Transcripts
Erik: Joining me next on the program is Charlie McElligott who heads up cross-asset macro strategy at Nomura. Charlie has put together a fantastic slide deck to accompany this conversation, so please download it. Listeners, you’ll find the download link in your Research Roundup email.
Charlie, for people who have been following your writing since you joined Nomura in January – I remember the first piece I saw that really got my attention was where you described this perfect storm after the VIX complex blew up. You said, look, if we get to certain levels on the S&P it’s going to trigger the commodity trading advisors, they’re going to start systematic selling, it’s going to unleash a whole bunch of things.
Fortunately, we never got to that level. But I was very impressed with your analysis. As I followed your work since then, I noticed that, though you tend to be writing about the here and now – because that’s the way institutional research is structured – I am able to assimilate a framework, if you will, that seems to guide your thinking, which I’ve pulled together from reading several of your pieces.
Can we try to present to our listeners a summary of that framework? How you think about markets and how this all fits together? And from there I want to go into much more detail on your slide deck and a number of other questions.
Erik: Joining me next on the program Marin Katusa, founder of Katusa Research. Marin, we are so excited to get you back on the program. You had some killer calls for us last time. Now, we had a chance to speak off the air. We did a lot of talking about copper and the long-term argument for copper.
We did mention uranium in the last interview. But I want to focus on uranium this time around. So let’s start with the high-level macro perspective. Why uranium? And why uranium right now, when so many people in the world are convinced that nuclear energy will never be used again?
Marin: Wouldn’t it be interesting if the actual winner of the de-carbonization of the planet was nuclear? And especially after what we’ve seen with Fukushima and the capital costs of building these nuclear reactors in the US? So what I actually did was I wrote a research report.
I have the advantage of having been to every single operating US and Canadian mine. I’ve been to projects. I’ve got a 17-year advantage over most people. So, rather than writing a bullish case on uranium, I decided to challenge it and say, if I was a “shorter,” how could I write a “short” report on uranium using all the information available?
I went through every plant on the planet, all of the producers, how much each plant will use, and actually wrote a “short” report that I published for my subscribers. It was a very deep plus-20-page report. At the end I said, okay, let’s look at the worst-case scenario. I’m going to ignore the base case and the positive case.
Erik: Joining me next on the program is Danielle DiMartino Booth, author of Fed Up. Danielle and I spoke off the air and agreed since we already did a full-length interview on the book we’re going to leave that alone.
But, before going on, I just want to suggest to all of our listeners that if you missed that interview, it was an excellent one. Fed Up is an excellent book. It’s the inside story from Danielle’s experience at the Dallas Fed talking about how the Fed works from an insider perspective. It was a fascinating book. I couldn’t put it down.
We’ve decided not to focus on that though. You can go back and listen to that entire interview. It’s still there, free of charge at macrovoices.com.
Danielle, let’s move on. That book was entirely about the historical perspective of all the things that have been wrong with the Fed in your experience and you’ve been very outspoken in your critique.
There is a new horse in town, though. Jay Powell is a different kind of Fed Chairman, or so it would seem to a lot of people. What’s your take on Jay Powell? Is this guy a different story? Are you optimistic? Or is it more of the same?
Danielle: I’m cautiously optimistic. I have not founded the Jay Powell fan club just yet, but many of the things that he has done since becoming Chair of the Fed, I predicted that he would do and held my breath. And then he did them. So I’m happy as a barking seal.
One of the first things I wrote about him was that he had no agenda at all. He did not have to be at the Fed. This is a gentleman who worked for a dollar salary to educate the Congress on the perils of the United States defaulting on its debt.
And has absolutely no political fight to pick. He has no economic agenda. He’s not a PhD in economics. He doesn’t sit in a Keynesian camp or an Austrian camp, for that matter. He’s a pragmatist with a markets background and appreciates the intersection of the two.
And he also cares for taxpayer dollars, because one of the first things he did, which I implored him to do, was to implement a press conference after every Federal Open Markets Committee meeting, which, as we know, is beginning in January. So that means we have eight live meetings a year instead of what we have been contending with since Bernanke imposed the press conference at every other FOMC meeting policy years ago.
Erik: Welcome to Part 7 of MacroVoices Eurodollar University with Alhambra Investments CIO, Jeffrey Snider. I’m your host, Erik Townsend. There is a slide deck to accompany this podcast and we recommend that you download it before listening, as we’ll be referring to the charts and graphs it contains throughout this program. You’ll find the download link, along with the other parts of this series at https://www.macrovoices.com/edu (for Eurodollar University).
At the end of the last episode, Jeff explained in detail how the system had broken down to the point where collapse was accelerating and starting to get out of control. Now let’s jump back in right where we left off as Jeff starts to explain the Fed’s efforts to intervene. We’re on Slide 93 on the PowerPoint deck.
Erik: Okay, Jeff, given that description of the problem, moving on to Slide 93, where and how does the Fed try to intervene, and how successful are they?
Erik: Welcome to Part 6 of MacroVoices Eurodollar University with Alhambra Investments CIO Jeffrey Snider. I’m your host, Erik Townsend. There is a slide deck to accompany this podcast and we recommend that you download it before listening, as we’ll be referring to the charts and graphs it contains throughout this program. You’ll find the download link, along with the other parts of the series at https://www.macrovoices.com/edu (for Eurodollar University).
As you know, it was a challenge to decide in the editing room where to break Parts 5 and 6 apart, because Jeff Snider was really on a roll, talking about how the sheer panic across the industry associated with the subprime mortgage crisis was creating a liquidity crisis, even in cases where the underlying credit itself was actually sound. We cut off just before Jeff began to explain how gold would come into the story as the collateral of last resort.
Just to refresh your memory, we’re going to rewind by a couple of minutes and replay the final two minutes or so of Part 5, just to keep the continuity of thought going as Jeff brings gold into the story.
Be sure to download the slide deck that accompanies this conversation. You’ll find the download link at https://www.macrovoices.com/edu (for Eurodollar University).
We left off at Slide 45 in the deck. Now here is Alhambra Investments CIO, Jeffrey Snider.
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