know, seen some pretty significant declines off the highs and, you know, crypto, Bitcoin, et cetera. But they could get a lot worse if the Fed is going to be successful in achieving its inflation objective. So when you start to think about this, there's this whole idea of quantitative tightening. And really over the last 13, 15 years, whatever you want to kind of count, there's been a very loose monetary policy. They at one point

Starting point is 00:06:35 did try to conduct quantitative tightening. It didn't go so hot. They basically waved the white flag very quickly and went back to loose monetary policy. Explain to people in, you know, kind of one or two sentences, like when you think of quantitative tightening, what should they be paying attention to? Or like, what are the important things to watch as they start to conduct this? Oh, well, I mean, number one, I mean, what's the level of volatility both implied and realized in financial markets? Because what happens when the Fed does starts to shrink its balance sheet, we all understand that QE is positive for markets. But the reason it's positive markets is mostly due to a substitution effect. We're taking safe securities out of the marketplace

Starting point is 00:07:11 and leaving investors, whether they be asset managers, retail investors, ultimately through mutual funds, et cetera, with a bunch of cash that's burning a hole in their pocket that needs to go to work if they're trying to generate a legitimate return, a real return. And so the content of tightening effectively works in reverse. The Fed is now creating a hole on the sort of the risk-free end of that spectrum. And now a lot of the money has to rush it from the further out on the risk curve to capitalize the U.S. government. And it's creating this sort of vacuum, this sucking effect on the further outs on the risk curve. So, you know, when you said quantitative tightening, they tried it and then they waved the white flag. You're absolutely right. And the scary

Starting point is 00:07:51 part about this particular time around is that not only are they going to do quantitative tightening into a global growth slowdown, a U.S. growth slowdown, but more importantly, they're going to try to get to a double from the previous pace of quantitative tightening. We've never seen this before. We've never seen the Fed hiking interest rates 50 bps at a time, doing 50 to 100 billion dollars of quantitative tightening at a time as they will be in a few months. And so I think it's a real, it's a science experiment, to say the least. When you think of that, if they've never done this before, at the speed, severity, you know, kind of simultaneous actions, the whole thing, should we throw out all historical analysis because this is a new environment and something

Starting point is 00:08:33 that we haven't seen before? Or do you think history can still serve as a great guide as we evaluate what could happen in the future? Yeah, no, a hundred percent. You don't want to throw out historical analysis and analogs, but what you do want to understand is that everything financial markets operate from a rate of change perspective and particularly rate of change relative to expectations. And so, you know, when you look at the world through that sort of, you know, that very quantitative lens, rate of change, what's happening at the margin, what's changing at the margins, you then can bring in the historical analogs that help you identify, hey, you know, the Fed might be shrinking its balance sheet with bigger numbers now,

Starting point is 00:09:09 but on a relative basis to what the balance sheet was, this is, you know, it's called a one sigma move lower or two sigma move lower. And so you can normalize things and help you create more scientific and more thoughtful analogs using historical data. And the reality is when you're talking about the kind of growth slowdown that our models are projecting. At the same time, you have a quantitative tightening episode. You're talking about anything on the order of 20% to 30% annualized declines in the S&P, 40% to 50% annualized declines in high beta stocks, and 60% annualized declines in something like Bitcoin. This is a really negative macro environment from a flows perspective. So all bets are off if you think about trying to buy the dip

Starting point is 00:09:47 here, which a lot of investors have done. So they continue to talk about very aggressive of interest rate um increases uh quantitative tightening all the stuff we're talking about the market at one point was pricing in 10 rate hikes 300 basis uh 300 basis point uh interest rate uh you've got some data that says we might not get there which i think uh it's becoming more and more obvious uh talk to us about this data and then what do you think is going to happen so uh actually pull up that chart the second chart usd you are yeah uh not this one uh the the other one, USD, EUR, and DUI. So we're probably not going to get there, but we don't have to get there. The market just has to get there for them. And what I mean by this is these

