Dear Hedgeye Nation,
We are excited to bring you yet another heavy-hitting macro-dose of financial insight with our newest Real Conversation on HedgeyeTV.
Throughout June, Hedgeye CEO Keith McCullough is hosting a special Real Conversations series with four leading market strategists: Inflation Tsunami: Investing During A Rising Inflationary Tide.
In this edition, Keith is joined by Steve Hanke, acclaimed professor of applied economics at Johns Hopkins and renowned FX and commodity trader.
For access to the entire slate our special "Inflation Tsunami" interviews, click here.
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McCullough: The biggest net-long position in CFTC Futures & Options contracts in all of Global macro, is long the long bond right now. They've expressed this being transitory, as buying their old deflation duration portfolio.
And that's paid out for a long time. I've got paid on that, and plenty of times I have been in the deflation-ista camp because that's what numbers were measuring and mapping to.
How much of that has to do with the legacy? I think you wrote about this as well. If you look at the average M4 or money supply growth in the last decade prior to this year, it's much more benign than where it currently is now and you've had much lower levels of inflation.
Is it just your career risk management for a lot of these people, they don't want to make a call on sustained inflation cause that really hasn't paid off for a decade?
Hanke: You are exactly right. The Bond market has bought into this Fed narrative hook, line, and sinker. The bond market is not showing up with inflation signals whatsoever.
All I can say is that these people are really going to get their fingers burnt badly unless they are fast on their feet. You don't want to be long bonds now. This is almost insanity now, I would say. Because of the fact that inflation is baked into the cake, we know that if you know anything about monetary economics.
The problem is that part of it is institutional memory. You have a lot of young folks who are trading that have no memory of anything and they never learned monetary economics.
LIVE INSIGHT FROM THE WEBCAST
MORE INSIGHT WITH STEVE HANKE
Steve Hanke is the founder and co-director of the Institute for Applied Economics, Global Health, and the Study of Business Enterprise at Johns Hopkins. Hanke served as a senior economist in the Reagan White House and as an advisor to several nations' governments. Currently, he is a senior fellow at the Cato Institute, chairman of a metallurgical supervisory board in Amsterdam and chairman emeritus of the Friedberg Mercantile Group Inc.
Watch last year's "Real Conversation" between Hanke and McCullough: "COVID-19, Panicky Markets & The Economic Implications"