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The Contrarian Investor Podcast Posts

Hugh Hendry, OG Contrarian (Szn 4, Ep21)

This podcast episode was recorded on Aug. 3 and released to premium subscribers the following day. To become a premium subscriber and take advantage of a host of other benefits including the Daily Contrarian briefing, visit our Substack or Supercast. Prices start around $9/month.

Hugh Hendry is a man who needs no introduction to contrarians. Over the course of this 90-minute conversation, he provided many views on markets, the economy, the Federal Reserve, China, and a lot more. Of particular interest to investors are his bullish views on commodities, oil producers, and luxury goods makers…

Content Highlights

  • Hendry’s most contrarian opinion right off the bat: The Fed is not responsible for the asset price bubble (2:40);
  • “We find ourselves in the fourth depression of the last 200 years” after “les miserables” period of 1830 to ~1855, 1870 to the late 1890s, and the 1930s (8:11);
  • “I don’t think we have inflation.” Sales of non-discretionary items are not increasing (13:53);
  • Very few people understand money and money creation. What are they missing? (28:56);
  • What’s behind the stock market rally this summer? It may be commodities, at least in part… (39:49);
  • Markets are ‘bucking broncos.’ Volatility can be a major distraction and nothing happens in a straight line. But commodity producers and uranium should be in good shape over the long term (46:55);
  • Background on the guest. As an ‘OG contrarian’ Hendry joins an exclusive list (54:58);
  • A little insight into Hendry’s current life and psychology (1:10:40);
  • Betting on the Chinese yuan weakening (1:14:37);
  • The odds of the 10-year treasury making new lows (1:22:44);
  • China invading Taiwan? Hendry sets the odds at 20% and says China will never have a stronger bargaining positioning vis-a-vis the U.S (1:24:16).

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The Bullish Case for Rare Earths: Louis O’Connor (Szn 4, Ep. 20)

Louis O’Connor, CEO of Strategic Metals Invest, joins the podcast to make the case for rare earth metals. These commodities, hitherto unavailable to retail investors, are now accessible and entering the mainstream…

Content Highlights

  • Rare earth metals (sometimes called rare earth elements) are intrinsic to daily life. They are part of modern technology as diverse as electric cars, military applications, solar applications, nuclear reactors, and more (3:01);
  • China produces more than 80% of the world’s rare earths and refines metals even mined in the U.S. (5:39);
  • Okay, so what are these rare metals exactly? There are 17 in all, though not all are exactly rare, or vital… (8:12);
  • Rare earths have outperformed almost all major asset classes the last five years (14:22);
  • The supply picture for rare earths is complicated, while demand is quite inelastic, depending on a diverse set of buyers… (18:58);
  • Rare earths are entering the mainstream and production is increasing in the U.S., where it is more expensive (23:01);
  • There is a specific rare earth where the investment opportunity is particularly compelling at present (31:58);
  • Tellurium, on the other hand, is one that is not deemed particularly advantageous at the moment (35:50).

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The ‘Fed Pivot’ Debate

Powell clearly hinted at ‘neutral policy,’ but was he speaking out of turn?

The following is an amended form of the Daily Contrarian of Aug. 1, which today also featured the host singing the opening of the Swiss national anthem in honor of Swiss national day. This briefing and accompanying podcast are released to premium subscribers each market day morning by 0700. To subscribe, visit our Substack.

As we start the week there are fresh doubts about this ‘Fed pivot’ that drove much of last week’s rally. If you’ll recall, comments by Fed chair Jerome Powell at his press conference led investors to conclude the Fed was going to reverse course on interest rate hikes and soon. This conclusion was refuted by Minneapolis Fed President Neel Kashkari late Friday, which has led to much pontification on Twitter and elsewhere.

Here is what Powell said that led investors to pile in to risk assets on Wednesday afternoon to start a rally that held the rest of the week.

Quote from Fed Chair Jerome Powell press conference, July 27, 2022.
Source: Jerome Powell press conference, July 27, 2022. Meme via IMGflip.com

Handicapping the Fed is a dangerous game but so far the market doesn’t appear to be too concerned by Kashkari’s comments. We’ll hear from other Fed officials tomorrow and again later in the week. That’s what’s scheduled, at least. If the Fed is serious about reeling back Powell’s comments they can have officials do interviews on CNBC and elsewhere. So that is maybe worth watching. Maybe Kashkari was the one speaking out of turn?

It’s another busy week for earnings, which should drive things most of the week. The main event however is Friday’s non-farm payrolls. As we know, the labor market has proven itself quite resilient so far in the face of tighter monetary policy, though unemployment claims are up.

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