Starting point is 00:10:28 charts show the overnight index swap forwards for basically money market rates that are trying to price in the Fed funds rate on future time horizon. So you look at it on a one-year-four basis, the market's at somewhere around 3.2%, which is obviously significantly higher than what the current Fed funds rate expectation is. That number had peaked in early May and was really starting to flag, particularly as we start to get some leaking commentary out of Federal Reserve officials that they might actually consider a pause in September with the expectation that obviously inflation would be starting to behave and get out of control by then. Well, in terms of our analysis, we're not seeing anything in the inflation data that says it has to be under

Starting point is 00:11:09 control by September. I mean, in the best case scenario, we have core PCE on a three-month annualized basis at just shy of 3% in the month of September data that will be reported in late October. And so this concept that they're going to be able to pause in September really sort of has to lean on some very Pollyannish forecast for inflation that somehow magically just gets under control without the Fed ever taking financial conditions into restrictive territory, which in our opinion is very aggressive. All right. And then you've got a third graph here that says the global downturn is not adequately priced in, which is crazy to think about given the asset price sell-off, et cetera. What is this telling us? Yeah, no. So this chart is super

Starting point is 00:11:51 important. The blue line is sort of a proxy for global growth. It's the world OECD composite leading index time series. The red line shows the S&P 500 high beta to low beta ratio. So this is high beta stocks relative to low beta stocks and historically. So, and basically throughout, you know, our duration of our careers, uh, pump, um, we've had three of these sort of global growth slowdowns, you know, kind of, you know, let's call it 2010 to 2012, you know, 2015, 16, and then obviously 2018 to 2020. Um, you know, these are non-recessionary slowdowns. I don't really count the lockdown as a recession. These are non-recessionary slowdowns and this S and P 500 high beta low beta ratio, uh, again, high beta stocks, but the low beta stocks declined 35 to

Starting point is 00:12:32 40% in each of these three instances. We're only down about, it's called 18, 19% now, which suggests that even if we slow and do not go into recession, we're still only about halfway done in terms of the amount of pain that we're likely to experience in financial markets. And obviously, if we go into a recession, all bets are off. You look at the far left instance observation there, down 60%. I mean, I'm not anticipating a global financial crisis, but obviously, something that looks more like the 2000 to 2002 unwind of the dot-com bubble, which has been our core analog is something that is very much on the, on the table in play. Got it. And then when you start to think about these asset prices, obviously we continue to watch what I'm going to call a change in psychology

Starting point is 00:13:15 among market participants. So investors waking up saying, Hey, you know, things are changing. Now we're starting to see founders of businesses or the executives of businesses doing the same thing and it seems like there's maybe like a chain reaction public markets obviously they woke up in q1 uh because they saw their stock prices falling there was a ton of uh talk about it then we started to see like the growth uh stocks in the private market they started to feel it because there were people pointing and saying hey well your public comps those multiples just compressed you now have a different valuation even if your business is still growing you've got great cash whatever and now you're almost even seeing it trickle into like maybe like series a series b private market

Starting point is 00:13:53 stuff. Like, how do you think about the relationships across even just inequities, public and private markets, and like this, like chain reaction of the psychological evolution that occurs? Yeah, this is that's one of the best questions I've gotten all year. So thank you for doing that. Yeah, I mean, you're one of the best. So I mean, it's all good. So there's a couple things I want to unpack there. Chain reaction is very important phrase in that question, because I think what we miss as investors, we sort of think about things like recession or recovery. And reality is, it's not just this one monolithic thing. The economy is not this one monolithic thing. My threshold for what I can bear from a financial debt service

Starting point is 00:14:31 perspective is very different than your threshold. It's very different than the thresholds of people who are watching us live right now. And so the reality is this concept that, hey, look, when Series A, when XYZ fund takes marks on this thing, they might not even be taking their marks at the same time as other funds take their marks. There's a legitimate chain reaction. And right now we're in a reflexive part of the cycle we're in a reflexive down cycle so that when these things start to happen they're going they're going to send signals and triggers to other funds like right like if you're a founder uh you know you're you're done well in a company you you maybe raised some uh some decent funds you're probably not rushing out to buy dips in in you know in small

Starting point is 00:15:08 private enterprises right now so that segment of the financing economy really slows down obviously we've seen i think want to say been on uh 170 to 200 i was reading this on bloomberg this morning, a deal of debt financing deals that have been postponed this year, year to date. You know, so we're really starting to see a real slowdown and backup and financing activity in the economy. And that really matters. And the reason it really matters is because we're obviously a very indebted nation, with the exception of household debt. We're seeing a very aggressive rise in corporate credit and corporate debt outstanding and public debt outstanding. And it's a very financialized economy on top of that. I mean, 70 percent of all of our private non-financial

Starting point is 00:15:46 sector credit in the US economy is intermediated by non-bank financial participants, which means all of these interest rates, the rise in corporate borrowing costs, the rise in mortgage rates, the rise in real interest rates, all this stuff really matters in terms of slowing the rate of activity. One of the things I keep coming back to is this idea that global debt to GDP is like 130% or, or I'm sorry, it's like 350%. The U S the U S is 130% give or take. Uh, and so when you start to do this, like GDP growth's got to be double digits, right. To basically get on the other side of this. Um, is that possible? Like, is it possible to literally grow our way out of the global debt to GDP ratios? No, absolutely not. I mean, the reason we grow is because of

Starting point is 00:16:33 be at new debt like if there yeah sure yeah actually no let me say that there could be some massive and this is what kathy wood is betting on obviously some massive change in technology that ushers in a wave of productivity that allows us to be substantially more productive uh with the limited resources that we have and i would say uh limited and declining resources i mean you you think about the kind of the aging of the baby boomer population and you know the size of that relative to the gen z population we're going to have a reduction uh in our workforce over the long-term, at least over the next kind of 10, 12 years or so. So that's going to be an issue in terms of trying to create GDP, right? We're running out, we already ran out of land. We're

Starting point is 00:17:09 running out of workers. So we got to find something, some technology that creates a lot more productivity and may or may not come. Certainly it's not going to come, you know, in terms of the time horizon that we want to manage risk on as it relates to the downside of this market cycle. Yeah. It's just fascinating to kind of think about the idea that like we have to keep playing this game and so when you think about uh fiat currencies you know somebody like a brent johnson uh who we recently had on was talking about his milkshake theory and and we talked to him in 2020 talked to him again uh this year and in recent weeks he looks pretty smart dollar strength and again you know relatively against other fiat currencies like how do you

Starting point is 00:17:46 see the currency markets playing out uh with all the fiats on a relative basis you know it's uh it's weird i think we're at a very interesting point in the in the milkshakes shout out to Brent because he's been nailed he's absolutely nailed that call you know what one thing I think is um particularly unique in this second circumstance is that during the COVID recovery the U.S. economy was aggressively capitalized by the rest of the world and as a function of that we significantly outperformed the rest of the world and not just as a function of that we obviously had better vaccines we had better reopening um or at least you know places like Miami never really shut down I mean you know there in April 2020 and wouldn't know there was a

Starting point is 00:18:24 pandemic, but I digress. So we had a substantial outperformance in our economy. And as a function of that, investors all around the world were happy to just throw money in our markets, whether they be in Apple stock, Google stock, Amazon, Tesla, et cetera, et cetera. So much so that we've seen about $6 to $7 trillion over the last couple of years enter the US economy from a capital inflows perspective, if you look at the change in our international investment position. Well, that's not to say that that all has to come out over the next two years, But it does seem to suggest that, hey, if the U.S. just comes back to Earth and we are arguing in our research, we're not going to just go back to Earth. We're going to go to a below trend growth state by the end of this sort of projection period or our next 12 month projection period.

Starting point is 00:19:06 If we go to a below trend growth state, what's the reasoning for about being overly allocated, overweight U.S. assets, particularly U.S. risk assets relative to the rest of the world? And I would posit that that reason significantly goes away. And this is exactly what happened in the unwind of the tech bubble. It wasn't just that the Fed was too easy in response to the Asian financial crisis and long-term capital management that caused the NASDAQ to go up. It was the fact that the world was blowing up and every sovereign wealth fund and every asset allocator and every global asset manager was keen to dump money in our markets because we have a legitimate growth cycle and a significant outperformance in growth back then in the late 90s. and it was no different than it was in this COVID recovery period, and now that's starting to unwind at the margin. So to answer your question, it's a very long-winded answer, and I apologize for this. I'm not so sure that the dollar is likely to continue heading higher, even though the Fed is going to continue to remove liquidity. Now, the dollar may, again, I'm not saying the dollar has peaked yet, but I think if you look at it on a six-month and nine-month, 12-month floor basis,

Starting point is 00:20:05 I could easily see a scenario where the NASDAQ's down, I don't know, 20% to 30% from here, and the dollar's down 5%, 10% versus its peer currency. So when you think about kind of what the Fed can do, do you have a thought process on the quantitative tightening? Like, is it September? Yeah, they're going to do it until it breaks something. That's the only thought process. But how long can that be?

Starting point is 00:20:27 I honestly think they'll be pivoting by their November 2nd meeting. That's kind of like my core. Pivot in terms of let's pause or pivot in terms of reverse, let's do interest rates let's go back to loose monetary policy qe etc no i i think uh so pausing in the in the context there's really no pausing in quantitative either pausing by no longer shrinking or expanded balance sheet that's what i mean by pivot that i would represent a real pivot um i don't think pausing in interest rates while still doing 100 billion dollars or 90 some billion dollars of qe two t's who cares you know like we don't care about the interest rates anymore

Starting point is 00:21:02 they're already been priced in maybe you'll get another 25 to 35 basis points higher in the terminal Fed funds rate expectations if inflation over the next month or two surprises to the upside, which it very much can, by the way. We can go into all the wonky details on why I think that it might. But in terms of the pause and the pivot, I do believe that, A, if the Fed gets to the November 2nd meeting, the world is sufficiently on fire from a capital markets perspective. Going back to that first chart, you've seen a more substantial tightening of financial conditions associated with a more significant growth slowdown that we have projected, particularly

Starting point is 00:21:33 throughout the summer months, then I do believe they'll be able to say, hey, I think $95 billion was too much. Let's just turn this off and look around and see where inflation settles out. If they pause by just saying, hey, we're going to go from $95 billion to $50 billion and we're not hiking interstates anymore, then all bets are off. But I think once they pause, what constitute a pause in my book is they stop this entire program altogether. They don't have to go to QE, but they have to stop quantitative data, which they haven't even started, by the way. It starts next wednesday any thoughts on uh whether they will get a interest rate cut that that's my contrary this only contrarian thought i think i have right now is that we may get a i call it

Starting point is 00:22:17 an interest rate like a cut check where everyone is thinking one thing and they basically just give us that one cut to say hey continue the party no i'll see see i i i see this is this goes to the behavioral side of the trade, which is equally as important in times like these. So for all of you watching and listening, my favorite book, and I'm sure I get asked what books do I read and whatnot, Thinking Fast and Slow by Danny Kahneman and Amos Dversky is arguably the most important book you'll ever read if you want to think about finance and economics. Certainly my favorite book. And I highly recommend everyone read that book. In terms of understanding the behavioral side of this, we're human beings. And you have to realize that the Fed is human beings.

Starting point is 00:22:56 Jenny Ellen's a human being. Jay Powell's a human being. Joe Biden, a human being. These three human beings got together on Tuesday just to remind the American public that, hey, even though when you go to the grocery store, it keeps going up and up and you go to a gas pump, it keeps going up and up and you take your kids school shopping and prices keep going up and up and you try to take your wife out for dinner, it keeps going up and up and up. hey we're gonna do something about it we messed up my bad we got transitory wrong i mean did you hear yellen and bullard yesterday i mean bullard basically came out and said look we're gonna lose our credibility if we don't get going and yellen was like yeah you're right i got this i got the damn call wrong do you think they got it wrong or do you think that they uh knew what was gonna happen and didn't say no they got it wrong they definitely got it wrong for sure that's what i think as well there's a lot of people who were very mad yesterday when i said that we should respect the fact that a public official like janet yellen was willing to say on national television

Starting point is 00:23:44 i got it wrong i thought that was fantastic and we should encourage more public officials doesn't excuse that they got it wrong doesn't mean that we should listen next time but admitting that you're wrong in public one very hard for those people to do and we should celebrate when when they do it at a minimum or at least encourage other people to do it yeah absolutely so there's a bit i can count on one hand of all the investors um that i could that i know got the inflation call right. Certainly Jim Bianco, Julian Brigden. Maybe there's a couple others that I'm forgetting. I apologize for forgetting you here, but I'll be the first person to say we got it wrong. Goldman Sachs got it wrong. PIMCO got it wrong. The Fed got it wrong. All these institutions and

Starting point is 00:24:25 research shops and very important Wall Street institutions and not so important Wall Street institutions sitting in my home here all got the inflation call wrong just to varying degrees, right? So let's be honest here. These are human beings with models and forecasts, And it's hard to model the kinds of shocks that we've experienced, particularly in this second half of the wave, the kind of the Omicron dynamic shutting down the global economy again and the supply chain disruptions that came out of that, the Russian invasion of Ukraine and the additional supply chain pressure on things like energy and food prices, that stuff. That stuff's hard to model. It's easy to model the core inflation dynamics, that stuff. It's pretty simple. But the other stuff has been very difficult.

Starting point is 00:25:00 But that's neither here nor there. What I'm really trying to say is this is an institution, the Federal Reserve, that is hell-bent on regaining credibility from getting a call wrong. They're a wounded animal, and right now they're fighting two battles, one, getting inflation back towards its target, and two, regaining the trust of the American people that millions are being harmed by these very aggressive price rises. So I would argue, Pomp, we're more likely to see them get incrementally hawkish relative to what's priced in the financial markets, particularly Fed fund futures, the euro dollar futures, OIS, et cetera, than they are to get incrementally dovish, at least over the next few months. The other thing that I've seen recently is Arthur Hayes, former BitMEX CEO. He wrote a report, and he said – he essentially called the bottom, right? Not explicitly, hey, this is the exact bottom, but he was like, look, I don't think Bitcoin will go below $25,000, $27,000. I think ETH, he was talking about like $1,700, $1,800, somewhere in that range.

Starting point is 00:25:55 And he used three things as his argument. One was there was a decoupling to some degree of crypto from the NASDAQ 100. Two was like the media is just yelling and screaming and being absurd and saying it's all dead and everyone in that industry is idiotic. And then the third thing he said was a relationship to past cycles. So the price in a new cycle doesn't go below the past all-time high. So Bitcoin at 20,000 in 2017, unlikely that we'd go below that. What's your take on like how Bitcoin and crypto as an industry will perform kind of moving forward given all this macro kind of uncertainty? Yeah, so right now, there's a couple of things I'll say on that.

Starting point is 00:26:37 So right now, I've been very, you know, one thing that's sort of, you know, keeping me from saying this is going to be a sustained. There's several factors that have kept us from saying this will be a sustained bear market rally, at least in stocks, is the fact that we have not seen the kind of participation you would expect to see from the digital asset space. Obviously, Bitcoin's been chopping people up between 29 and 31,000 for weeks now. Ethereum, obviously, looking even worse from a technical standpoint. But just if you think about it from a broader macro market cycle perspective, I mean, a lot has to go right if you see another 20 to 30 percent, no, not 20, 30 percent, another 20 percent decline in the S&P from here, let's call it 20% to 30% decline in the NASDAQ from here for Bitcoin not to make new

Starting point is 00:27:18 lows. I think it'll be very difficult. And again, don't forget, it's not just about where the fundamentals or the technicals are, because we know that, sorry, I'm not great with on-chain analytics, but we know that somewhere around 22,000 is a key level of support, 24,000 is a key level of support. Fundamentals don't matter when people need liquidity. And I can guarantee you if growth slows worse, if the growth slowdown, by the way, this is our base case scenario, If the growth slowdown is worse in our base case scenario, we do go into a profit cycle recession, and the Fed is shrinking its balance sheet at $95 billion a month, and inflation is not behaving, people will demand liquidity. They will demand cash, and the only way they're going to be able to get it is by selling risk assets because, again, the deposits in the banking system are shrinking. The reverse repo uptake continues to go higher, and the Fed wants it to go higher.

Starting point is 00:28:05 This is a significant draining of liquidity from financial markets that is about to happen. and so in my opinion i'm not sure you can price that in because again these are technical dynamics what's the thing that you're looking forward to uh or looking at that would surprise people the most right now oh and 100 it'd be inflation uh surprising to the upside over the next couple of months surprising to the upside yeah and the reason i say that so right now um particularly if you look at core inflation dynamics which is obviously what the fed cares about most core pce let's take core pc right now core pc is running about four and four point nine percent no, is it? Yeah, 5.9%, no, 4.9% on a year-over-year basis, 3.9% on a three-month

Starting point is 00:28:43 annualized basis. And then you take it and look at what are the driver, what are the leading indicators for core PC? It's things like core services inflation, core goods inflation, median CPI, sticky CPI, et cetera. So let's highlight two of those factors right now. One of those factors is core goods CPI, significant slowdown. We're only tracking at 0.8% on a three-month annualized inflation rate basis. Yeah, that's down from a year-over-year rate of change of 10%. Right now, core services inflation is actually accelerating. It's up 7.5% on a three-month annualized basis versus right around up five on a year-over-year basis. So the biggest risk, I think, to financial markets right now is an incremental repricing higher of terminal Fed funds rate expectations and incremental hawkish rhetoric surrounding the pace, the timing, et cetera, of the quantitative tightening program.

Starting point is 00:29:30 and how you get there is by services inflation alongside energy prices continuing to rise and food prices continuing to rise, taking that baton, wrestling that baton away from goods prices and causing the inflation basket to either flatten out or start to rise again from a core inflation standpoint. And to me, I think that we'd all be completely,

Starting point is 00:29:51 for lack of a better word, fucked if that occurs. And I think that's a more than 33% chance of occurring in the next couple of months and no one's really positioned for that. Yeah. We're going to be talking about this a long time. There's no right answer, right? Inflation is sticky. This is what we learned in the 70s. This is what we learned in the early parts of 2000 and into 2008. One, inflation is a lagging indicator. You can't just expect inflation to magically go down by itself without a slowdown in growth and the production demand

Starting point is 00:30:20 and the easing of supply-demand dynamics. But two, it's sticky. It permeates. It's sticky. You know, business A raises prices and wages go up and business B does the same thing that business C does with business B. It's a process. And so we have a lot of tightening to do ahead of us for inflation to really start to behave. And I think the manner the Fed wants, not just because of its mandate, but also because of its very human psychology, they need to heal. My friend, I appreciate you always coming here, dropping absolute facts on us. Where can we send people to find you on the Internet or find out more about 42 Macro? absolutely man thank you man uh for 42 macro.com come check us out uh we definitely put out some uh some what i think some world-class research uh but if you if you can't afford it uh just go

Starting point is 00:31:01 check us out on twitter at 42 macro uh d dale d-d-a-l-e appreciate you pump all right buddy sounds good we'll see you next week and uh i'm making my paris uh recommendation list and you i'm gonna call you i got some how i did the folks at uh the folks at the the aquarium club know me very well all right buddy i'll see you later brother thanks so much for listening to today's episode i really hope you guys enjoyed this one 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 palms crypto course.com we've developed a curriculum with the top teams across the industry it's a three-week intensive training

Starting point is 00:31:43 program with over 50 events packed into that three-week time period. Go to pompscryptocourse.com to learn more, and I'll meet you guys for the next episode.

The Pomp Podcast - #987 Darius Dale On The Chain Reaction Of A Recession

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